The taxpayer is required to calculate and pay interest on the amount of tax outstanding by the due date. Interest shall be calculated as of the day following the day on which payment of the tax was due pursuant to law until the date of payment or set-off, inclusive of the latter. The rate of interest is 0.06 per cent per day.
The amount of interest = the amount of tax outstanding by the due date × the number of days delayed × interest rate.
If a taxable person fails to pay interest on the amount of tax outstanding by the due date, the tax authority submits a claim for interest (a claim for interest is not submitted if the amount of interest is less than 10 euros).
Taxable persons can voluntarily pay the calculated interest by compiling the interest calculation in the e-MTA, on the basis of which the tax authority will deduct the interest payable from the available money on the prepayment account.
On 1 January 2020, an amendment to § 97 of the Taxation Act entered into force, according to which the interest amount shall be rounded out to the nearest euro (unless it is otherwise provided by an Act concerning the tax or the customs legislation).
Rounding is done in accordance with the mathematical rule.
a) if the accrued interest is 10.49 euros, after drawing up the claim for interest, 10.00 euros should be paid;
b) if the accrued interest is 10.50 euros, after drawing up the claim for interest, 11.00 euros should be paid.
If the accrued interest is less than 0.50 euros, the claim for interest is not drawn up, as the interest is rounded to zero. The accrued interest is not displayed in the public inquiry of arrears. The accrued interest expires within the time limits specified in § 118 of the Taxation Act.
If a taxable person does not have the possibility to use the e-MTA, he/she can seek help from the tax authority.
When compiling the interest calculation for voluntary payment, the payable interest amount has to be transferred to the prepayment account on the day of compiling the interest calculation or no later than the next day after compiling the calculation. If the taxpayer fails to transfer the required amount in full to the prepayment account in due time, the interest calculation compiled by him/her is automatically cancelled and the amount of interest moves back under the calculated interest.
Non-calculation of interests from tax liabilities
If a taxpayer fails to pay tax by the due date, he/she has to pay interest on the amount of outstanding tax. However, in certain cases the tax authority suspends the calculation of interests. Such cases may be: suspension of the activity of credit institution that is used for the fulfilment of tax liabilities, compromises related to the bankruptcy proceedings of a taxable person, declaration of bankruptcy. Likewise, the tax authority suspends the calculation of interests if the amount of interest exceeds the claim for tax which is a basis for the calculation thereof or during reorganization proceedings or debt restructuring proceedings (from the initiation of reorganization proceedings or debt restructuring proceedings until approval of the reorganisation plan or the debt restructuring plan). More detailed list of the cases of suspension is contained in § 119 of the Taxation Act.
Based on good administrative practice and the ruling of the Administrative Law Chamber of the Supreme Court, the tax authority does not calculate interests in cases where the delay in tax proceedings has been caused by the tax authority itself. Such cases may be the following:
failure by the tax authority to act has caused an unjustified delay in control activities;
the tax authority’s procedure of defining its position in taxation takes more time than usual and the continuation of tax proceedings depends on supplementary decisions based on the evidence available to the tax authority.
Shortening the period of calculation of interest, the tax authority makes its decision. The decision is forwarded to the taxpayer as a separate administrative act together with the notice of assessment or liability decision. The period during which the tax proceedings were unduly delayed and the number of days by which the calculation of interest will be reduced is indicated in the decision.
The calculation of interest is not suspended if it is necessary to make a request to the authority of another Member State in order to identify important information. According to the Directive 2011/16/EU on administrative cooperation the requested authority shall provide information no later than six months from the date of receipt of the request.
Likewise, the delay is not caused by the tax authority’s failure to act if the tax authority sends the taxpayer or third party an order to provide information and to submit documents. The period during which the tax authority is waiting for such information and/or documents, which are significant in the tax proceedings, cannot be considered as a delay caused by the tax authority.
The tax authority exercises discretionary power in non-calculation of interest. Shortening the period of the calculation of interest, the tax authority makes its decision, which is forwarded to the taxpayer as a separate administrative act together with the notice of assessment or liability decision. The period during which the proceedings were unduly delayed and the number of days by which the calculation of interest is reduced is indicated in the decision.
Some examples for guidance
The official conducting the tax proceedings left the service on 1 January 2019. A new official continued the tax controls from 15 February 2019 and no control activities were carried out in the meantime. The tax proceedings were finished with the assessment of taxes on 2 September 2019. Due to the 45-day delay in the tax proceedings, the tax authority will shorten the period of the calculation of interest by the number of days delayed.
The tax authority started tax controls on 1 April 2019. The tax authority collected all the evidence significant for the tax proceedings by 1 August 2019. In the course of the tax proceedings the tax authority faced a new problem in practise, which required a clear opinion of the tax authority that would serve as an example to follow in the future. Forming the opinion took two months (from 1 August until 1 October 2019, it is 60 days). During that period no other activities related to controls were performed. The tax proceedings were finished with the assessment of taxes on 2 December 2019. Like in other similar cases, the tax authority considers 30 days to be a reasonable duration for defining an opinion in such a question. The days exceeding the 30-day period are considered as a delay. Given the duration of 60 days that was needed for shaping the tax authority’s opinion, the tax authority will shorten the period of calculation of interest by 30 days.
- Clause 31 (1) 5) and sections 115, 117 and 119 of the Taxation Act
- Ruling no 3-3-1-78-14 of the Administrative Law Chamber of the Supreme Court (in Estonian)
- Directive 2011/16/EU on administrative cooperation