Vastus

SUPREME COURT REPU B LI,C OF ESTON IA 12 August 2019 Dr Marek Domagala No.6-1l19-441 domagala@trybunal. gov.pl Answer to your inquiry Dear Dr Marek Domagala Thank You for the questions about Estonian law. On behalf of the Supreme Court of Estonia, I hope that You find our answers helpful. 1. In your Country's legal system, is the social insurance system based on citizens' mandatory payment of social insurance premiums to a specialised state-owned insurance agency or a different entity? If so, what measures are in place to secure the fulfilment of the obligation to pay the insurance premiums in the situation where there is a risk of default on the payment of overdue social insurance premiums? For instance, is there a possibility of securing such a liabilify by mortgaging an immovable property and/or by pledging movables (movable properties) as well as transferable properfy rights? The financing of Estonian social insurance is very much related to labour taxes. The private social (health insurance) is marginal. The tax authority for state taxes is the Tax and Customs Boardl (Taxation Act2 (TA) g 5 sec. 1). Social tax is a financial obligation which is imposed on taxpayers to obtain revenue required for pension insurance and state health insurance (Social Tax Act3 (STA) $ 1). Payers ofsocial tax are required to calculate social tax for every insurable person and transfer the social tax due to the bank account of the Tax and Customs Board by the tenth day of the month following the taxable period and submit the corresponding tax retum to the Tax and Customs Board of the payers of social tax by the same date (STA $ 9 sec. I pp. 1 and 4).In case a taxpayer has been declared bankrupt, the declaration shall be submitted separately for the part of taxable period preceding the declaration of bankruptcy and the part of the taxable period following the declaration ofbankruptcy (STA g 9 sec. 11). In order to secure the fulfilment of the obligation to pay the social tax (as other state taxes), there are two measures available according to TA: security (TA $ 120 fI) and compulsory execution (rA $ 128 f0. I Homepage of the Tax and Customs Board, available in English: https://www.emta.ee/eng. 2 Available in English: https://www.riigiteataja.ee /enleli/501042019003lconsolide. 3 Available in English: https://www.riigiteataja.eelen/eli/ee/513122018003/consolide. The rate of social tax is 33% of the taxable amount (STA $ 7 sec.l). The proportion of social tax transferred into the state pension insurance funds is 20Yo and the proportion of social tax transferred into the state health insurance funds is l3% (STA g 10 sec. 2). 17 Lossi St, 50093 Tartu, ESTONIA. Tel +372 730 9002, fax +372 730 9003, e-mail: [email protected] www.riigikohus.ee Pursue to TA $ 120 sec. 1 a tax authority has the right to request the provision of security: 1) upon the payment of tax arrears in instalments; 2) in event of extension or suspension of the fulfilment of a claim for refund; 2l) upon suspension of the execution of an administrative act; 3) in other cases prescribed by law. Special provisions in TA $ 120 sec. llregulate, that upon placement of goods under customs supervision or release thereof for free circulation, a tax authority has the right to demand a security to cover taxes due related to the incurrence of the customs debt. According to TA $ 120 sec. 2 no security shall be required if the amount of a claim is less than64 euros. No security shall be required from state, rural municipality and city agencies either (TA $ 120 sec. 3). A tax authority shall determine the amount of security to be provided. The tax authority shall determine the scope of security based on the size of the secured claim and the extent of the costs of possible compulsory execution. (TA $ 121). Unless otherwise provided by an Act concerning a tax, a person who is obligated to provide security may choose between the following types of security: 1) surety; 2) an amount of security paid into the bank account designated therefor as a deposit; 3) a registered security over movables or a mortgage established for the benefit of the state, a rural municipality or a city (TA g 122). Regulated is also the replacement of security, the release of security and the use of security (for more information, please see: TA $$ 125-127). Compulsory execution means that a tax authority is required to collect tax arrears unpaid by a taxable person (TA $ i28 sec. 1). Compulsory enforcement of the amount of tax due by the taxable person is permitted only after the taxpayer has been given at least once the term to pay the tax arrears with a warning about the consequences of non-compliance with obligation on due term (TA $ 129). By way of compulsory execution the tax authority has the right: 1) to apply for a prohibition which is making visible the restraint on disposition to be entered in the land register or another properly register without the consent of the person concerned; 2) to apply for establishment of a mortgage on an immovable, a ship entered in the ships register or an aircraft entered in the civil aircraft register pursuant to the regulation conceming judicial mortgage provided in the Law of Property Act; 3) to make a claim for payment against financial entitlement; 4) to seize other proprietary rights, as well as apply for a prohibition which is making visible the restraint on disposition to be entered in the register maintained with regard to the rights; 5) to issue an order to freeze securities or a securities account pursuant to the provisions of the Securities Register Maintenance Act (for more information, please see: TA $ 130 sec. 1). A tax authority has the right to issue an order to a credit institution for the seizure of the bank account of a debtor or for the transfer of money from the bank account of a debtor to the bank account designated therefor in the amount of the tax arrears (TA S 131 sec. 1). The tax authority may apply to a bailiff for continuing the enforcement procedure for the collection of tax arrears, if enforcement actions performed by the tax authority have not yielded any results within reasonable time (TA $ 130 sec, 2). A tax authority may submit a petition for the declaration of bankruptcy of a taxable person as bankrupt if enforcement action taken by the tax authority or a bailiff does not result in the collection of tax arears (TA $ 133 sec. 3). In certain cases, if a justified doubt arises that the compulsory execution may become considerably more difficult or impossible as a result of the activities of the taxable person, it is possible ensuring enforcement before imposition of financial claim or obligation by the permission granted by the administrative court (TA $ 1361). 2(3) 2. Are 'overdue social-insurance-premiums receivables' subject to any limitation periods? If so, does the lapse of a limitation period for 'overdue social-insurance-premiums receivables' result in the expiry of the previously established security (e.g. the expiry of a mortgage on an immovable property)? Are 'overdue social-insurance-premiums receivables' subject to a limitation period also in the situation where the recovery of the overdue receivables has been secured (e.g. is it still possible to recover ooverdue social-insurance-premiums receivables' after the lapse of the limitation period, using the amount obtained from the sale of the property previously mortgaged to secure the payment of those overdue insurance premiums)? The limitation period for the compulsory execution of claims is in general five years. The limitation period for the compulsory execution of a claim for interest is five years, too (TA S 132 sec. 1-4). A limitation period is interrupted: 1) upon submission of an application to a bailiff for enforcement of collecting tax arrears; 2) upon declaration ofbankruptcy ofthe taxable person; 3) upon the entry into force of the administrative court ruling for provisional legal protection; 4) upon the entry into force of the ruling on reorganisation or of the ruling on the acceptance of the debt restructuring application for processing (TA $ 132 sec. 5). Tax liability and accessory obligations related thereto and other financial obligations collectable by the tax authority shall terminate upon the expiry of a limitation period for compulsory execution (TA $ 132 sec.8). with kind ,4 Andraš Tšitškan Head of the legal information and judicial training department Supreme Court of Estonia 3(3)