In previous article we have collected the most common mistakes of businessmen in accounting and document management to help you to avoid the troubles.
Today we will continue to list the associated TAX mistakes.
From 2018 y. enterprise exceed turnover of 40,000 euros per year have to register the company as tax-payer for VAT tax. The tax law provides the privilege for Start- Up businessmen, allowing them to work and not register a VAT number (KMKR number) until the turnover reaches 40,000 euros per year. This mistake could be discovered when the entrepreneur apply for the preparation of the annual report for financial year. In this case, you have to pay tax on the entire amount of turnover, which exceeded the limit established by law, as well a penalty for late payment of tax.
1) Firms with a tax number should also submit “zero” tax returns (KMD, KMD INF) and a declaration on income and social taxes, mandatory funded pension payments and unemployment insurance (TSD), even if the company has no activity and not payroll payments declared in TSD.
2) A terrible situation could happen when the firm provides the financial documents not in time. Especially a lot of problems and money losses are due to the fact that entrepreneurs do not bring documents to the accounting department, when it becomes necessary to declare turnover. The Tax Law states when determining the date of the turnover due to the principle of the earliest transaction:
– sending the goods to the buyer or provision of the service;
– full or partial receipt of payment for a good or service;
– consumption for own company needs, provision of goods or services to their employees.
3) Often, entrepreneurs bring the documents for their services and goods to the accounting department only when the full payment of the bill is received. Unfortunately, not on time declared turnover, as well as correction of VAT declarations can become a reason for revision of Tax Department. From 2017 y. the situation has become particularly transparent after the introduction of the KMD INF declaration form, where you have to register the all issued and received invoices between VAT taxpayers in Estonia, whose amount exceeds 1000 euros per month.
4) Sometimes businessmen are confused between personal and business resources. In Estonia, there is 0% corporate income tax, due to which there are in the accounting some freedoms. For example, the entrepreneur himself decides the limit of cost for fixed assets, and what will be their percentage of depreciation. The situation changes as soon as the entrepreneur decides to make expences from the company account. Then could occurred the special benefit taxes. It is important to keep in mind that any payments from the company, including expenses, are the subject of close attention of the Tax Department! Only expenses related to the entrepreneurial activity of the firm are not subject to additional taxes. Entrepreneurs do not always take this into account, pay their personal invoices from the companies funds, avoiding additional special benefit tax risks.
5) Many entrepreneurs are careless concern to registration, collection and storage of initial accounting documents. Absence of invoices, as well as their incorrect execution, can cost for the company special tax. Paid expences are not confirmed by invoices are subject to income tax of 20/80 or 25%.
Paying entertainment and food expences for company owner and employees from the firm’s funds involves additional special benefit taxes. In case of receiving guests and clients, there are small tax exemption. Food, restaurants, any other benefits for employees of the company are taxed from the first euro.
We listed only the most popular tax mistakes in business. But the nuances in accounting and tax accounting can not be considered, therefore, perhaps the most dangerous and costly mistake an entrepreneur to save on an accountant. We advise you to entrust your accounting and tax affairs to a qualified specialist, which will allow you to save money on penalties and use your time not to deal with government agencies, but concentrate entirely on business and on the main production operations.
