Starting on 1 October 2023, amendments come into force under which construction contractors must register the construction site and contracting chain in the Tax and Customs Board’s subcontracting chain and working time information system.
The main reporting obligation entailed by the amendment pertains to main contractors, but the reporting obligation actually applies to all construction companies engaged in construction works beyond a certain scale.
The purpose of the changes is to increase tax compliance in the construction sector – according to the Tax and Customs Board, payment of unreported wages resulted in tax losses of 14.3 million euros and 13.7 million euros of VAT not received. The amendment also promotes compliance with workplace requirements and regulates employment of foreign nationals in Estonia.
The registration obligation applies to construction sites where construction starts 1 October 2023 and later, and sites in progress expected to be completed later than 1 October 2024.
Additional criteria have been established as well to keep things in proportion. Only large-scale construction projects that meet one of the following two criteria must be registered.
The main contractor is obliged to file data in the e-services environment of the Tax and Customs Board concerning the building being built, the construction works and data on the contracting entity, at least three days before the construction work begins. Since the Tax and Customs Board has access to the Building Register, the data have mainly been pre-filled and the main contractor must confirm that these are authentic.
All construction companies (including the main contractor) are obliged to file data on the construction work they are performing and the data on their subcontractor(s), meaning that contractors on each level are obliged to register the subcontractors they have hired. Data must be submitted at the first opportunity before construction works are launched.
That means that the main contractor registers the site and submits the data on their subcontractor. The subcontractor in turn is obliged to register the subcontractors they have hired and so on, until the full contracting chain can be discerned.
The amendment requires all employees on the site to register the time of their arrival and departure. The time is registered electronically through smartcards issued by a Tax and Customs Board partner (Hansab AS) or other authentication device compatible with the registration system (e.g. mobile app).
The electronic system must automatically transmit to the Tax and Customs Board:
The main contractor must ensure that the required electronic registration system is used on the site and that the data are sent to the Tax and Customs Board. Above all, the main contractor must regulate this through contracts entered into with subcontractors. All construction companies are obliged to ensure that the persons allowed on to the construction site record their time worked in the required manner.
The requirements are applicable to all persons permitted to enter the construction site, such as visitors and others who are on the site but are not working there. An exception is transport workers, whose entry and exit do not have to be registered separately provided that they are not involved in the construction work.
The legislation mandates a penalty payment of up to 3300 euros (up to 1300 upon first violation and up to 2000 the second time) for non-performance of obligations and the possibility of misdemeanour proceedings, but for now, Tax and Customs Board enforcement is aimed more at training and implementing changes than penalization.
The smartcards necessary for registering working time must be ordered by the employer from a special Hansab ordering environment (https://helk.hansab.ee/). Management board members have automatic access to the environment and after logging in they can designate persons who can submit orders for the cards on behalf of the company. Orders may be submitted by management board members of companies or persons authorized thereby.
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