Estonian bank offers a service to automatically declare taxes on paid wages

Estonian bank LHV , in cooperation with the Tax and Customs Board, has launched a Salary Payment service, which can be used by entrepreneurs for the simultaneous payment of salary, declarations and payment of taxes in the LHV Internet bank without entering the e-Tax Board/e-Customs.

The new service primarily facilitates the declaration of salary for a small enterprise with simpler types of salary payments. When using the Salary Payment service, the enterprises are in most cases released from the obligation to enter data in different environments.

According to Andres Kitter, LHV’s Head of Retail Banking, Salary Payment is a unique innovation and a good example of how an open salary infrastructure and innovative public services can significantly facilitate the everyday operations of an entrepreneur. “On the one hand, we updated – in cooperation with the Tax and Customs Board – the possibilities available to small and medium sized enterprises for paying a salary to their employees; on the other hand, however, the state’s tax revenues can now be declared in a completely novel way,” Kitter explained.

“We developed the Salary Payment solution while taking into consideration the needs of enterprises and prepared a flexible solution, now we invite all enterprises to try it out in the LHV Internet bank. Salary Payment is also a positive example of open banking, since in good cooperation with the tax authority we can now offer the clients better and more convenient operations,” Kitter added.

According to Evelyn Liivamägi, Head of the Tax Department at the Tax and Customs Board, the new service, developed in cooperation between the bank and the authority, presents an example of how a declaration-free entrepreneurship can be a perfectly feasible goal. “Our aim is to eliminate the need for switching between different environments for complying with one’s tax obligation. Upon request, data transmission must also be possible through the systems that the enterprises are using anyway in their everyday operations,” Liivamägi explained.

“With the automation of data transmission between the enterprises and the state and by expanding pre-population, it is possible to significantly cut the time spent by entrepreneurs on state-enterprise communication and increase the time spent on the development of their enterprises. Next, we plan on decreasing the burden of submitting data for those enterprises who use the enterprise resource planning software, when, starting next year, it will be possible, under the project “Aruandlus 3.0”, to forward remuneration-related tax information to the tax authority through their enterprise resource planning software,” added Liivamägi.

The Salary Payment service can be used for six different payments to a private individual: 1) salary, 2) remuneration of a management board member, 3) remuneration based on a contract under the law of obligations, 4) sick pay, 5) payment of minimum social tax, 6) payment of a taxable dividend. All other types of payments to employees and payments to non-residents must be declared as before.

When using the service, the LHV client can determine the respective features of the transfer (e.g. salary payment, rate of working time, calculation of tax-free income) in the Internet bank. The bank sends the source data for taxation to the Tax and Customs Board, who automatically calculates the amount of payable tax based on the person and returns to the bank the information on tax amounts to be paid in such a way that when making the transfer, the client can already see the related tax liability. The tax amount can be paid either immediately together with other payments or at a later date. The payments can be saved for making future salary payments together.

The development of the application by the Tax and Customs Board was financed from the European Regional Development Fund

Source: LHV Bank

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