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REGISTER OÜ: Can the Estonian Tax and Customs Board Not Hear the Outbursts of Turnover of the Dying?

When VAT-liable companies are sold and bought not for the purposes of business – creating value – but milking the state dry (you and me, dear reader!) whose problem is it? VAT liabilities are forgotten, VAT rights are happily accepted, and the company is left to decline. The all-seeing eye of the Tax and Customs Board is temporarily blind, and its ears are deaf to the uproar of the dying.

A couple of days ago, the following offer landed in the mailbox of a company:

“Selling companies. VAT liable registered company – from 1,500€. All set up, VAT liable. Digital change of management board members within 24h. Completion of notary-certified sale of shares within 5 working days. Additional services: liquidation and mediation of companies, compiling annual reports, legal address services, consults, book-keeping services etc.’’

Neither the email nor the links in the text reveal who the seller is. This alone is warning enough that all is not quite right.

What does this sort of ‘sale of VAT liable companies’ mean?

This is legal scheming pure and simple – all is within legal bounds – that we have previously described here and, more recently, in the article Tax Obligation or Tax Injustice? Our current Estonian VAT system works on the naïve presumption that everybody with a turnover and issuing invoices always gets their money for the goods/services they sell – the money from which a portion is paid to the state as VAT. And that every VAT liable taxable person actually pays tax.

The reality is something quite else and frustratingly frequently the seller does not get paid – but this does not reduce the seller’s obligation to pay 20% VAT on the money the entrepreneur did not get to the state. 1/5 of nothing to be paid to the state in real hard cash – a loss commonly known as ‘out of your own pocket’.

Zero turnover is no obstacle to being a VAT liable taxable person

The precondition of becoming a VAT liable taxable person is that the company most have or must initiate economic activity. It takes a bit of creative thinking* to prove this to the Tax and Customs Board. The tax office on the other hand must check whether the VAT registered companies adhere to the conditions, including submitting VAT returns. If the VAT returns have not been submitted for six months, the taxman has the right to delete the company from the register of VAT registered taxable persons.

This is where it all gets fun – zero turnover does not stop anyone being a VAT registered taxable person, so you can submit your zero turnover VAT return, keep the VAT registration, and voila! – you can sell such companies on.

Why would anybody even want to buy a VAT registered company?

Setting up companies in Estonia is so quick, easy and cheap, and so is registration for VAT liability, so why on Earth would anyone want to pay thousands of euros for it? If I can start a company with only a hundred euros, why would I be willing to pay 1,500? WHY?

Moreover, a representative of the Estonian Creditors Association, Marie Rosin tells an enticing tale of her recent experience:

An entrepreneur approached her with a question whether this is an offer worth selling your company for: the company had roughly 1 million euros in turnover in 2016, but halfway through 2017 the company stopped transactions and, in the beginning of 2018, he was offered 10,000 euros for this inactive company. Rosin recommended not selling considering that most probably, the buyers wanted to misuse the company’s clean history and impeccable reputation. But having a former company conduct questionable and bad business would cast a shadow on the selling entrepreneur – because former relations to companies are visible on the business network , the entrepreneur’s Reputation Score would take a hit and this would in turn affect the Credit Score of his future business ventures.

With any kind of sales transaction, it is always the aim to pay less and get more. So, it follows that anyone buying a VAT registered company with no real assets and economic activity (including any sort of profits), is purchasing something else of value to the person. WHAT IS THAT?

In all likelihood, s/he is buying the possibility of earning dirty money. This possibility is input VAT deductions and the trust of sellers/suppliers – the seller presumes that a VAT registered company actually does have a turnover and economic activity.

Then, this freshly bought VAT-registered company concludes a purchase, but the invoice to the supplier is not paid; next, a sales transaction is completed without paying any tax on it (see an example along with calculations here), and finally, the company is left to decline, possibly at the hands of a straw man. We in Inforegister call this sudden awakening of otherwise comatose companies the final outburst of turnover before death arrives.

In conclusion, a company with good intentions and no turnover for months, has no use for VAT registration. It would only mean unnecessary reporting obligations and no direct benefit for the company.

Identify the first danger signs and act instantly

As an honest entrepreneur planning to do fair business generally has no need to buy an inactive company for a hefty sum of money, such schemes are easy to spot both for the Tax and Customs Board and the creditor (supplier/buyer).

  1. A company with zero turnover but valid VAT registration is a potential ‘commodity’ on someone’s shelf.
  2. A company with zero turnover but valid VAT registration changing the owner and board member simultaneously should be ringing alarm bells for the Tax and Customs Board.
  3. The new owner/executive has previously had problematic relations (debts, left companies to a straw man, etc).
  4. The seller (the leaving owner/executive) is a liquidator and/or at the helm of many inactive companies both with and without VAT registration.
  5. A person looking to buy a company should be made cautious by the unreasonably high price of the inactive company (starting from 1,500€!) and the fact that the identity of the seller is not easily ascertained. It does not pay off doing business with this sort if you want to protect your reputation.
  6. Supplier – do not sell to such a company without prepayment, because otherwise you might just lose your money. Do thorough research on every company that you trust your money with.

In summary

At the end of May 2018, a whole 152 Estonian companies were bankrupt and yet VAT-registered and a similar number of companies with valid VAT registrations were facing liquidation. This means that around 300 ‘done for’ companies still had access to the benefits of being VAT registered.

Valid VAT registration (May 2018)

No of companies

No of companies with tax arrears

Total tax arrears





In liquidation








At the end of the second quarter, (2018) Estonia had about 84,000 VAT registered companies not facing liquidation or bankruptcy. Out of these, 250 companies with no turnover but valid VAT registration had tax arrears amounting to 5.3 million euros. But we do not see here all of those that simply quietly wrote off the sums not received from the debtors – along with the VAT sums that the debtor did not pay to the creditor, but the state still collects.

Registered and valid VAT liability (May 2018)

No of companies

No of companies with tax arrears

Total tax arrears

2017 no turnover




2017 turnover








As with fighting against any true sins (drugs etc), life must be made impossible for both the provider and the purchaser – such companies should be made impossible to sell (their VAT registration withdrawn) and immensely inconvenient to buy (e.g., nobody willing to sell to such companies without prepayment).

If despite all this such transactions still take place, then both the Tax and Customs Board and possible business partners should keep a close eye on them.

*From the homepage of the Tax and Customs Board: When applying for a registration as a person liable to VAT, the person shall furnish proof of the fact that the person is engaged in business in Estonia or is about to commence business in Estonia. If the proof provided concerning the person’s business or commencement of business is insufficient, the tax authority shall have the right to request that the person submit additional proof or collect such proof on its own initiative. Proof is any information confirming that the applicant has either commenced business at the place of business stated in the application or has planned to start business. Such proof can be, for example, preliminary contracts, (commercial lease, procurement, delivery, employment, etc.) contracts, sites for work to be performed, etc

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*Maksuameti kodulehelt: …/Registreerimisavalduse esitamisel peab isik tõendama, et ta kas juba tegeleb ettevõtlusega Eestis või alustab seda. Kui isiku ettevõtlusega tegelemine või ettevõtluse alustamine ei ole piisavalt tõendatud, on maksuhalduril õigus nõuda isikult lisatõendeid või koguda neid omal algatusel. Tõend on igasugune teave, mis kinnitab, et avalduse esitaja on avalduses märgitud tegevuskohas kas alustanud ettevõtlust või ettevõtluse alustamine on kavandatud. Sellised tõendid võivad olla näiteks äriplaan, eellepingud, lepingud (rent, hange, tarne, tööd jms), tehtavate tööde objektid jne./…

REGISTER OÜ peavoolumeedias



REGISTER OÜ relations online

Names, keywords and adjectives about REGISTER OÜ from the depths of the Internet helping you to understand the essence of the company, its relationships, values and tragedies

REGISTER OÜ viimased sündmused




Personaalne sõnum.

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Kajastatud subjektid:Helen Kokk, Marie Rosin, ÖU OÜ, Peep Küngas, REGISTER OÜ, SCORIFF OÜ, Siim Käba, STACC OÜ, ZERO TECHNOLOGIES OÜ


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