Estonia: Company board member not liable for company’s VAT and income tax liabilities (Supreme Court decision)

A Supreme Court decision concerning VAT and income tax liabilities.

A Supreme Court decision concerning VAT and income tax liabilities.

The Supreme Court held that a taxpayer was not jointly and severally liable for tax liabilities (value added tax (VAT), income tax and social tax) of a company accruing during a period when the taxpayer was a member of the company’s board.

The tax authority argued that the taxpayer was to blame for the fact that the company had been stripped of assets and unable to pay its tax liabilities. Specifically, the tax authority submitted that while under the taxpayer’s leadership, the company operated in insolvency circumstances and adopted cash transactions, thereby violating the obligation to organize its business activities and, as a result of preferential treatment of other creditors, to pay taxes.

The Supreme Court rejected the tax authority’s arguments for the following reasons:

  • Only the shareholders of a private limited company have the authority to decide whether to transform or dissolve a company or not.
  • The tax authority failed to establish that the company was insolvent at a particular point in time.
  • There are no legal provisions that prohibit cash transactions. In addition, the use of cash does not mean that the amount of the company’s liquid assets has been reduced, if it has not been ascertained that financial assets have been drained from the company.
  • The tax authority failed to prove the taxpayer’s intentionality.  

Read a January 2023 report prepared by the KPMG member firm in Estonia 


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.