From October, employees and their working hours must be registered at major construction sites
On October 1, amendments to the Taxation Act will enter into force, according to which general contractors and construction companies are obliged to register the persons present at the construction site in case of major construction works and to submit the relevant data to the Tax and Customs Board. The main goal of the change is to reduce tax losses in the construction sector and ensure fair competition.
In the future, entrepreneurs must provide the Tax and Customs Board with information about the building, construction works, about their customer and subcontractors performing construction works, and people present at the construction site (§ 2510 (2)). In order to submit and collect data, the Tax and Customs Board creates a database of employment chain and duration of employment.
The new requirements only concern major construction works
Entrepreneurs do not have to submit the aforementioned data to the Tax and Customs Board for each construction work - the changes only concern larger construction works. According to the law (§ 2510 (3)) major construction works are construction works which expected duration exceeds 30 working days and at least 20 persons are working on the construction site at the same time, or which expected volume exceeds 500 human labour days.
The new requirements will apply to major construction works starting on October 1, 2023, or later. In addition, the new requirements cover major construction works that began before October 1, 2023 and is expected to be completed on October 1, 2024 or later (§ 16818).
4 new obligations are added to the main contractor
In the future, the main contractor must provide the Tax and Customs Board with information about major construction works and the name and personal or registry code of the contractor of the construction works, or confirm the data displayed in the Tax and Customs Board's database at least three working days before the beginning of the construction works (§ 2511 (1) 1)).
In addition, the main contractor is obliged to ensure that an electronic registration system for workers is installed on the construction site (§ 2511 (1) 2)). The law states that the technical requirements of the electronic registration system are established by the Minister in a regulation, but at the moment the corresponding regulation has not come into force yet (§ 2513 (1)).
The amendment, which comes into effect on October 1, also stipulates that the main contractor must submit to the Tax and Customs Board once a day the total time of each person's stay on the construction site the previous day, and up to three times a week, in an impersonal form, the times of every person entering and leaving the construction site to the nearest second (§ 2511 (1) 3)). The main contractor must keep this data during the construction works and for four months after the completion of the construction works (§ 2511 (1) 4)).
New obligations of construction companies
Starting from October 1, every construction company, including the main contractor, must provide the Tax and Customs Board information about the major construction works it performs and the name and personal identification or registry code of the subcontractor from whom it buys or has bought services related to the construction of the building, or confirm the data displayed in the database before starting the construction works (§2512 1)). In addition, the construction company must indicate in the database of the Tax and Customs Board, if necessary, the persons who are allowed on the construction site (§2512 2)).
In the future, the task of the construction company is also to ensure that all persons entering and leaving the construction site are recorded in the electronic registration system by the persons the company has allowed onto the construction site (§2512 3)). This is necessary so that the main contractor can submit the data of all construction companies, i.e. subcontractors and their subcontractors, to the Tax and Customs Board.
As of October 1, every construction company must ensure that the people allowed to the construction site by the company have the necessary means of identification to enter and leave the construction site (§2512 4)). The identification tool can be a special smart card, which will be issued by the contractual partner of the Tax and Customs Board (§ 2513 (3)). However, it is also allowed to use other solutions, for example a mobile application, if it meets the requirements for identification tools. These requirements are established by the Minister by regulation, but this regulation has not yet entered into force (§ 2513 (2)).
A fine of up to 3,200 euros
If the main contractor or construction company fails to submit the necessary data to the Tax and Customs Board, it is possible to punish a legal person with a fine of up to 3,200 euros and a natural person with a fine of up to 1,200 euros (§ 154).
If you have any questions about the changes that will come into effect on October 1 and are related to construction works, please contact the Chamber's lawyers at the e-mail address juristid@koda.ee.
See also: The provisions of the Taxation Act concerning the registration of construction workers