TSD explained for small companies

Most small companies in Estonia meet the TSD only when they first pay someone. The TSD is the monthly employer return. It reports the income tax and social tax on the salaries and other payments the company makes, and it reports the income tax on a distribution of profit. This guide explains what the TSD covers, when a small OÜ must file it, the deadline, and what Sapita does and does not do for it in the first release.

What the TSD reports

The TSD is filed for a month in which the company made a payment that carries tax. The main payments are salaries, board fees and dividends. For each payment, the return shows the amounts withheld from the recipient and the amounts the employer must pay, such as the income tax and the social tax on the salary.

The return also reports the income tax that the company pays on a distribution of profit. A dividend paid in a month appears in that month's TSD, and the tax on it is calculated as explained in the guide on salary and dividends. The rate and the annex of the return are set in law and in EMTA's guidance, so check the current form before you file.

The return is named for its purpose, a monthly declaration of the employer. It is not a return for the company's profit. Profit is reported in the annual report.

When a small OÜ must file it

A company must file the TSD in a month when it pays a salary, a board fee or a dividend. A company that pays nobody in a month has nothing to report for that month, and it does not need to file a return with zero figures for it. Check the current EMTA rule before you rely on this, because the filing duties depend on the type of payment.

Three common cases:

• A salaried owner. The company pays a salary every month, so it files a TSD every month.
• A dividend only. The company pays no salary but distributes a dividend in March. It files the TSD for March, and the tax on the dividend is due on 10 April.
• A board fee. A board member who is not an employee receives a fee. The fee is reported in the TSD for the month of payment.

The deadline

The TSD for a month is due on the 10th of the following month. A payment made in May is reported in the TSD due on 10 June. If the 10th is a weekend or a public holiday, the deadline moves to the next working day. The Sapita calendar shows the date and the reason when it moves, for the months in which the company has a TSD item.

The deadline is strict. Interest runs on late tax, and a late filing can lead to a penalty. Plan the cash for the tax before you pay the salary or the dividend, so the money is there on the due date.

What Sapita does and does not do

In the MVP, Sapita does three things for the TSD. It shows the TSD as an item on the calendar in the months when a salary, a board fee or a dividend is recorded. It explains the return in the guide and in the help text. It gives you the amounts that the books record for those payments, so you can check them.

Sapita does not generate the TSD file, does not submit it and does not calculate the payroll for you. You file the return in e-MTA yourself, using the figures you have checked. This is a deliberate limit of the first release, and the calendar says so next to the item.

Working out the amounts

The amounts in the TSD come from the payments, so the first step is to record each payment correctly. A salary entry shows the gross pay and the deductions, and a dividend entry shows the net amount paid and the tax. If a payment is recorded with the wrong amount, the TSD will show the wrong amount too.

Two checks help. Compare the total of the month's payments with the bank statement, so you know that every payment was made and recorded. Then compare the tax figures with the rates in force for the year. If the two do not agree, find the difference before you file.

A simple monthly routine

1. In the month of a payment, record the salary, board fee or dividend with its date and its recipient.
2. Check the bank line for the payment, and match it to the entry.
3. Look at the calendar for the TSD item of the month, and note its due date.
4. Before the 10th of the next month, check the amounts, prepare the return in e-MTA and file it.
5. Pay the tax by the same date, from the company account.

This guide is education, not tax advice. The exact content of the return and its rates are set by EMTA and by the law, and a company with unusual payments should confirm them with an adviser.

Key terms in this guide

• TSD: the monthly employer return.
• Income tax on distributions: the tax charged when profit is paid out.
• Dividend: a payment of profit to shareholders.
• E-MTA: the online service where the return is filed.
• Liability: an amount the company owes until it pays.
• Payable: an unpaid bill, including tax due.
• Journal entry: the record of each payment.
• Bank statement: the bank's list of the payments you match.
• Reconciliation: matching each bank line to its entry.
• Cash position: the money you have before a payment falls due.
• Retained earnings: the profit a dividend is paid from.
• Owner loan: money between the owner and the company.

Sources

• EMTA, income and social taxes, including the TSD and the tax on distributions: emta.ee
• Income Tax Act (tulumaksuseadus), Riigi Teataja: riigiteataja.ee
• Social Tax Act (sotsiaalmaksuseadus), Riigi Teataja: riigiteataja.ee