Tax & Legal Updates
Latest tax and legal news prepared by our professionals from Tax Department and Law Firm Deloitte Legal
Amendments to the Estonian Income Tax Law, Value Added Tax Act and Traffic Act
The Estonian Government has prepared a draft law, in order to implement a series of tax amendments.
Amendments, that are planned to come into force on 1 July, 2017
- Changes in the taxation of the employee’s transport expenses. According to the draft law, the employer’s expenses related to the employees’ transportation will not be taxable as fringe benefits, in case the transportation by bus in accordance with the Traffic Act is organized or if the employee lives at least 50 kilometres from the workplace.
- Changes in the taxation of the employees’ share options. The aim is to establish that the period between the issuance of the share option and its realization, in order to receive a fringe benefit, does not have to be 3 years, in case of the transfer of shares of the company or the death of the employee. This way the amount taxable as a fringe benefit would only be the part left from those three years.
- Changes in the taxation of the employee’s accommodation expenses. The aim of the amendments is to make the reimbursement of the accommodation expenses of the employee exempt from taxes for the employer, in case, where the need for accommodation is related to the business of the employer itself, the expenses are within the marginal rate established by law, the employee’s home is at least 50 kilometres far from his place of work and the employee does not own any residential real estate, which would be located closer by.
Amendments, that are planned to come into force on January 1, 2018
- In case a personal car is used for business purposes, the parking payments made during the course of performance of the professional duties, can be reimbursed by the employer without any tax liability.
- In case, where an employer is enabling an employee to use the company’s car for personal purposes, it will now be possible to calculate the fringe benefit only on the kilowatt basis, regardless of the distance travelled. Also, an obligation to inform the Estonian Road Administration about using a certain car only for business purposes has been added.
- The resident credit institutions and the Estonian branches of the non-resident credit institutions shall have an obligation to pay the advance payments of income tax at the rate of 14% from the profits earned in the previous quarter. The advanced payments will have to be made by the 10th calendar day of the 3rd month of the ongoing quarter.
Tax on sweetened drinks
According to the new draft law, the aim of taxing sweetened drinks is to influence the consumption, i.e. make the manufacturers add less sugar to drinks, as well as to influence consumers into consuming less sweetened drinks. The taxation rate depends on the sugar level in every drink and is planned to come into force on January 1, 2018.
Taxation of the business income
The aim of the draft law is to favour the micro-entrepreneurship, as well as to improve the taxation-related behaviour of the micro-enterprises. In order to achieve that, the taxation of services provided and goods sold by an individual will be made easier and is executed through the separate business bank account The tax amount (at the rate of 20%) will be automatically transferred to that account from the income received during taxation period. The law is planned to come into force on January 1, 2018.
Tax interest 0.06% per day is in compliance with the Estonian constitution
The Estonian Supreme Court’s Constitutional Supervision Board has decided on 29 March 2017 that the tax interest rate 0.06% per day is in compliance with the Estonian constitution and there is no reason to believe that the respective interests rate could have any kind of hidden agenda, in particular, intended as a tool to punish the taxable persons or to earn the additional tax income to the state resources.
Looking to invest? Estonian crowdfunding solutions might be just right for you
There was a time when the word “crowdfunding” meant that someone was probably trying to rip you off. Those days are gone and crowdfunding has become an incremental option on the market that offers businesses and individuals a good alternative for turning their ideas into reality.
Estonia has noticed its potential and it should come as no surprise that there are a handful of crowdfunding platforms originating from Estonia, tens, if not hundreds, of successful fundraising campaigns and a countless number of not-so-successful attempts and of course, a lot of investors.
Full article can be read here.
More information: Merit Lind, Head of Law Firm Deloitte Legal, firstname.lastname@example.org
Intragroup services caught the attention of the tax authority
On the international level, intragroup services are quite challenging for tax authorities, as companies use these transactions (of course, also other transaction types as loans etc.) to optimize with taxes. Services are commonly used for shifting untaxed profit to a country, where lower income tax rate applies. Therefore, the intragroup transactions have caught the interest of the tax authorities and are being constantly monitored.
Full article can be read here.
More information: Krisli Klaarman, Deloitte Advisory Tax Advisor email@example.com
Changes in the Commercial Code and other Associated Acts
The Estonian Parliament Riigikogu has passed the Act on the Amendments to the Commercial Code and other Associated Acts. The amendments primarily concern the location of the legal persons and their management boards or the bodies substituting those, as well as abolish the possibility to personally attend the offices of the Commercial and Land registries.
Currently both a company and its management board must be located in Estonia. With the new amendments this requirement is being abolished, which means that as of 15.01.2018, when the new law comes into force, it will be possible to manage the Estonian companies also from abroad.
Another change concerns the fact that as of 01.07.2017 the Commercial and Land Registry departments are not going to offer the on-site services anymore, which means that in order to have a look at and make copies of the Registry information and file documents (including the information from the Commercial Registry and Land book) it will be necessary to either do it electronically or make an appointment with the notary’s office.
Read more here.
More information: Natalia Aleksejeva, Law Firm Deloitte Legal Attorney, firstname.lastname@example.org
The indiscriminate collection of data by telecom operators remains incompatible with the EU law
At the end of last year, the European Court of Justice (ECJ) in its decision of 21 December in the case Tele2 Sverige AB (C-203/15) has explained that the general obligation of telecom operators to preserve the traffic data of the electronic communication service users, including all the data on the persons, electronic communication devices and other related data, is inconsistent with the EU law.
However, in Estonia, the valid Estonian Electronic Communications Act still unrestrictedly obligates the telecom operators to retain the communications data of all the persons.
Full article can be read here.
More information: Sander Hein, Law Firm Deloitte Legal Associate, email@example.com
March 2017 newsletter can be read here.
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