close
Share with your friends

Infocourier - January 2020

Infocourier - January 2020

InfoCourier provides a monthly overview of the latest changes in legislation.

1000
Joel Zernask

Partner, Head of Tax Services

KPMG Baltics OÜ

Contact

Related content

InfoCourier - January 2020

Income Tax Act

23 (4) Basic exemption – the recipients of maternity benefit paid out in the fourth quarter of a taxation period (e.g at the end of the year) can now delay a portion of the benefit into the next year. In this way their basic exemption is not reduced and they do not have to pay additional income tax. 

23 1 (1) Increased basic exemption upon provision of maintenance to child – the additional annual tax-free income is now 3,048 euros starting from the third child (an increase of 1,200 euros).

23 1 (2) Increased basic exemption upon provision of maintenance to child – the parent’s additional tax-free income will not be reduced if a child receives survivor benefits or state pension upon the loss of a provider.

34 When tax arrears are paid in instalments, the interest paid on the arrears is no longer taxable.

44 Tax returns – the deadline for filing tax returns was delayed to April 30.

45 Calculation of income tax paid abroad – as from 2020, the taxable income (incl pensions) that an Estonian resident has received abroad is subject to the same deductions that would have been allowed if the income had been received in Estonia. The full extent of deductions can be claimed also in case the bulk of income has been received abroad.

46 Payment and refund of income tax – the deadline for the payment and refund of income tax was delayed to October 1.

47 Advance payment s – the threshold for advance payments of sole proprietors was raised to 300 euros (from 64 euros).

48 Income tax on fringe benefits – compensation for public transport fares paid for employee’s transport between home and work is no longer taxed as a fringe benefit.

54 5 Exit tax – an Estonian resident company who transfers assets from Estonia to a permanent establishment in another state or from a permanent establishment in Estonia to a head office abroad, is taxed based on the market value of the assets. 

§ 54 7 Income tax on amount giving rise to mismatch in tax outcomes – certain amendments have been made with a view to avoiding double taxation caused by a mismatch arising from differences in classification of financial instruments, payments and entities by different jurisdictions, or differences in the rules for allocation of payments between the head office and a permanent establishment or between two or more permanent establishments of an entity.

More information on the amendments to the Income Tax Act and the related amendments to other acts is available here (in Estonian).

Taxation Act

  • Chapter 11 When tax arrears are paid in instalments, the tax authority has the right to reduce, retrospectively, the rate on interest charged on the arrears by up to 50 per cent as of the date when the arrears were created.
  • Chapter 14 1 Resolution of double taxation complaint – a more detailed procedure was established for settling double taxation disputes between EU member states arising from the application and interpretation of tax treaties.

Value-Added Tax Act

  • There has been a change in the taxation rules for goods supplied to another member state with the intention of creating a stock for a known customer (call-off stock). If the goods are to be called off within a 12-month period, such supply of goods does not give rise to tax or reporting obligations in the other country.
  • Another change concerned the taxation of chain transactions. These amendments were discussed also in the November issue of InfoCourier.

Alcohol, Tobacco, Fuel and Electricity Excise Duty Act

  • The excise duty on cigarettes and smoking tobacco increased by 5% and 8% respectively.
  • The annual production limit for small breweries eligible to 50% reduced excise rate was increased from 6,000 to 15,000 hectolitres.
  • Gas intensive companies benefiting from a lower rate of excise duty now include companies who produce electricity and thermal energy as an activity ancillary to their main production (e.g the growers of glasshouse produce). These amendments were discussed also in the November issue of InfoCourier.

Securities Market Act

  • In case a consumer credit contract references a benchmark index (e.g Euribor) as the basis for determining the amounts to be paid, the consumer must be provided with accurate information on the index, including the full name of the index and its administrator, and the consequences that may arise from the use of the index.

Amendments to the Funded Pensions Act (reform of the mandatory funded pension scheme)

A bill on amendments to the Funded Pensions Act and the related amendments to other acts is currently undergoing the second reading in the Riigikogu. The bill proposes changes to the second pension pillar, increasing the options available to people saving for retirement. These are the most significant amendments:

  1. people can choose whether they want to stay in the second pillar or leave it – joining or leaving the second pillar will be optional for everyone;
  2. as an alternative to pension funds, people will also have the option to invest their retirement funds themselves through a personal pension investment account;
  3.  subject to certain conditions, people will be permitted to withdraw funds from the second pillar before the retirement age;
  4. after reaching the retirement age, everyone can choose how they wish to use the accumulated pension wealth.

More information on the amendments to the Funded Pensions Act and the related amendments to other acts is available here (in Estonian).

Additional information: Tax Advisor Einar Rosin, erosin@kpmg.com

Amendments to the Law of Ship Flag and Registers of Ships Act and Amendments to the Income Tax Act and Other Associated Acts

The bill is currently undergoing the second reading in the Riigikogu. It sets out in more detail the special tax treatment for the shipping industry established in February 2019, and brings it in line with the state aid rules of the European Union.

More information is available here (in Estonian).

Additional information: Tax Advisor Einar Rosin, erosin@kpmg.com.

Mandatory Disclosure Regime – reporting cross-border transactions

The act on amendment of Tax Information Exchange Act was passed by the Riigikogu. The EU Directive on Administrative Cooperation in the Field of Taxation has been amended as the member states agreed on the automatic exchange of information on reportable cross-border arrangements, with a view to increasing the transparency of tax planning and tax regimes. The act transposes this amendment into national law.

The law concerns mostly tax intermediaries – tax advisers, credit institutions and lawyers – who design cross border tax-planning schemes for their clients and companies who engage in cross-border transactions. In some circumstances, however, the reporting obligations may fall on the taxpayer instead.

Information must be disclosed about three types of cross-border arrangements:

  • arrangements with potential implications for taxation;
  • arrangements that may help to avoid exchange of information on financial accounts;
  • arrangements that may help to hide ultimate beneficial owners.

An arrangement is reportable if it involves a cross-border aspect and if it meets at least one of the criteria established by a regulation of the Minister of Finance. A regulation also provides a list of information that must be disclosed to the tax authority.

It is important to note that the reporting obligation relates to direct taxes (primarily income tax). Value-added tax, custom and excise duties, social security contributions and state fees fall outside the scope of the directive.

The amendment took effect on 1 January 2020.

Additional information: Tax Advisor Einar Rosin, erosin@kpmg.com.

© 2020 KPMG Baltics OÜ, an Estonian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. 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.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal