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The Riigikogu passed legislation on 15 April 2020 for mitigating the economic and social consequences of the Covid-19 outbreak. Tax-related measures are described below.
Interest on tax arrears is not charged from 1 March 2020 until the end of the state of emergency.
* Charging interest is suspended automatically – the taxpayer does not need to request it specifically.
* Tax returns should still be filed in a timely manner.
* The suspension of interest does not mean a general tax exemption: if a taxpayer falls behind with payments, tax arrears would still arise. Despite the suspension of interest, entities tendering for public contracts are therefore advised to pay their tax liabilities or to apply for payment in instalments.
From the end of the emergency state until 31 December 2021, a lower tax interest rate will apply (reduced 0.06% to 0.03% per day).
* The interest rate is lowered automatically – the taxpayer does not need to request it specifically.
From 1 May 2020 to 31 December 2021, the tax authority may decide to reduce interest by up to 100% (i.e. to zero) if tax arrears are paid in instalments, as from the date the taxpayer decides to apply for payment in instalments.
* The tax authority makes the decision on interest reduction based on the specific situation and difficulties faced by each entity.
* The taxpayer has to apply for the reduction of interest.
The tax authority is granted the right not to disclose information on tax arrears in the period from the declaration of emergency on 12 March 2020 to the date when two months have passed since the official end of the emergency state.
* The tax authority has announced that the public debt inquiry tool has been temporarily closed down as, for the time being, it does not provide a true reflection of companies’ regular performance. The list of tax debtors whose tax arrears arose before 1 March 2020, however, remains available.
The tax authority has the right to disclose information containing tax secret to government offices and to persons involved in reviewing and implementing measures to support businesses affected by the effects of the Covid-19 pandemic.
The reduced 9% VAT rate applicable to paper-based books and educational materials is extended to electronic books and educational materials, as well as on publications on other physical media (e.g. books in audio formats). The amendment took effect on 1 May 2020.
The reduced VAT rate is applied also to electronic newspapers and magazines, excluding publications mainly containing advertisements or personal announcements, or publications with mainly erotic, pornographic, music or video content. The amendment took effect on 1 May 2020.
Customs duties and VAT are waived on the import of personal protective equipment and other medical equipment used to combat the spread of the Covid-19 virus. The exemption is based on a decision made by the European Commission.
* If the import of goods is exempt from VAT under section 17 of the Value-Added Tax Act as in this case, the intra-Community acquisitions of these goods are also covered by the exemption.
* A zero VAT rate is applied also on domestic sales of the said goods in accordance with section 15(3)14) of the VAT Act.
* It is important to note that the duty and VAT exemption is temporary and is applied from 30 January to 31 July 2020. The European Commission has assured that the period may be extended if necessary.
* The duty and VAT exemption applies to:
- state organisations, including state bodies, public bodies and other bodies governed by public law;
- organisations approved by the competent authority;
- businesses that supply goods to the above persons (supplies on behalf of entitled persons), provided there is a written agreement to this effect.
* Further information (in Estonian) is available on the tax authority’s website.
* The amendment took effect on 22 April 2020 but it is applied retrospectively as from 30 January 2020.
The amendments take effect on 1 July 2020.
Income tax is not charged on gifts or donations made for charitable purposes by legal persons from 12 March to 1 July 2020 to Estonian state or local government authorities or social welfare institutions or to hospitals in Estonia. The aim of these amendments is to grant a temporary income tax exemption to donations made to hospitals which, even if established as foundations, are not treated as tax-exempt charity organisations in regular circumstances. The amendment took effect on 22 April 2020 and is applied retrospectively.
A private individual or a sole proprietor may additionally deduct up to 5,000 euros from the income derived from the sale of timber felled on the land owned by the individual and from the transfer of the right to cut the standing crop growing there, as well as from Natura 2000 support for private forest land. The aim of the amendment is to give the owners of forest land a stimulus to manage their forest themselves instead of selling it. The amendment is applied retrospectively as from 1 January 2020.
The amendments are applied retrospectively as from 1 March 2020.
The amendment is applied retrospectively as from 12 March 2020.
The excise duties on some fuels and electricity are reduced temporarily from 1 May 2020 to 30 April 2022 to mitigate the effects of the state of emergency. The table below shows the current and reduced excise rates.
The amendment took effect on 1 May 2020.
In March 2020, the Riigikogu passed an Act on Amendments to the Commercial Code with the aim of simplifying the transfer of shares of private limited companies. The main amendments are:
- provided that the disposition for the transfer of a share is executed in a format which can be reproduced in writing,
- all shareholders consent to using the simplified procedure;
The amendments take effect on 1 August 2020.
The circuit court has examined the obligation to file a tax return in a case brought by a natural person living and working abroad. The view held by the Tax and Customs Board was that the person was obliged to file a tax return in Estonia, reporting also any income received abroad. The Tax and Customs Board claims that the person should be treated as an Estonian resident as the person owns property in Estonia and is associated with Estonian businesses.
The tax authority did not raise doubts about the fact that the person lives and works in Norway and receives their main income there. The tax authority, however, ignored the fact that the person has never lived in their property in Estonia and that the businesses they are associated with in Estonia have been deleted from the Commercial Register or are no longer in active operation. The person has, furthermore, produced a tax residency certificate from the Norwegian Tax Administration, proving their Norwegian tax residency.
The court found that the identification of the person as a tax resident in Estonia was not grounded in sound reasoning and that the tax authority’s decision was not based on a sufficient analysis of residency and other relevant circumstances. The tax authority has thus acted in breach of the principle of investigation and other tax processing practices (obligation to provide explanation, etc.). In the Court’s opinion, there is no proof that the person has closer personal and economic relations with Estonia, which would justify being treated as a tax resident in Estonia. Therefore the Court has overturned the Tax and Customs Board’s tax decision.
More information is available here (in Estonian).
Additional information: Tax Advisor Einar Rosin firstname.lastname@example.org
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