This issue of InfoCourier covers the following topics:

  • Amendments to the Income Tax Act
  • Simplified procedure for eyesight examination of employees and reimbursement of glasses

Please feel free to contact KPMG’s tax advisers with any queries you may have.
We hope you are enjoying reading it!

Amendments to the Income Tax Act

List of non-cooperative jurisdictions was adopted

In March 2021, a bill of amendments was passed with the primary aim to replace the regulation of low tax rate territories in the Income Tax Act (§ 10) with the EU list of non-cooperative jurisdictions for tax purposes. Currently, the EU list is composed of American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, US Virgin Islands, and Vanuatu. The list was last updated in February 2021 and it will continue to be updated twice a year – in February and in October.

Email

In 2019, the guidelines for non-cooperative jurisdictions for tax purposes were approved. Based on the guidelines, EU member states must apply at least one of the following countermeasures:

(1) a prohibition of deductions of certain costs;
(2) controlled foreign company rules;
(3) limitations in tax exemption rules or in the withholding of income tax.

Estonia has already applied the measures and the amendment will extend them to the jurisdictions in the EU list. The amendment will enter into force on 1 July 2021.

Equal calculation of basic exemption for residents and non-residents

Another amendment will equalise the calculation of basic exemption for a natural person who is a resident of Estonia and for a natural person who is a resident of another Contracting State of the EEA Agreement (Income Tax Act, subsection 11 (3)). In the previous version of the Income Tax Act, a natural person residing in another Contracting State could use the same exemptions on the income earned in Estonia as a natural person residing in Estonia, but a different procedure for the calculation of exemptions was applied: Estonia’s residents could deduct basic exemption continuously, while residents of another Contracting State were only able to deduct it for the whole year when they submitted their income tax returns.
In addition, it is stipulated that similarly to residents of Estonia, natural persons who reside in other Contracting States do not have to submit income tax returns if their income does not exceed the rate of basic exemption or if their income during the taxation period is not subject to additional income tax (excluding non-residents who derive taxable business income in Estonia or who wish to use the right of recalculation of income tax). The amendments will enter into force on 1 January 2022.

Tax exemption for per diems and other expenses reimbursed by certain agencies

Furthermore, per diems paid to officials and employees who participate in long-term secondments and short-term assignments of the European Border and Coast Guard Agency (Frontex) as well as in the missions of the asylum support team of the European Asylum Support Office (EASO) are exempt from income tax if the per diems do not exceed the respective ceilings set by the agencies. Travel, accommodation and other expenses reimbursed by the agencies are also exempt from income tax. The purpose of the amendment is to guarantee equal treatment in terms of taxation of costs reimbursed to national experts at EU institutions or agencies and to those who participate in civilian missions. The amendment entered into force retrospectively on 1 January 2021.

More information on the bill is available here (in Estonian).

Further information: Tax Advisor Ave Rego, averego@kpmg.com

 

Simplified procedure for eyesight examination of employees and reimbursement of glasses

The Government approved in February amendments to the regulation concerning the occupational health and safety requirements for work with display devices. The amendments entered into force on 1 March 2021, stipulating that:

  • An employer can offer an employee eyesight examination also during intervals between medical examinations.
  • In addition to occupational health doctors and eye specialists, optometrists may also perform eyesight examination.
  • The reimbursement of costs is extended to cover general visual disorders (previously the regulation set out that costs were to be reimbursed only for visual disorders caused by work with display devices).
  • For work with display devices, an employer must provide their employees with glasses or other optical accessories to correct their clarity of vision, if necessary, or must reimburse the employees the costs related to the accessories. The reimbursed sum is paid out by an employer on the basis of a certificate (an optometrist’s decision, an eye specialist’s prescription or an occupational health doctor’s decision). The previous tax exemption that applied to costs and reimbursements is now extended to optical accessories deemed necessary by an optometrist.

More information on the bill is available here (in Estonian).

Further information: Tax Advisor Ave Rego, averego@kpmg.com