VAT 20% as of July 1

Value added tax will increase from 18% to 20% as of July 1, 2009.

Unfortunately no additional information available in English from government sources.

VAT taxation information at the Estonian Tax and Customs Board: telephone +372 880 0813, e-mail: kaibemaksemta.ee

Real Estate Market Report 2009

Read the report here

new business center

Report published by Ober-Haus real estate agency and Sorainen law office.

A quote from the report:

More than 100,000 sqm of new office space flooded the Tallinn market in 2008, bringing the total to 250,000 sqm. The total stock of A class and B class office space reached 500,000 sqm by the beginning of 2008. The largest developments of 2008 include the first phase of  Ülemiste City (10,000 already delivered but which plans another 160,000 sqm of office over seven years), Delta Plaza (15,500 sqm delivered) and Tammsaare 49 (22,000 sqm delivered). Due to the downturn in the economy, however, almost all future developments has been postponed.

Swedbank to establish Baltic real estate company

Due to a growing number of confiscated properties in the Baltic States, Swedbank “will become a real-estate company” in the region, the bank’s CEO said, The Swedish Wire writes.

In the trail of the financial crisis in the Baltic States, Swedbank, the region’s largest lender, is likely to end up with large assets in real-estates, confiscated from customers that fail to pay interest.

“We will become a real estate company in these countries within a few years”, said Swedbank’s CEO Michael Wolf in a speech at the political event Almedalen Week on the island of Gotland on Tuesday.

Read more from BBN here

Construction of Bauhaus store begins

Real estate developer Häuser Oberschneider has started the construction of international construction goods retailer Bauhaus’ first store in Estonia in the Lasnamäe borough of Tallinn.

The store in the Tähesaju City, located on the crossing of Mustakivi and Laagna roads, will cover 20 000 square meters, making it the largest construction goods shop in the country, said Paul Oberschneider, the CEO of Häuser-Oberschneider OÜ. 

The construction works are due to be completed by April 2010. The building contract has been signed with construction firm OÜ Fund Ehitus and the estimated investment into the development will be EEK 220 million, which will be covered from internal resources, added Oberschneider.

More than 100 000 articles are sold in the Bauhaus shopping centres for workshops, house and garden. Both private customers and small businesses find a wide assortment of quality products with competitive prices under one roof in all Bauhaus countries. All stores across Europe are based on one concept, with a full lineup of goods and a culture of best quality of service, said Marina Vahtola, general manager of Bauhaus in Finland and Estonia.

The choice of products in the Estonian Bauhaus store will be based on the latest trends in European demand and Bauhaus expects to compete by providing Estonian clients with a positive new choice in goods, services, and customer service, said Bauhaus shopping centre manager Priit Jamnes. 

OÜ Häuser Oberschneider, focused on the development of retail space, has since 1999 developed altogether 90 000 square meters of shopping areas, with the Norde Centrum, Lasnamäe Centrum and Lasnamäe Prisma the best known in Estonia.

Bauhaus, established in 1960, is a privately owned, German network of shopping centres with around 200 branches in 14 European countries: Germany, Austria, Spain, Croatia, Denmark, Sweden, Norway, Switzerland, Turkey, Slovenia, Czech Republic, Hungary and Finland. The next Bauhaus centres will be unveiled in Estonia and Iceland, the closest Bauhaus stores to Estonia are currently in Finland in Espoo and Vantaa. 

Upon completion Tähesaju City will house mainly different interior design, construction goods and home electronics stores on 100 000 square meters.

Economist: raise of VAT rate will deepen recession

The upcoming increase of VAT rate and raise of excise duties on motor fuel will deepen economic recession, not ease it, says economist Viktor Trasberg. Trasberg who teaches economics in Tartu University says that Estonian government is doing the same what IMF did in Latvia. “In Latvia, the extremely incompetent recommendations of IMF to increase consumption taxation and decrease income tax put Latvian economy into a state of coma. It seems that we will do the same in Estonia, but without help from IMF,” he writes in Eesti Päevaleht.

According to him, increasing consumption taxes will push up prices and fuel grey economy. Another downside is that tax burden will be even faster shifting from the affluent middle classes to the poorer population and that the state will be depending only on one type of tax revenues. “Richer people can buy goods from abroad, poorer people are stuck with what they have got. This is likely to increase the wealth gap further.”

Read more from BBN here

Estonia invites Germans to the vacation in nature

The Estonian Tourist Board started the summer campaign in Germany, in the frame of which Estonia is for the first time introduced to the Germans as the destination of nature vacation, Enterprise Estonia announced. The campaign organised in the German big cities Berlin and Hamburg and in their close surrounding up to the middle of July sets the objective to introduce diverse opportunities of the Estonian nature vacation to the Germans and thus increase the visiting of different Estonian districts.

According to Tarmo Mutso, the Director of the Estonian Tourist Board, Estonia has never before advertised itself as the attractive destination of nature vacation at the German market. “The aim of this campaign is to emphasize the attraction of compactness and closeness of Estonia – small country two flight hours away involving many exciting experience contrasts. The visual solution of the campaign focuses on the plumpness and diversity of the Estonian nature and responds slyly to the question where such nature can be experienced, “Mutso said. He added that the essential keyword in the campaign is also the expansion of the target group visiting Estonia, especially with younger Germans – the classic visitor of the Baltic countries from Germany is over 50 years old according to the data of Enterprise Estonia.

The main source of communication of the campaign is Internet, the banners inviting to discover Estonia are visible up to 8 July on the most visited Internet sites of Germany: MSN Advertising, Yahoo!Deutchland, MEINESTADT.de. Also the citizens of Hamburg and Berlin see the posters introducing Estonia in the metro stations of their cities.

The prize packages are drawn on the website of the campaign www.visitestonia.com which include both the flights and accommodations and take the winners from Germany to enjoy nature in Lahemaa and Saaremaa from Tallinn. The prizes will be 4 flight tickets for two and 4 holiday packages from the Estonian cooperation partners. The main partner of the campaign in Estonia is Estonian Air which provides the special offers with lower prices specially for the campaign.

Several tourism operators of Germany participate with the packages introducing the Estonian nature tourism in the campaign which is added to the website of the campaign. “The Germans usually book their vacation mostly through the tourism operators and travel agencies, Internet is used mostly as the information source, ” Mutso explained.

According to the information of Enterprise Estonia the German tourists held the second place among the foreign tourists staying overnight in the Estonian accommodation facilities after the Finnish tourists, by making 6.4% of the foreign tourists. As to the number of nights spent they held the third place after the Finnish and Russian tourists. When summing up the last year 91 915 German tourists stayed overnight in the Estonian accommodation facilities, which is 6% more than in 2007. Most of the German tourists travel to Estonia within the time period from May to September.

The German tourists travel around Estonia more than the tourists originating from other Western European countries. Compared to the latter the Germans also visit more naturally beautiful places – 45% of them hiked or stayed in the nature.

Tallinn Old City motivates the German tourists foremost to choose Estonia their holiday destination – three fourths of the holiday tourists names this as the key factor in the survey. Two thirds named the wish to become acquainted with the culture and history very important. Beautiful nature was the third in importance – this was named as very important by half of the respondents.

The campaign is financed by the European Regional Development Fund in the mediation of the programme of promoting Estonia as the tourism destination of Enterprise Estonia.

Source: Enterprise Estonia

The state separates the transmission network from Eesti Energia

Minister of Economic Affairs and Communications Juhan Parts set up a committee on Friday which will prepare the separation of the transmission network from AS Eesti Energia.
“We have set the objective of taking over the transmission system operator Elering OÜ (with the former name OÜ Põhivõrk) from Eesti Energia 100% to direct state ownership by 2010 at the latest. This should be done in a balanced manner in order to achieve a well-functioning electricity market,” added Parts.
According to Parts, separation of the transmission network must not, however, significantly impair the financial capacity of Eesti Energia for making the expected large investments in electricity production which would ensure the required security of power supply. Also the investment capacity of the transmission network operator has to be ensured.
Parts added that the Estonian electricity market should surely be developed by bearing in mind the roles of both the future transmission system operator and Eesti Energia in the future integrated Baltoscandian market that will be developed.
The National Development Plan of the Energy Sector until 2020 has set the goal of creating preconditions to ensure as much as possible the adequate functioning the electricity market. According to Parts, one of the most important activities for the achievement of this long-term goal is to ensure the full independence of the electricity transmission system operator.
Representatives of the Ministry of Economic Affairs and Communications, Riigikogu, Estonian Competition Authority, Ministry of Finance, Eesti Energia and Elering OÜ belong to the committee. Taavi Veskimägi will be the Chairman of the Committee.
The Committee will present to the Ministry the method and time schedule for the separation of the transmission network by 31 August this year at the latest. After that date the committee will continue the provision of advice to the Minister of Economic Affairs and Communications for the implementation of the separation.
The state has set the objective of separating the transmission network from Eesti Energia by 2010 in the National Development Plan of the Energy Sector. Such separation is required by the directive on the common rules for the internal market in electricity, which has been developed in the framework of the EU Third Energy Package.
The main task of the transmission network is the transmission of electrical energy from producers to large industrial users and distribution networks.

Source: Estonian Ministry of Economic Affairs and Communications

Every fifth Estonian is poor

According to Statistics Estonia, in 2007 19.5% of the Estonian population lived in relative poverty, a similar amount to the previous year. The difference in income between the poorest and richest fifth of the population was fivefold, leaving Estonia persistently in the top ten of the poorest countries in Europe.

In 2007, a person was considered to be at-risk-of-poverty if his/her monthly equalised disposable income was below 4,340 kroons. The at-risk-of-poverty threshold rose by 860 kroons compared to 2006. The share of persons living in relative poverty did not change significantly compared to the previous year, but the difference in income between the poorest and richest fifth of the population decreased by 0.5 percentage points. The difference in income between the poorest and richest fifth of the population was fivefold. In Europe the income distribution was more unequal than in Estonia in Latvia, Lithuania, Poland, United Kingdom, Portugal and Greece. The inequality level was similar to Estonia’s in Italy, Spain and Germany.

In 2007, incomes grew for the entire population. Incomes increased most in the smallest and medium income quintiles — in the first, second and third — by about a quarter. In the fifth income quintile that comprises of richer people income increased by 13%. The distribution of income in society remained at about the same level as in previous years — there was no significant mobility between the quintiles irrespective of occupation, age and gender. The richest households in Estonia are households without children where all members are working (their at-risk-of-poverty rate is 4%) and the poorest are households with children where nobody works. In the latter the at-risk-of-poverty rate increased by three percentage points during the year and rose to 87% in 2007.

Due to the decrease in the differences of incomes, income inequality slightly lessened between Estonians and non-Estonians and the urban and rural population. Ethnic Estonian citizens’ income increased on average 17% over the year, while the income of non-Estonians with other or unspecified citizenship grew by about a fourth. Similarly, the income of the urban population grew by 17% and that of the rural population by about a fourth.

Population by income quintile and place of residence, 2007

Northern Estonia — Harju county, incl.Tallinn;
Central Estonia — Järva, Lääne-Viru and Rapla counties;
Northeastern Estonia — Ida-Viru county;
Western Estonia — Hiiu, Lääne, Pärnu and Saare counties;
Southern Estonia — Jõgeva, Põlva, Tartu, Valga, Viljandi and Võru counties.

In Northern Estonia the concentration of richer people among the overall population was the highest — 55% of Northern Estonians belonged to the fourth or fifth income quintiles. In Northeastern Estonia (Ida-Viru county) most people were poor — nearly 60% of people belonged to the first or second income quintiles. Central, Western and Southern Estonians had a comparatively even income distribution. The ratio of rich and poor people tends to be more equal in the cities, in the countryside the poor are a larger majority.

Although relative poverty did not decrease in spite of economic growth, people’s subjective appraisals of their health, living conditions and accessibility of health care improved in 2008. An increase of a few-percentages in the share of positive appraisals did not depend on the population’s income group, place of residence or occupation.

The estimations are based on the social survey, which has been conducted by Statistics Estonia since 2004. In 2008, over 4,700 households participated in the survey. The survey collects data about yearly income, which is the reason why the survey of 2008 asks for data about incomes in 2007. The yearly income is necessary for calculating the indicators of poverty and inequality. Social surveys are conducted on the basis of harmonised methodology in all European Union countries by the name of EU-SILC.

At-risk-of-poverty rate is the share of persons with an equalised yearly disposable income lower than the at-risk-of-poverty threshold. At-risk-of-poverty threshold is 60% of the median equalised yearly disposable income of household members. Equalised disposable income is the total household income, which is divided by a sum of equivalence scales of all household members.

Source: Statistics Estonia

Foreign trade deficit decreased in April

According to Statistics Estonia, in April both exports and imports of goods at current prices declined by 40% compared to April of the previous year. The foreign trade deficit decreased twice.

In April 2009 exports of goods totalled 7.7 billion kroons and imports 9.4 billion kroons, which is significantly less than in April last year. The steep decline was caused also by the high comparison data of April 2008. The trade deficit amounted to 1.7 billion kroons, which decreased by 52% compared to April of the previous year.

Steep decline in Estonia’s foreign trade in value terms has been caused by the decrease in demand in both internal as well as external markets. According to Eurostat, in the 1st quarter this year a decline of more than a quarter was announced in the trade of main partner countries (Finland, Lithuania, Sweden). Significant decline was announced in both exports and imports in all Member States. In comparison of the Member States, the decline of exports was the biggest in Finland, Malta and Sweden and the largest decrease in imports was in Lithuania, Latvia, Romania and Estonia.

The main countries of exports from Estonia were Finland (18% of Estonia’s total exports), Sweden, and Russia. By value, in April the main commodities exported to Finland and Sweden were electrical machinery and to Russia — railway rolling stock. The decrease in exports of goods from Estonia was announced to all main countries of destination. Compared to April of the previous year exports declined the most to Finland and Sweden (both by about 40%).

The main countries from where goods were imported to Estonia were Finland (14% of Estonia’s total imports), Lithuania and Germany. Commodities of electrical machinery and equipment were mostly imported from Finland and Sweden and commodities of mineral products (incl. fuels) — from Lithuania. Compared to April of the previous year, the imports of goods from Germany, Finland and Sweden decreased by nearly a half.

In comparison of trade with main partner countries, the largest surplus (exports exceeded imports) was registered in the trade with Finland and Sweden and the largest deficit — with Lithuania and Germany.

In April, the biggest share in Estonia’s total exports was held by the commodities of machinery and equipment, accounting for over a fifth. Compared to April of the previous year, the exports of the commodities of all sections decreased significantly. A significant decline was in commodity sections where goods are exported from Estonia after processing (machinery and equipment; metals and products thereof and mineral products incl. fuels).

In April the biggest share of imports was held by machinery and equipment and by mineral products (incl. fuels). The share of both commodity sections accounted for about a fifth of the total Estonia’s imports. The turnover of imports of all the commodity sections declined steeply. The decrease in arrivals of machinery and equipment and also transport equipment influenced the decline of total imports the most.

Exports of goods from Estonia declined by 7% and imports to Estonia by 4% in value terms compared to March this year.

Estonia’s foreign trade, January–April, 2008–2009

Month	Exports, million kroons			Imports, million kroons			Balance, million kroons
	2008	2009	Change, %	2008	2009	Change, %	2008	2009
January	10 155	7 269	-28	13 745	8 829	-36	-3 590	-1 560
February	10 679	7 794	-27	13 632	8 881	-35	-2 953	-1 087
March	10 652	8 288	-22	14 145	9 803	-31	-3 493	-1 515
April	12 338	7 678	-38	15 914	9 399	-41	-3 576	-1 721

Source: Statistics Estonia

Read more here: http://www.stat.ee/?id=31334

Estonian food products signed in national colours

The Estonian Food Industry Association together with producers and retail chains will launch a campaign for the popularisation of Estonian food in which domestic food products will get a sign in national colours.
Sirje Potisepp, head of the Estonian Food Association, said the aim of the campaign was to raise consumer loyalty concerning Estonian goods.
Potisepp said the popularity of local food items was falling. “The share is falling in the assortment and so its competitiveness is contracting,” she said at a press conference on Thursday. The average percentage of Estonian food in stores was 63 in 2008; the year before it was 64%.
The aim of the national colours campaign is to help consumers find Estonian products in stores. According to the Estonian Institute of Economic Research (EKI) it is difficult for consumers to establish the origin of goods in stores because the product information is in too small print on packages and the origin country of the raw material, the producer country or the producer cannot be established from product information.
According to an EKI study, 70% of the people preferred Estonian products in 2008, while in 2007 the figure was 73% and in the best years, 2002 and 2007, 87%.
According to present plans the campaign will last until July 1010, but it could be extended indefinitely.

Source: Estonian Review