A simplified tax operation for foreign undertakings

The Tax and Customs Board shall offer to foreign undertakings a simplified application form for registration as a person liable to value-added tax which is accessible both in English and in Russian and which makes application for a value-added tax identification number simpler.

“We will contact, when needed, the undertaking who has submitted an application in order to clarify some aspects concerning business activities. We offer consultation to undertakings as well in order to clarify the information concerning the Estonian tax system, how to find information from our web site, how to choose transaction partners not to be involved in fraud schemes and wherefrom to seek further advice,” Monika Jõesaar, the head of the service division of  the Tax and Customs Board, explained.  She encourages everyone to use advisory services so that doing business in Estonia would be simple and comprehensible already from the very beginning.

You will find the English application form for VAT identification number here and in Russian here

Source: The Tax and Customs Board

Tax office cooperates with the investors in terms of vast VAT return

The Tax and Customs Board calls on the economic operators intending to make greater investments than ordinary ones to inform the Board beforehand in order to ensure the fast refund of input VAT and thereby the stable cash flow.  

Such cooperation where economic operators send the preliminary information about major transactions to the Tax and Customs Board beforehand and thus the VAT refund is customarily fast is giving an effect already, for example, with lots of developers of immovable property. A prior notification to the Tax and Customs Board would surely support the operation of those companies as well which sell to external markets, intend to make great investments or start their investment period, and where the immediate monthly refund of VAT shall ensure the stable cash flow.

“A delay in refunding of the VAT may noticeably influence the financial resources of the company and thus the whole economic run. That is why we encourage to notify about such first or exceptionally great charges already in advance so that we could handle these primarily and refund the VAT to the company”, Jaanus Värk, the head of the Audit Department of the Tax and Customs Board explained. You can contact the Board via e-mail: jurisik@emta.ee.

The Tax and Customs Board receives on an average 35,000 claims for the refund of VAT per month and 98 per cent of these claims are fulfilled within four working days. Often the claim of the company for the refund may be controlled additionally just for the reason that an exceptionally large amount to be refunded is in question and in this case the refunding will take place at least two weeks.

Source: The Tax and Customs Board

Estonia’s tax revenues increased by 7.3 pct in 2015

According to the Ministry of Finance, the state received revenues in the amount of 7.98 billion euros, which is 171.3 million euros more than last year. In comparison to 2014, the state tax revenues increased by 483.1 million euros or by 7.3 percent.

Expenditures increased by 7.2 percent up to 8.33 billion euros in comparison to last year. The highest increase, 23.8 percent, was in state investments. EU funds and other subsidies were used less than in the previous year, because the new period for using subsidies has not started in the extent it was expected.

“I would like to thank all the tax-payers, especially all the enterprises that provide jobs for Estonian people,” said Sven Sester, the Minister of Finance of Estonia. “The money in the state budget is the money of the taxpayers and the government uses it for the benefit of the entire Estonian society.”

“The government incurred expenses with the aim of improving Estonia’s security and the economic safety of our families. We ended the 2015 fiscal year with Estonia’s public finances in a good shape,” Sester added.

Tax revenues collected during the year made up about 90 percent of all the state revenues. The Estonian Tax and Customs board collected 7.13 billion euros in taxes, which is 483.1 million euros or 7.3 percent more than in the previous year. The growth was mostly due to the increased revenues from value added tax and social tax. As the largest revenue types of tax revenues, social tax was paid in the amount of 2.39 billion, value added tax in the amount of 1.86 billion and excise duties in the amount of 873.0 million euros. The highest revenue growth was in collecting value added tax (161.4 million euros or 9.5 percent) and social tax (160.4 million euros or 7.2 percent). Transferable taxes were collected in a total amount of 1.19 billion euros, which is 56.2 million euros or 5 percent more than in the previous year.

The total amount of non-tax revenues received by the end of the year was 852.2 million euros, which is 311.8 million euros less than the year before. This decrease was mainly caused by EU funds and other subsidies, whose use decreased by 42.3 percent within the year. During the year, goods and services were sold for 162.5 million euros and other revenues that were received amounted to 148.1 million euros.

8.33 billion euros was allocated for expenses, making the year’s increase of expenses 556.8 million euros. About a half of this increase or 256 million euros constituted  the payments for retirement, healthcare, unemployment insurance and other subsidies. In terms of expenditure types, 4 billion euros for subsidies, 2.54 billion euros for other operational expenditures and 1.44 billion euros for labour and management costs were paid last year.

Labour and management costs increased by 98.4 million euros or by 7.4 percent in comparison to the year 2014. 722.4 million euros were spent on labour costs with an annual increase of 6.9 percent. Management costs included 712.8 million euros or 7.8 percent more than in the previous year. Similarly to the two preceding years, labour and management costs for all types of expenditure were considerably larger for December than the average of previous months, exceeding the average expenditures of the year by 62.5 percent.

468.8 million euros was allocated for investments during the year which is 9.5 percent less than in the previous year. State agencies invested 337.3 million euros which is 23.8 percent more than in the previous year. Investment subsidies, however, were allocated to the extent of 131.6 million euros which is 114 million euros or 46.4 percent less than last year. The more modest figure in the use of investment subsidies is related to the smaller use of foreign financing in comparison to what was planned for the year 2015.

Foreign subsidies with advanced payments were allocated in the amount of 658.9 million euros or 65.5 percent of what was planned. A total of 14 677 projects were executed with EU financial backing in the 2007-2013 programming period. Estonia can use up to 4.4 billion euros of the allocated European Structural and Investment Funds and can apply for an additional 2 billion euros from different special programmes and direct aid funds for the entire on-going 2014-2020 financial period. 109.1 million euros has been paid as subsidies for the new period so far, including 68.6 million euros of structural aid and 40.3 million euros within the framework of the rural development programme. The difference between receipt and disbursement of foreign subsidies in the last year was 288 million euros which also affected the size of the liquidity reserve.

At the end of December, the State Treasury had 1.15 billion euros of liquid financial assets (deposits and bonds), which included 733.1 million euros in the Liquidity Fund and 398.5 million euros in the Stabilisation Fund. Compared to the end of 2014, the total size of liquid assets managed by the State Treasury decreased by 347.6 million euros or 23.3 percent. The size of the resources of the Ownership Reform Reserve fund increased by 5.3 million euros within the year, reaching 14.8 million euros.

By the end of November, the general government nominal budget surplus was 0.3 percent of the GDP or 53.1 million euros. The budget deficit of the central government was 44.8 million euros and the budget deficit of the health insurance fund amounted to 26.6 million euros. The budget of the unemployment insurance fund was in a surplus from the start of the year, growing throughout the period. The budgetary surplus of the unemployment insurance fund was 42.7 million euros at the end of November. The total sum of local government budgets was also in surplus, which constituted 81.8 million euros at the end of November.

Source: Press release by the Ministry of Finance

Important legal amendments that enter into force in 2016!

The new Accounting Act will enter into force in the new year, which establishes simpler requirements for the preparation and publication of annual reports by micro and small companies. Micro companies will only be required to prepare main reports: a short balance sheet with the mandatory rows specified in the Act, and an income statement. Small companies must prepare and submit to the Commercial Register a balance sheet, income statement and no more than nine notes.

The notes are mandatory only if the company has such entries and they are important. Small companies are still required to prepare and publish a management report. Micro and small companies are no longer required to prepare cash flow reports and reports on changes in equity. The new requirements are applied to reports whose reporting period starts on 1 January 2016 or later.

The limits of audit obligations will be increased twice and the review limits 1.6 times. The new limits are applied to financial statements prepared for reporting periods that start on 1 January 2016 or later. The Ministry of Finance is of the opinion that the number of reassuring audit services will decrease by 1,335 cases of contracting as a result of the amendments.

The new Insurance Activities Act, which is based on the insurance supervision reform of the European Union, will enter into force. The Act stipulates that insurers must have the means and experience required for operating according to requirements, company management must be organised transparently and efficiently, and key employees must comply with certain requirements. The Act also stipulates new disclosure requirements, which make the insurance market more transparent, and supervision mechanisms that help protect the interests of clients. Requirements for insurance brokers are also specified.

The amendments made to the Guarantee Fund Act, which provide depositors with more protection in the event of the possible bankruptcy of a bank, will enter into force at the beginning of 2016. A deposit with interest is still guaranteed to the extent of up to 100,000 euros per depositor in one bank and this principle will not change. However, the Act now also stipulates that if a person has sold property immediately before the bank’s bankruptcy, the funds received from such a sale are guaranteed to the extent of another 70,000 euros in addition to the aforementioned 100,000. Another important aspect stipulated in the Act is that from 31 March 2016 onwards the compensation due in the case of a bank’s bankruptcy must be paid out within seven working days instead of the present 20 working days.

People who buy classic lottery tickets or bet on sports results can also restrict their gambling themselves starting from the new year. Requests for setting restrictions on gambling, betting or playing the classic lottery can be made at gambling locations and in the e-environment or at Tax and Customs Board offices.

Changes in declaring income (on tax return for 2017):

•             An additional rebate is paid out to low-income persons in 2017 based on the income earned in the next year. Adults who have been in full-time employment for at least six calendar months during the year preceding the submission of their requests can apply for rebates. Based on the poverty line forecasts of the Ministry of Finance and the budgetary possibilities agreed in the coalition agreement and the state budget strategy, persons whose income in 2016 remains below 7,782 euros can apply for the rebate in 2017.

•             The basic exemption will increase from the present 154 euros to 170 euros per month in 2016.

•             The increased basic exemption in the case of pensions is 2,700 euros per year (225 euros per month).

•             The rate of the increased basic exemption related to child maintenance is 1,848 euros (154 euros per month) for the second and every subsequent child up to 17 years of age.

•             The deduction from an individual’s income is 1,200 euros per calendar year.

•             The separate five per cent limit upon subtraction of gifts and donations from an individual’s income will disappear. The amendment equalises gifts and donations with the deduction of training expenses and home loan interest to which only the general limits will apply (50% of taxable income, but not more than 1,200 euros).

•             Twenty per cent can be subtracted from the rent earned on the basis of a residential lease in the 2017 tax return to cover the costs related to giving the premises on lease.

•             The tax-exempt daily allowance for a business trip abroad will increase from the present 32 euros to 50 euros. Daily allowance may be paid at the higher rate (up to 50 euros) with tax exemption for the first 15 days of every foreign business trip, but for no more than 15 days in a calendar month.

Alcohol, tobacco and fuel excise duty rates will change. More information about the different rates: http://www.emta.ee/index.php?id=2989

•             Alcohol excise duty will increase by 15 per cent from 1 February. This means an estimated three per cent increase in the price of half a litre of beer and a nine per cent increase in the price of a one-litre bottle of vodka.

•             Excise duty on tobacco will increase by 8 per cent from 1 June. The average price of a packet of cigarettes will increase to 3.26 euros in 2016.

•             Excise duty on petrol will increase by 10 per cent from 1 February. At current world market prices, this will affect the price of a litre of petrol by about 5 cents.

•             Excise duty on diesel and light heating oil will increase by 14 per cent from 1 February. This will influence the price of a litre of diesel by about 6.6 cents in the next year.

•             Excise duty on natural gas will increase by 20 per cent from 1 January.

The planned amount of revenues in the 2016 state budget is 8.84 billion euros and the amount of expenditure 8.92 billion euros. In 2016 the state’s revenues will increase by 3 per cent and expenditure by 4.2 per cent compared to the amounts planned for 2015. Investments with investment support increase by 22.5 per cent in the state budget, reaching 480 million euros.

The budget of the government sector will have a structural surplus of 0.6 per cent of the GDP in the next year. In the opinion of the European Commission, the 2016 state budget plan of Estonia complies fully with the requirements of the stability and growth pact.

The impact of labour taxes on the tax burden will decrease next year by an estimated 0.66 per cent of the GDP. Next year’s tax burden as a whole will remain at a level similar to this year’s, i.e. 33 per cent of the gross domestic product (GDP).

Defence expenditure will also exceed 2 per cent of the GDP in the next year, and reach 2.07 per cent of the GDP according to the summer forecast of the Ministry of Finance. The defence budget will increased by 37.1 million euros or 9 per cent in comparison with this year. A defence budget of 451 million euros will guarantee the development of Estonian defence capacity and the country’s ability to react to the challenges of a changed security environment. The acquisition of new major weapons systems, such as the infantry’s combat vehicles and anti-tank missile systems, will continue in 2016.

374 million euros is allocated for strengthening homeland security. In addition to pay rises for police officers and other homeland security staff, the priorities for 2016 include construction of the eastern border of Estonia for which 20 million euros have been allocated, strengthening rapid response capability, and updating the equipment of the Police and Border Guard Board and the Rescue Board. The renovated Piusa cordon and Narva-2 border checkpoint will also be opened next year.

The government will increase the salary fund for teachers, cultural and social workers, police officers and other homeland security employees by 4 per cent. Specific pay rises are up to each ministry to decide. In reforming the state’s administrative management and organisation, the government proceeds from the principle that the employment rate in the government sector must be proportional to the working-age population. The number of employees in the government sector is therefore reduced.

Source: Public Relations Department, MINISTRY OF FINANCE

Tax Board leaves businesses one day to submit new online reports

New requirements for Estonian businesses for reporting income and social tax entered into force on January 1, but Tax Board’s online systems will start accepting income and social tax declarations only on February 9, ie one day before the statutory reporting deadline.

Although Tax Board has promised to launch the online system already on February 6, some companies could miss the deadline if there are problems with the online system.

Read more from BBN

Tax authority has better means to fight shadow economy

Marek Helm, director-general of the Tax Boad, says that, finally, the tax authority has the means to fight shadow economy, writes Postimees.

Helm said that such tools as the employee registry, reporting of transactions in excess of 1,000 euros, new reporting requirements on income and social tax and e-tax board are changes that were implemented in less than a year.

Helm said that many of his colleagues in other countries have expressed their surprise over such speed of implementation.

Read more from BBN

Change of VAT on company cars boosted tax inflow by 10.3 pct

Estonian state collected 478 million euros in taxes in November, marking an increase of 10.3 percent year on year.

The increase in the sale of motor vehicles in the past two months can be considered a one-off cause.

Read more from BBN

Read also Refunding VAT on company cars may change