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:

•             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.

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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.

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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

Consumer Protection Board takes Elisa to court

The Consumer Protection Board has taken mobile phone operator Elisa to court over e-bill fees.

The aim is to get the money charged for bills sent by email back for customers, the Board told ETV on Thursday.

The Board said customers should have the possibility of receiving e-bills without an additional charge.

Elisa said customers can log into their online accounts and see their bills for free.

At the beginning of the year the company instituted a 60-cent surcharge for bills sent via e-mail.

Source: ERR News

5 mEUR euros in tax still unpaid

Estonian Tax and Customs Board said this week that it is still waiting for 4.9 million euros in income tax and social tax as well as the second payment of land tax that was due by October 1.

The authority said that some 2,400 people have not fulfilled their tax duties worth around 2.2 million euros.

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20 pct cut in unemployment insurance premium proposed

The Unemployment Insurance Fund board has approached the Cabinet with a proposal to lower the unemployment insurance premium from 3 percent to 2.4 percent.

Currently employees pay 2 percent and employers 1 percent. Under the new proposal, the split would be 1.6 percent and 0.8 percent.

The fund’s board, which is currently chaired by the head of the country’s unions, Peep Peterson, said Monday’s offer was a compromise.

“The new premium rate would allow us to cover the needs of the work ability reform and to continue amassing reserves at a reasonable rate,” said Peterson, as reported by “The board reviewed the potential crisis scenarios before making the decisions and we can be sure that we can get by with the with the insurance resources we have even in complicated times.”

Read more from ERR News

Employment register brings additional 10 mEUR annually

According to Tax Board estimates, the new staff register, which requires the registration of all employees before they begin work, will bring in an additional 10 million euros in tax revenue each year.

The register should affect the construction and catering sectors the most, Postimees reported, as the percentage of staff being paid in cash under the table is 43 and 14 percent, respectively.

The actual process of registration has been streamlined, as companies only need a few minutes to register a new staff member and that registration must now only be made at the Tax Board, previously employees had to be registered at a number of state institutions, including the Health Board.

Before the new requirement entered force on July 1, companies had more time to register employees and would only make staff official after crackdowns. The Tax Board often found many employees officially on their first day at work, although they had been working for the company for months.

Source: ERR News

Estonia joins the EU-wide insolvency registry

The European Commission launched a EU-wide interconnection of national insolvency registers, linking databases from Estonia, the Czech Republic, Germany, Netherlands, Austria, Romania and Slovenia, with others set to join at a later stage.

The database will be serve businesses, creditors and investors, who want to make checks before deciding to invest.

Alar Jäger, the deputy head of Krediidiinfo, an Estonian financial information company, said the definition of insolvency varies across the union, and the register could be a step towards aligning rules practices and definitions.

He said Estonian companies giving out credit to EU partners, such as asking for payment of goods and services after delivery, will benefit. Those type of companies make up 91 percent of businesses in Estonia.

Source: ERR News

Pwc: Estonian total tax rate is one of highest

According to PricewaterhouseCoopers Estonia’s tax level is not low. On the opposite, it is one of the highest in the EU.

Read more from here – taxes