Estonian administrative burden to reduce with the new act

The Ministry of Finance has issued a draft act amending the Authorised Public Accountants Act and other acts to be circulated for approval, reducing the administrative burden for both the private and the public sector.

As the amendments enter into force, certificates for sworn auditors will be issued by the auditing supervisory board of the Estonian Board of Auditors. Until now, this has been the task of the Finance Minister acting upon recommendations from the Board of Auditors.

“A quality auditing service is an important public good, ensuring the reliability of vital financial information for entrepreneurs and investors,“ Finance Minister Sven Sester said. “I have confidence in the high level of self-regulation of sworn auditors, so we can entrust them with functions previously performed by the Ministry of Finance. As a professional organisation, the Board of Auditors has grown and strengthened over the years.“

The auditing supervisory board of the Estonian Board of Auditors shall also take over other tasks relating to the approval of sworn auditors and issuance of activity licences previously performed by the Ministry of Finance. The releasing of the Ministry of Finance from issuing and revoking professional certificates and activity licences and other relating tasks enables it to focus on legislative functions.

The professional organisation shall become responsible for approval and registration of sworn auditors and firms of auditors, adoption of quality assurance standards and codes of ethics, managing professional training as well as quality management systems and rules for investigation and administrative discipline. In all, the upcoming amendments should shorten proceedings, reducing the administrative burden and saving money. The existing three-layer supervision system will be replaced by a two-layer system. The Ministry of Finance will continue to supervise the Board of Auditors.

According to the draft, public-interest entities include listed companies, insurance undertakings and banks. The scope of public interest entities shall be reduced to the minimum permitted by the EU directive. Such limitation of the definition of public-interest entities serves to avoid excessive administrative burden for the public and private sector: according to EU law, auditing of public-interest entities shall be subject to increasingly detailed reporting and a number of other stringent rules.

According to the draft, contracts for statutory auditing of annual accounts must be concluded for at least two years. The longer-term contract requirement shall help improve the quality of the auditing services.

The amendments are planned to enter into force on 1 January 2017. The draft will align Estonian law with the EU directive on statutory audits of annual accounts and consolidated accounts (2014/56/EU). The draft is part of the government’s programme for developing business environment and making Estonia the world’s most attractive region for doing business.

The draft act is available in the government’s information system (in Estonian).

Source: Estonian 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:

•             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

Bill created to tighten smoking laws

The government has drawn up a bill which will further limit where smoking is allowed.

In 2007, smoking was banned indoors in bars and cafes, with the new bill taking aim at designated smoking areas in buildings. Lawmakers are aiming for the ban to come into effect in 2017, Eesti Päevaleht reported. Prisons will also become smoke free that year.

Special rooms for smoking may still be set up in buildings, but according to the daily, these rooms will be the next to go.

“Ventilation systems, designated smoking rooms and partial limits do not offer people enough protection from second hand smoke in the environment,” the bill said.

The Health Board has so far identified 40 such areas, including in care homes and casinos.

Diana Ingerainen, head of a union of GPs, said limiting places where people can smoke has shown to be effective in cutting smoker numbers.

The number of people, between the age of 16-64, who smoke at least one cigarette every day has plummeted from slightly over 50 percent to 19.5 percent in 2014.

Source: ERR via Estonian Review

Estonian ministry steps up fight against smoking

Estonia’s Ministry of Social Affairs is seeking opinions on a draft tobacco law which foresees graphic health warnings on cigarette packs and a ban on indoor smoking areas without walls, among other things.

“Tobacco product packages are an influential marketing tool. Graphic warnings will raise smokers’ and above all young people and minors’ awareness that smoking damages health and also motivate them to give it up,” Minister of Health and Labor Rannar Vassiljev explained. “I believe that realistic pictures will diminish everyone’s wish to pick up a cigarette pack. I hope the new approach is also conducive to not starting next to dropping the habit.”

Picture health warnings will be obligatory on packages of cigarettes, smoking tobacco and waterpipe tobacco, spokespeople for the ministry said. So far only warning texts have been used on packages.

The bill also envisions a ban on indoor smoking areas without walls from 2017. Abolition of smoking areas has been recommended also by the World Health Organization. The organization has said there is no such thing as harmless tobacco smoke content in air.

The draft law further proposes to make prisons and their territories smoke-free so as to help inmates kick the habit and protect their and employees’ health.

The bill was sent for consideration to the Justice Ministry, Ministry of Economic Affairs and Communications, Finance Ministry, Health Board, association of tobacco manufacturers and justice chancellor.

Source: Baltic News Service via Estonian Review

Tallinn’s restrictions on hard liquor sale affects 200 stores

Alcohol sale restrictions which, among other things, ban strong alcohol sales in small stores in Tallinn as of July 1 will affect about 200 stores or a third of the total number of stores selling liquor in the Estonian capital city.

According to a spokesperson for the Tallinn Enterprise Board, Aave Jurgen, in October 2014 the number of stores selling alcoholic beverages was 600 in Tallinn and about 200 of these did not have a total area of 150 square meters or more which is needed according to the new law. She added that by today the number may have changed but not by much.

Jurgen said that the city is to definitely exercise supervision.

According to Jurgen the aim of the restriction is to somewhat limit access to hard liquor.

As of July 1 retail sale of alcohol will be banned in shops whose entrance is situated within 50 meters of the main entrance of a basic school, high school or vocational school. It will also be illegal to sell alcohol in buildings situated in the territory of gas stations and alcohol will be sold in specially designated areas at sports events. Where under the present regulation hard liquor can be sold in shops with a total area of at least 75 square meters, as of July 1 the minimum area requirement will be increased to 150 square meters.

Source: Baltic News Service via Estonian Review

Statoil turns to Supreme Court over alcohol sale ban

One of the largest vehicle fuel retailers, Statoil, has asked the Supreme Court for its opinion on Tallinn City Council’s ban on the sale of strong alcohol in filling stations, which is due to come into effect on July 1.

The company said the ban is unconstitutional as it goes against the freedom of enterprise, and previous rulings by the Supreme Court have said such bans are illegal.

Statoil said the ban, due in effect on July 1, should be postponed until the court has come to a conclusion.

The ban, among a number of others to limit the availability of alcohol, is part of the city’s drive against alcohol consumption.

Source: ERR News

Tallinn limits the sale of alcohol

Following the Tallinn City Council’s decision to limit alcohol sale on the city’s territory, approximately 124 will lose the right to sell alcohol, according to the calculations.

These are shops that are located less than 50 meters from the entrance of primary, secondary and vocational schools, or do not satisfy the increased total sales area requirement.

The City Council doubled the minimum size of licensed shops, from 75 to 150 square meters. The restriction aims to limit the number of corner shops in residential areas, which specialize in selling alcohol.

Gas stations have also been banned from selling alcohol in an attempt to decrease the risk of alcohol-related road accidents.

In addition, the sale of alcohol during sporting events has been confined to a restricted area of the venue.

The Deputy Mayor of Tallinn, Merike Martinson, referred to the data released by the National Institute for Health Development, which put alcohol-related deaths in Tallinn at 139. According to a study by Estonian Institute of Economic Research, 83 percent of Estonian population said that alcohol consumption must be cut down and 51 percent polled said it should be done by imposing strict regulations.

“Whereas most of the European countries have four or five outlets that sell alcohol per 100,000 people, this number is 195 in Estonia and 440 in Tallinn,” Martinson said. “The facts indicate alcohol consumption and the resulting accidents have reached a dangerously high level, and something must be done about it.”

The changes will come into effect in July 1.

Source: ERR News