9 Important Amendments
On 1 July, over 250 legal acts entered into force with many positive changes for entrepreneurs. With the proposal from the Chamber, the accommodation costs of employees were exempt from the fringe benefit tax. Furthermore, the employer’s possibilities for paying for the employee’s transport between home and work without the addition of the fringe benefit tax improved. The tax amendment package, road use fee for trucks and the tax on sweetened drinks passed by the Parliament in June will enter into force on 1 January 2018.
The Chamber has prepared an overview of the most important amendments that entered into force on 1 July.
1. Employee’s accommodation costs exempt from fringe benefit tax
Thanks to the Chamber’s initiative, employers will have the opportunity to compensate the accommodation costs of an employee working on the basis of an employment contract without having to pay the fringe benefit. Fringe benefit is not required if the place of residence of the employee is at least 50 km from the place of work and the employee has no other place of residence nearer. In Tartu or Tallinn, the accommodation costs can be compensated tax free to the extent 200 euros per month, in other places up to 100 euros per month. The amendment entered into force in August but will be applicable also for the expenses made in July.
Read more: Amendments
2. Employer’s possibilities to pay tax free for the employee’s transport between home and work
Since August, by the proposal of the Chamber, it is no longer required to pay fringe benefit tax on expenses made for the transport of an employee, working on the basis of an employment contract, between home and work, if the employee lives at least 50 km from work or if employer organises employee transport by bus or by a vehicle, which has at least eight places. The tax exemption entered into force on 1 August, but will be applicable also for the expenses made in July.
Read more: Amendments
3. New measures for preventing the hidden taking out of profit
With pressure from the Chamber and other business organisations, the government waived the plan to establish the pledge income tax in June. Instead, the Parliament passed a new solution for the prevention of hidden taking out of profit. The new solution enters into force at the beginning of next year, but certain amendments are applicable retroactively from 1 July of this year.
From 1 July 2017, if an entrepreneur gives a loan to the parent undertaking or its subsidiary, or an existing loan is increased, the term of repayment of the loan is extended or other important changes are made to the loan agreement, the entrepreneur is required to declare such loans to the Tax and Customs Board next year. If the term of payment of the aforementioned loan is longer than 48 months, the entrepreneur is also obliged to verify the ability and intent to repay the loan, if the tax administrator so requires.
Read more: Amendments
4. Amendments related to employment of minors
From 1 July, employers are no longer required to send separate documents to the labour inspector or apply for a written permit if the employer wishes to employ a minor who is 7-14 years of age. From now on, the employer is required to register the employment of a minor who is 7-14 years of age in the employment register at least ten working days before starting work. Additionally, the consent of the legal representative of the minor, work conditions of the minor and information on whether the minor is subject to compulsory school attendance must be entered into the register. The information entered into the employment register is sent automatically to the labour inspector who must then check that it is allowed for the minor to work and that the working conditions of the minor are in line with the requirements set out in the law. The consent of the labour inspector is required if ten working days have passed since making an entry into the employment register and the labour inspector has not refused to give the consent.
Read more: Employment Contracts Act
5. New Customs Act entered into force
On 1 July, the new Customs Act entered into force, bringing the Estonian law into accordance with the EU Customs Code. In addition to a large number of technical and linguistic changes, there were a number of substantive amendments. For example, the customs agents became independent of the customs agency and may independently submit an application for taking the exam. Furthermore, an employee of a customs agency holding the licence of authorised operator using the simplified customs procedures is also considered a competent customs agent without having to pass the customs agent exam.
Additionally, the basis for calculating customs services expenses provided as special services, changed. In the future, the expenses are calculated on the basis of the average salary cost of a customs official and transport costs, not only the salary of customs official.
New databases were added. The x-ray images database will collect all images made during customs check and the collected information will be used for preventing smuggling and tax fraud. For the same purposes, the database for the carriage of passengers was added, which will collect information regarding international bus and train passengers. So far, the respective data has been collected only on air and maritime passengers.
Read more: New Customs Act
6. The number of vital services decreased, liability and obligations clarified
The new Emergency Act establishes a more accurate liability and obligations for the providers of vital services in preparation for emergencies and operating in an emergency. Instead of the current 46 vital services, the new law provides 14 vital services: supply of electricity, natural gas, liquid fuel, district heating; ensuring driveability of state and local roads, supply with water and sewerage; telephone service, mobile telephone service, data communication service, electronic identification and digital signing, organising of health care services, payment service and cash circulation. Vital services will not be including rail transport, functioning of waste management and functioning ports or functioning of ferry transport. Moreover, the definition of the provider of vital services is restricted and a specific criteria is set: a company is considered to be a provider of vital services if the service is used by at least 10,000 consumers. A company that meets this definition is obliged to fulfil all the obligations established for the provider of vital services arising from the Emergency Act, first and foremost to ensure contingency of service, its regular checking, availability of risk analyses and relevant forwarding of information to government agencies.
Read more: New Emergency Ac
7. The rules for the taxation of share options
In the future, when an employee realises a share option, or acquires a share of a company before three years have passed since the issue of the option, the employer is not required to necessarily pay fringe benefit tax on the revenue received from the realisation. It is not required to pay the fringe benefit tax upon realising the option in case of selling the company or in the event of the employee’s incapacity for work or death. If the options agreement has not been signed digitally or notarised, the employer is required to present to the Tax and Customs Board a copy of the agreement so that the date of giving the option could be observed. The amendment will enter into force on 1 August, but will become applicable retroactively from 1 July.
Read more: Amendments
8. Amendments related to fuel and alcohol excise duties
From 1 July, the liquid gas tax rate will depend on whether it is used as fuel or motor fuel. The excise duty for liquid gas used as fuel decreased by more than twice. The excise duty for liquid gas used as motor fuel increased by more than 1.5 times. From 1 July, the excise duty for heavy fuel oil similar to diesel fuel increased by approximately 10 times. The excise duty for heavy fuel oil different from diesel fuel remained on the same level. Similarly to the excise duty for the heavy fuel oil, the excise duty for shale-derived fuel oil similar to diesel oil increased almost 10 times. A separate excise is foreseen for motor natural gas, which is approximately 17 percent higher than the excise duty for natural gas.
From 1 July, the beer excise duty increased by 70 percent. The excise duty for cider and wine, the ethanol content of which is up to six percent by volume increased by 45 percent.
9. From now on, the data in the registry and land registry department can be reviewed at the notary or in the internet
From 1 July, there is no customer service at the service points of the registry and land registry departments located at the courts. This means that the registry and dossier data is now accessible at the notary offices or via the respective e-service in the internet. There is a notary office in each county, due to which the availability of data and services does not deteriorate even if it is not possible to use the respective e-service.
The service used most by entrepreneurs, i.e. issuing the certified print-out of the registry card by the notary is more expensive than the current registry department’s fee for the same service, but the e-service for the print-outs is cheaper and businesses have free access to the data regarding themselves.
The print-outs of the ship’s registration book and the papers of nationality are now issued by notaries and the Estonian Maritime Administration.
Read more: Commercial Code
Should you have any questions regarding the legal acts that entered into force on 1 July, contact the lawyers of the Chamber by writing juristid[at]koda.ee.