The Chamber of Commerce compiled an overview for the businesses of the most important legislative amendments that entered into force from January 1, 2020. Altogether, a total of 160 legal acts entered into force, which is almost two times less compared to previous years.
Excise duty on gaseous fuels increased by a quarter
The excise duty on liquid gas and natural gas increased by 25%. Excise duties on tobacco increased 5 per cent instead of the initially planned 10 per cent. Excise duties on diesel and petrol did not change. There were no changes made to the excise duties on alcohol either.
See more: Alcohol, Tobacco, Fuel and Electricity Excise Duty Act
Public transportation ticket price exempt from fringe-benefit tax
Starting from the new year, it is no longer considered fringe-benefit, when the employer reimburses the price of public transport ticket for getting to and from work to their employee. For example, if a person lives in Keila and goes to work by train to Tallinn, their employer has the opportunity to reimburse the cost of their train ticket without the fringe-benefit tax. So far, the employer has had the opportunity to reimburse the cost of their public transport tickets without the fringe-benefit tax if the employee is located at least 50 kilometres from their place of work.
See more: Income Tax Act
The immigration quota decreased
The immigration quota in 2020 is 1,314, i.e., one less compared to the previous year. Of the quota for 2020, 28 spots have been reserved for creative workers, 18 for athletes, coaches, referees and sports officials, and 10 for foreigners arriving in Estonia under an international agreement. If a foreigner wishes to get a residence permit for working in another field or for entrepreneurship, for them the size of quota is 1,258 in the new year.
Initially, the Ministry of Interior came out with a proposal that the residence permit quota would be only circa 650 in the new year and the residence permit for working would be issued in only five fields (processing industry, information and communication, transport and warehousing, education and healthcare). In other cases, getting a residence permit that goes under quota would have needed the minister’s permission. Due to the opposition of the chamber and other parties, the ministry withdrew the proposal.
See more: 2020 immigration quota, The division of immigration quota
Lower income tax on regular dividends
Companies are allowed to apply 14 per cent income tax rate on dividends, if the size of dividends is less than or equal to two-thirds of profit distributed to legal persons in 2018 and 2019.
The use of lower tax rate is allowed only in the event the profit is distributed among legal persons. If dividends are paid to natural persons, a company is required to withhold additional 7 percentage of income tax.
Regular dividends stand for distributed profit that is less than or equal to average taxable distributed profit of preceding three calendar years. When calculating average dividends for three years, the first year is 2018. The 14 percent rate becomes applicable in full extent in 2021.
See more: Income Tax Act
The minimum wage rose to 584 euros
As of 2020, the minimum wage for working full time rose from 540 euros to 584 euros. The minimum rate of hourly rate is 3.48 euros as of January 1 (3.21 euros before).
See more: Setting the minimum rate for salary
The minimum obligation for social tax increased to 178 euros
In 2020, the minimum monthly obligation for social tax is 540 euros. It means, for an employer, the minimum obligation for social tax is 165 euros monthly, and this applies also, if the employee is working part-time. The change affects employees whose salary is below the minimum wage. In addition, the change affects the members of boards, who wish to have health insurance. This means that the members of boards must from now on pay 178.2 euros instead of 165 euros in order to have health insurance.
See more: State Budget Act 2020
Reduction in administrative burden regarding environmental permits
As of new year entered into force amendments to the General Part of the Environmental Code Act and to 14 other acts, the purpose of which is to reduce red tape related to processing environmental permits, increase legal clarity and allow management of environmental permits in environmental decisions information system (KOTKAS).
For example, the Waste Act no longer has the requirement of granting waste permit for up to five years. Now the environmental permit is granted for unspecified term. Also, the act no longer requires applying for waste permit for each county separately. Amendments to the Protection of Atmospheric Air Act combines formerly separate permit for greenhouse gas emissions trading system with environmental permit and integrated environmental permit. Amendment to Environmental Impact Assessment and Environment Management Act provides developers with an opportunity to assess environmental impact already prior to submitting the application for activity licence. Earlier, such opportunity was available only in case of building permit, but now it extends to other activity permits (e.g. integrated permit).
See more: Act Amending the General Part of Environmental Code Act and other Acts
Exit tax established
Exit tax or income tax on removal of assets from Estonia is applicable as of the beginning of this year. This means that if an Estonian company moves assets to a permanent establishment in a foreign country, then the difference between market value and book value of removed assets will be subject to income tax. It is possible to postpone payment of this tax for up to five years, provided that the assets of the company are taken to a permanent establishment in contracting country or that a company becomes a resident of the contracting country.
See more: Income Tax Act
Increase in the fees for food and veterinary supervision
As of January 1, the hourly rate of fee for performing food supervision operations increased from 12.3 euros to 23.84 euros. Main reason for the increase is that starting from the new year, the fee will also include the cost of laboratory analyses. Hourly rate of fee for veterinary supervision increased from 12.3 euros to 14.9 euros. As of new year, companies are to pay a fee for feed supervision, amounting to 33.7 euros per hour. Feed supervision fee replaces former state fee collected for performing supervision acts. As a result of that amendment, feed operators are no longer required to submit to the state data concerning the quantity of feed produced and brought to market.
See more: Rate of hourly fee for food, feed and veterinary supervision operations for 2020
Tax advisors received a new obligation
From the new year, amendments to the Tax Information Exchange Act entered into force, which impose tax advisors (e.g. lawyers, auditors) a new obligation to submit to the Tax and Customs Board information on cross-border tax schemes, which may have a significant impact on taxation, exchange of information on financial accounts or identifying actual beneficiaries. Information must be presented on the schemes on the development or implementation of which the tax advisors have provided information to their clients.
In certain cases, the obligation to submit information also lies with the company that uses the scheme. This is applicable, for example, if the scheme has been developed by the company. Furthermore, this applies in a situation where a lawyer or an auditor cannot submit information to the Tax and Customs Board because the submission of the information would bring along violation of the obligation to keep a professional secret.
See more: Tax Information Exchange Act
Small breweries granted a higher excise concessions
From new year, small breweries may use up to 50 per cent alcohol excise concession if they produced up to 1.5 million litres of beer last year. Previously the limit for the concession was 0.6 million litres. If a brewery is a starting company, they may use the concession if their planned production volume is up to 1.5 million litres of beer. If a small brewery exceeds the limit of 1.5 million litres, the beer exceeding the limit value is subject to taxation at the full excise duty rate.
See more: Alcohol, Tobacco, Fuel and Electricity Excise Duty Act
Changes in the rules for rounding the amount of payable interest
As of this year, payable tax amount must be rounded to full Euros instead of cents, provided that tax legislation or customs rules do not require otherwise. The rules for rounding established by special acts (e.g. Environmental Fees Act) will not change. Additionally, in reasoned exceptional cases, a company has an opportunity to request and tax authority has the right to decide to reduce tax interest retrospectively up to 50 per cent as of the day when tax arrears occurred. Request for postponing the payment of tax arrears can be submitted to the tax authority by any company with solvency problems.
See more: Taxation Act
Fuel must contain at least 10% of biofuel of the total fuel energy
From new year, the total energy of the petrol, diesel fuel and biofuel released for consumption must contain at least 10 per cent of biofuel and not less than 6.4 percent in each litre of fuel released for consumption. Previously, the engine fuel and diesel fuel released for consumption in Estonia had to contain at least 6.4 percent of biofuels.
The new requirement will not remain in force for long, because the government has already approved amendments to the Liquid Fuel Act, upon the entry into force of which adding bio-components to fossil fuels will become more flexible. According to the amendment, it is not required that each litre of engine fuel and diesel fuel released for consumption contain biofuel. It would suffice if the supplier of the fuel ensures with a period of 6 months that there would be at least 10 per cent of biofuel in the fuel portfolio sold by them.
See more: Liquid Fuel Act; Planned amendments to the Liquid Fuel Act
Income tax in case of hybrid mismatches
As of the beginning of this year, the rules to avoid hybrid mismatches entered into force. Hybrid mismatches are differences in qualification of financial instruments, payments and units in different countries or in imputation of payments between headquarters and permanent establishment or between two or more permanent establishments of one unit. Such mismatch in taxation may lead to double deductions or deduction without recording a revenue. In 2020, new standards enter into force, governing the methods for imposing income tax on the sum causing mismatch. Depending on situation, tax is imposed either on payment, cost or loss that can be deducted or is exempt from income tax in the other country or, tax authority may refuse to apply income tax exemption on revenue that has been deducted or exempt from income tax in the other country. For example, if mismatch occurs during tax liability calculation, which permits to consider the same payment as cost in more than one jurisdiction, then income tax must be paid on the amount allowed to be deducted in the jurisdiction of payer.
See more: Income Tax Act
Notaries are no longer allowed to issue official translations
From 2020, notaries will no longer be able to verify translations of the documents submitted to the Commercial Register. If previously, the translations could be approved by notaries as well as sworn translators, this competence now lies only with sworn translators. This means that if a company wants to submit a document in a foreign language to the Commercial Register, it must first be translated and verified by a sworn translator.
See more: Commercial Code
Obligation to submit data on the use of a crop varieties
A company growing crops, including sowing seeds for producing food or feed, will have to submit information on the crop varieties used to the Agricultural Registers and Information Board from the new year. They must submit the name of the grown crop and variety and the area of cultivated land used for growing each variety as well as data on if the certified seeds or propagation material or seed produced for own use is used. In case of summer crops, the information must be submitted by 30 June of the year of sowing and in case of winter crops, by 30 June of the following year.
See more: Plant Propagation and Plant Variety Rights Act
Consumer protection and technical regulatory authority will receive additional rights to carry out supervision
Amendments to the Consumer Protection Act that will enter into force in the middle of January will give the Consumer Protection and Technical Regulatory Authority additional authorisations. In the future, the Consumer Protection and Technical Regulatory Authority will be allowed to request from providers of web service and banks information in order to identify a person of the responsible company. Furthermore, the Authority will have the right to perform purchases for the purpose of monitoring compliance (including, if necessary, with concealed identity) in order to check geographic discrimination or following of post-sale rights (e.g. the right to withdraw). If necessary, the Authority is also entitled to prevent access to the web interface if terminating a violation is not possible in any other manner.
Furthermore, from the middle of January, the procedure of the consumer disputes committee will become simpler. For example, it is now possible to settle a dispute in a single-member committee and according to a written procedure without a meeting if the appellant agrees. Claims related to guarantees against companies who provide travel services only in Estonia will be simplified. The amendments will enter into force on 17 January 2020.
See more: Amendments to the Consumer Protection Act and other acts
Should you have any questions regarding the legal acts that entered into force in 2020, you can contact the legal specialists of the Chamber by writing to email@example.com.