See, Which Tax Amendments Are Planned To Alleviate the Crisis
16.04.2020
We have prepared an overview of the state’s tax package, the aim of which is to alleviate the negative impact on companies resulting from the corona virus outbreak and establishing the emergency situation. The tax package includes, for example, decreasing of the excise duties for fuels, suspension of interest on tax arrears and ensuring health insurance for members of the board for the period of the emergency situation.
Excise duty on diesel fuel, natural gas and electricity will be temporarily decreased
The excise duty on diesel fuel will be decreased from 49.3 cents to 37.2 cents per litre. The state presumes that decreasing the excise duty will decrease the price of diesel fuel by 14.5 cents per litre. The excise duty for special purpose diesel fuel used in agriculture will decrease from 13.3 cents to 10 cents per litre. The excise duty rate for electricity will decrease from 79.14 euros to 40 euros per 1,000 m3, which is approximately the level of the year 2017. The excise duty for liquid gas will be decreased by two times. Additionally, the excise duty for light fuel oil, heavy fuel oil, shale-derived fuel oil, natural gas for engine, liquified natural gas for engine and components of diesel fuel will be decreased. The fuel excise duties will be decreased during the period from 1 May 2020 to 30 April 2022.
Health insurance of members of the board and people employed under a contract according to the Law of Obligations Act will not be interrupted during the emergency situation
According to the amendment of the Health Insurance Act, the health insurance of a member of the board, member of the supervisory council, a person earning salaries or service fees based on a contract under the law of obligations and a person paying taxes on business income will not be interrupted if no social tax is paid to the extent of at least the minimum obligation of social tax during the emergency situation. The insurance cover for the people listed above will be valid until the tenth date of the second month after the end of the emergency situation.
Amendments related to the social tax
Pursuant to the Social Tax Act, employers are required to pay social tax only on the payments made, not on the least monthly rate. This means that the amendment will release the employers from the obligation to pay social tax on the least monthly rate for each of their employee. This exception will be applicable for March, April and May of 2020. The amendment will be a benefit for those employers whose employees earn less than 540 euros per month. Thus, this amendment may serve the employers whose employees are working part time or are on unpaid vacation. This amendment will not affect the status of the health insurance of employees.
The Social Tax Act will also include an exception for sole proprietors. In case of the sole proprietors, the state will pay to the tax administrator for the sole proprietor’s social tax advance payment calculated for the first quarter of this year. If a sole proprietor has already paid the advance payment, the advance payment account of that person will have an excess payment, which may be left there to cover future tax obligations, or an application may be filed to request refund of the excess payment. The amendment will not influence the social guarantees of the sole proprietor.
Amendments related to tax interests
The Taxation Act will be updated with a provision according to which the obligation to calculate and pay interest from tax arrears is suspended from 1 March until the end of the emergency situation. This means that companies are not required to prepare interest calculation entries or pay tax interest. The amendment concerns calculation of interest on arrears that occurred earlier as well as those from 1 March. The amendment will also mean that payment of interests on postponed tax arrears will also be suspended.
Furthermore, the overall tax interest rate will decrease from 0.06 percent to 0.03 percent per day after the end of the emergency situation until 31 December 2021.
The amendment of the Taxation Act will also give the tax administrator the right to decrease the interest rate during postponing of the payment of the tax arrears. The tax administrator has the right to decrease the interest rate of postponed payment of tax arrears to the extent of 100 percent from the date of making the decision to postpone payment during the period from 1 May 2020 to 31 December 2021. The amendment also concerns the tax arrears payment schedules already in force. At the moment, it is allowed to decrease the postponed tax arrears interest rate up to 50 percent.
Tax and Customs Board will have the right to suspend publishing of tax data
The Taxation Act will be updated with a provision that will allow the Tax and Customs Board to suspend disclosure on the internet of data on taxes paid by operators and the number of persons employed by them. Publishing of the tax data may be suspended from the declaring of the emergency situation until two months after the end of the emergency situation. The state explains the amendment with the reasoning that disclosure of tax data during this time might not give an adequate overview of the tax obedience of operators.
By now, the Tax and Customs Board has temporarily closed the tax arrears query, i.e. at the moment it is not possible to check if a transaction partner has tax arrears or not. Although the tax arrears information is not currently published, tenderers with non-postponed tax arrears still cannot participate in public procurements.
Lower value added tax for e-books and electronic publications
A reduced value added tax rate of 9 percent will be applicable for e-books, electronic educational literature and electronically available journalistic publications. The decreased value added tax rate is not applicable if the publication is meant mainly for advertising or private announcements, or mainly of erotic or pornographic content or a publication of video or music content. At the moment, a decreased rate is applicable only for hard copy books, exercise books and periodicals. The amendments will enter into force from 1 May of this year.
State to stop payments into the second pillar of the funded pension
In relation to the suspension of payment of the state’s share (4 percent) of the funded pension payments from 1 July 2020, people have the option to choose in October 2020 if they stop the payment of their 2 percent share from 1 December. In order to stop the payments, a person has to submit an application to the account manager or pension registrar. For the people who submit their applications to stop the payments will no longer pay their 2 percent from December 2020. Payments are not made until 31 August 2021. For the people who continue paying their 2 percent of the funded pension payment, will receive the state’s share of 6 percent instead of the current 4 percent until 2025. People, who stopped the payment of their 2 percent share, will receive 6 percent of the state’s share from 1 January 2023 until October of the same year. Exceptions are foreseen for people born during the period of 1942 to 1960.
Amendments related to the income tax
Sole proprietors are given the right to deduct additionally up to 5,000 euros from the revenue gained from the transfer of timber harvested from a registered immovable that belongs to them. At the moment, this sum is 2,877 euros. Additionally, sole proprietors will have the same right with respect to income earned from transfer of the right to harvest growing forest. The same rights are foreseen also for natural persons. These amendments are implemented retroactively from 1 January 2020.
Tax package discussed at the Riigikogu
As the Riigikogu has not yet passed the tax package, changes may be made to it. Should you have any proposals or comments regarding the tax package, please let our lawyers know by writing to juristid@koda.ee. The Riigikogu is planning to pass the tax package in the nearest future.
