The taxation provisions adapted to mitigate the consequences of the emergency situation established due to the spread of the coronavirus entered into force on 21.04.2020.This is a brief overview of the key changes adapted. If you have any further questions, please contact Leinonen using the contact details below.Tax interest
- From 01.03.2020 to the end of the emergency situation (as of 21.04.2020, the emergency situation is due to end on 01.05.2020, but this time limit may be subject to extension) no tax interest is calculated on tax arrears.
- From the end of the emergency situation until 31.12.2021, tax interest shall be 0.03% per day instead of the current 0.06%.
- Due to the emergency situation, a tax authority may reduce the interest rate by up to 100% from 01.05.2020 to 31.12.2021 upon the payment of tax arrears in instalments.
- Tax authorities recommend submitting requests for the payment of tax arrears in instalments as of 21.04.2020 or after the end of the emergency situation.
Social tax measure
- Leinonen's team will assist Leinonen's clients with the preparation and submission of simplified as well as regular requests for the payment of tax arrears in instalments.
TSDs (declaration of income and social tax, unemployment insurance premiums and contributions to mandatory funded pension) submitted in March, April and May of 2020 shall not reflect the application of minimum social tax rate to income from employment earned by employees with employment contracts. That means, during this period social tax can be paid on actual remuneration paid without interrupting the employee's health insurance
. This change also applies to employment during holiday and part-time employment.
Note! No remuneration compensation from the Estonian Unemployment Insurance Fund can be applied for upon holiday without pay. This social tax measure is designed for everyone, i.e. not only for those who are experiencing financial difficulties due to the coronavirus.
Health insurance will also not be suspended for management board members and service providers operating on the basis of a contract under the law of obligations if such persons were covered by health insurance in March, but their earnings did not exceed 540 euros in the period from March to May 2020.Gifts and donations
From 12.03.2020 to 01.07.2020 companies can make gifts and donations for charitable purposes exempt from income tax to Estonian state and Estonian local government authorities or social welfare institutions or operators of hospitals located in Estonia. There is no need to declare gifts/donations to such authorities and institutions on TSD. Changes related to VAT
The scope of application of the 9% value added tax (VAT) rate has been updated.
The 9% VAT rate
applies to the following:
1) electronic books and educational literature (the learning materials specified in clause 16 (1) 6) of the Value-Added Tax Act shall remain exempt from tax);
2) press publications which are electronically available, except for publications publishing predominantly marketing or private advertising content or containing predominantly erotic or pornographic materials or video or musical content.Exemption from VAT
Exemption from VAT was extended to cover the import of medical supplies and devices, but it only applies to specific organisations and such supplies and devices as are designed for the prevention of the spread and for fighting the effects and consequences of COVID-19. For more information, please contact Leinonen's tax advisory team.0% VAT
In addition, provided that certain conditions are met, a 0% VAT rate can be applied domestically to certain goods sold or donated to hospitals, social welfare institutions or Estonian state and Estonian local government authorities to fight COVID-19. For detailed implementation conditions, please contact Leinonen's tax advisory team.Temporary cut of excise duty
The following excise duties will be reduced from 01.05.2020 to 30.04.2022:
- diesel fuel, incl. diesel fuel marked with a fiscal marker;
- heavy fuel oil, light fuel oil and shale-derived fuel oil;
- liquefied petroleum gas, natural gas and motor natural gas;
- electric power.
For more information on excise cut rates see here: https://www.emta.ee/et/ariklient/aktsiisid-vara-hasartmang/kutus-ja-elektrienergia/aktsiisimaarade-ajutine-vahendamineChanges to II pillar of funded pension
- State payments (4%) from social tax to the II pillar will automatically stop from 01.07.2020 to 31.08.2021, except for persons born in 1960 or before that.
- From 01.10.2020 to 31.10.2020 you can submit an application to stop your personal payments to the II pillar for the period from 01.12.2020 to 31.08.2021. This means that as of 01.10.2020, everyone must decide whether they wish to continue making 2% payments or suspend their payments (i.e. whether their employer will withhold the 2% payments to the II pillar or not). Applications can be submitted through the internet bank, in bank offices or through the website of Pensionikeskus. People born between 1942 and 1960 can also submit the application.
Attention accountants! As of 01.11.2020
- Payments to the II pillar resume automatically if no application is submitted to suspend the payments. Note! There is no option to reverse suspended payments.
, please check the website of Pensionikeskus
) to see if employees' 2% payments to the pension fund are withheld.
- As of 01.01.2023, only the people who resumed their 2% payments in the period from 01.12.2020 to 31.08.2021 shall start receiving compensation from the state forthe state's suspended payments (4%). Compensation is automatic.