The tax consultancy
team of Leinonen summarises dome of the most important tax changes that took
effect in 2020.
Taxes on salaries and wages
The rates of taxes on salaries and wages will not change in the new year:
Minimum wage: it must be kept in mind when calculating payroll taxes that the hourly minimum wage is 3.48 euros as of 1 January 2020, which means that the monthly minimum wage of a full-time employee is 584 euros.
Income Tax Act
Ticket for transport to work and home
Compensation of the public transport tickets used to
travel between home and work is not taxed as a fringe benefit.
Proof of tax-exemption of dividends earned abroad
As of 1 January 2020 an Estonian company, which has received dividends from a foreign company where it has a holding of at least 10%, is obliged to prove when it pays the dividends on without tax that income tax was withheld or that the share in profit that was the basis of the dividends was taxed in the foreign country irrespective of the country in which the dividend is received.
The change concerns Estonian companies that take their assets to a permanent establishment located in another country. The permanent establishment of a foreign company registered in Estonia, which takes its assets out of Estonia, must also take the exit tax into account. The difference between the market value and book value of the assets taken out of Estonia is subject to income tax. Transactions between parent companies and subsidiaries are not subject to exit tax.
Income tax on hybrid mismatches
Hybrid mismatches may occur in cross-border situations where different countries treat the same entity or financial instrument differently in terms of taxation, which results in repeated deduction of costs or exclusion from income. A new chapter called Taxation upon Mismatch in Tax Outcomes was added to the Income Tax Act in order to prevent such situations. The purpose of the chapter is to prevent double taxation, which is caused by the differences in the qualification of financial instruments, payments and entities in different countries as well as on the attribution of payments between the headquarters and a permanent establishment or between two or more permanent establishments of an entity.
Deadline for submission of individual tax returns extended by a month
must declare their income earned in 2019 by 30 April 2020 (instead of the
previous 31 March). The deadline for payment of income tax was also extended
and is now October instead of July.
Value Added Tax Act
Call-off stock and time of supply
As of 1 January 2020, an Estonian company can transport its goods to a warehouse of another member state for a known buyer without creating the obligation to register itself as a VAT liable person in that member state.
When the conditions below are met, transporting goods
to another member state will not generate Intra-Community supply of goods and
the obligation to register as a tax payer in another member state, but when the
call-off stock is transferred in another member state. The Intra-Community
supply of goods is generated when the goods are sold from call-off stock.
If the same goods are transferred several times in a row within the scope of a transport transaction, the 0% tax rate can only be used in the case of the sales where the goods are taken across the border to another member state.
Proving 0% supply
If the seller does not declare the transfer of the
goods to a taxpayer of another member state in the VD report, they no longer
have the right to treat it as 0% Community supply, but it has to be taxed as
national turnover in the seller’s member state.
The definition of investment gold was specified in the
act to make it comply with the definition used in the VAT Directive.
Tax Information Exchange Act
Tax advisers, lawyers, auditors and in certain cases companies themselves must submit to the tax authority information on cross-border tax schemes that may have a significant impact on taxation, exchange of information on financial accounts or the identification of beneficial owners.
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