Charge for smart devices, i.e. private copying levy

Our customers have contacted us with a concern that from 01.04.2021 a tax has to be paid for smart devices (mobile phone, laptop, etc.). Colloquially, this is also called a digital tax. When googling, different news articles can be found according to which taxpayers should start to pay a fee of up to three euros starting from this year for the use of their smart devices. So what really changed and who are affected by this change?

On the one hand, nothing revolutionary entered into force, merely the Copyright Act was supplemented, but on the other hand this presumably concerns a large number of entrepreneurs. A fee for use of any audio-visual works and sound recordings for private use (hereinafter: private copying levy) is collected in Estonia since 1996. The purpose of this levy is to compensate the authors for the proceeds that they fail to receive when people make re-recordings for their own use. The list of the equipment on which this levy is charged is outdated, therefore the levy items were renewed. As a result of this amendment, manufacturers, importers, sellers or persons who bring recording devices and storage media into Estonia from any other European Union Member States have to pay the levy for the following recording devices at the following rates:

Sellers have to pay the levy only in the case the manufacturers, importers, or importers of these products have not paid the levy. Sellers can obtain information about importers and payers of the levy or any other additional information even through the Estonian Authors’ Society (hereinafter: EAÜ). Natural persons shall pay the levy in the case the import or bringing of recording devices and storage media from any other European Union Member State into Estonia is done for commercial purposes.

The above specified persons have the obligation to notify the EAÜ four times a year in writing of the quantities of recording devices and storage media which have been:

a). Produced in Estonia, or

b). Imported to Estonia, or

c). Brought into Estonia from any other European Union Member States during the previous three months.

This means that the reports will be submitted on a quarterly basis, by the 20^th date following each quarter (e.g., the report for Q I has to be submitted at the latest on 20 April).

Based on the data submitted, the EAÜ shall issue an invoice to the company, based on what the private copying levy has to be paid. Subsection 27 (5) of the Copyright Act provides for the cases when it is possible to request a refund of the private copying levy from the EAÜ. For example, if the above specified products are used within the framework of the statutory activities of the undertaking or the devices are intended for use by educational and research institutions for educational and scientific purposes.

Example 1. An Estonian company purchased 20 laptops on 12.04.2021 from a German e-store for their everyday business activities.

As the company purchased these laptops for their business purposes, the company is entitled to submit a refund request; insofar the devices are used in the framework of the company’s statutory activities. The company shall submit a report to the EAÜ on the equipment brought into Estonia at the latest on 20.07.2021 and, together with this report, even a report for refund. The forms of both these reports shall be uploaded to the homepage of the EAÜ.

In summary, the directory of recording devices and storage media on which the private copying levy is collected was updated. The effected amendment concerns to a greater or lesser extent all the legal entities operating in Estonia that purchase any devices listed in the above table from outside Estonia. In addition, the amendment is also reflected on the consumer level, insofar the selling prices of the recording devices and storage media will be increased by this levy.

For further information, place contact Leinonen’s tax and legal advisory team.