BONJOUR L'ESTONIE

Savisaar to introduce sales tax and boat tax in Tallinn

Tallinn City Government is proposing new local taxes in Tallinn for next year to bring more revenues into the budget.

According to the next year's draft budget that was submitted to the Tallinn City Council today, the city's next year's budget will be 7 billion kroons.  

In spite of poor budget revenues, the city is confident that it will succeed in balancing the budget by introducing new taxes.

Starting from July 2010, Tallinn will introduce a sales tax for traders and retailers which is expected to bring in 150 million kroons. Sales tax will be paid by natural persons who are self-employed in trade business or service sector and by legal persons that operate in the retail, catering or service segment.  

Tallinn will also introduce a boat tax payable by owners of yachts and boats that are up to 12 metres long.  

Estonia lacks a coherent alcohol policy

The head of the Estonian Association of Food Industries Sirje Potisepp stated that Estonia lacks alcohol policy, writes the National Broadcasting/LETA. In the past two years, excise taxes on alcohol have been raised by four times; if one were to include the surge by 10% that will enter into force in January, it could be stated that the excise tax rate on alcohol has grown by a total of 43%.

Potisepp noted that raising excise taxes is not the correct form of alcohol policy. “If the policy is restricted to raising excise taxes, I am of the opinion that this is not a correct way of forming a policy. The alcohol policy should require prevention, improving the culture of alcohol consumption and also taking into account the financial side so as not to grant opportunities to the illegal market,” she explained.

Producers of alcohol state that sales of beer has been falling in the part few years and the increase in the excise taxes contributes to this trend.

Estonia one step closer to Martial Law

Toomas Hendrik Ilves, the Estonian president, has signed a number of new amendments into law. The amendments called the “Bronze Night” package, involve tightening regulation of rallies and demonstrations.

The new laws ensure stricter penalties for “aggressive acts” against the state, treason, and “aggressive” activities by foreigners against the Republic of Estonia.

The new laws also establish penalties for “calling to support military action against Estonia”, or attempting to subvert the present regime, calling for a conspiracy against the Republic of Estonia, to influence the police or government officials, as well as the organization of mass unrest, and participation in them.

The package of amendments was developed after street protests by the Russian-speaking population of Estonia, when the Estonian government made an order to move the “Bronze Soldier” monument, dedicated to Soviet soldiers who liberated Estonia from the Nazi occupation, from it’s original site in central Tallinn to a less prominent location at a military cemetery.

Estonia on the way to limiting freedom of assembly ?

Estonian parliament has adopted changes to a controversial law which could restrict participation in mass protests.

The law deals with, among others issues, the procedure of amending the Criminal Code and the law on foreigners.

Earlier this year the lawmakers also proposed and voted for amendments introducing criminal responsibility for calls for mass protests and preparation for them, as well as for distributing false information about Estonia which put at risk public security. They also implied the possibility of stripping naturalized citizens of their status for getting involved in mass protests.

In July, Estonian President Toomas Hendrik Ilves dismissed the draft law, which sparked wide disputes in the country. The president said that Estonian laws should prevent crimes against the state and punish people for actions undermining Estonia’s independence, territorial integrity and constitutional order. At the same time, Hendrik believes that it is unacceptable to limit democratic freedoms, especially freedom of assembly and expression.

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Several politicians and public figures have criticized the proposed amendments, saying they would affect Estonia’s democratic development.

Estonia comply with EU advertising rules

The European Commission decided today to close infringement proceedings against Estonia as the country now fully comply with EU TV advertising rules.

The Commission also launched infringement proceedings against Estonia as TV channels were regularly breaking the EU's limit of 12 minutes of advertising per hour. The country was in breach of the EU's Television without Frontiers Directive, but has meanwhile adjusted its national legislation and practice to comply with European audiovisual rules.

" I welcome the real steps taken by Estonia to comply with European advertising rules. Thanks to successful collaboration between national authorities and the European Commission, television viewers in Estonia are now better protected by clear rules. Above all, it should be 100% clear that what they are watching is an ad," said Viviane Reding, the EU's Media Commissioner.

Lawyers’ millions not taxed by a social tax

Estonian top lawyers earn most of their income as dividends and pay social tax only on 10-20 pct of income, Äripäev reports.

The paper reviewed the incomes of management of bigger law firms (turnover more than EEK 5 mln, 31 bureaus). Their annual reports show that holders pay themselves wages as small as possible.

49 members of Estonian bigger law firms, who all also are holders, paid themselves an average of EEK 154,143 a month (net amount) as dividends, at the same time their average monthly salary was EEK 15,911 a month (gross), which slightly exceeds the average salary.

Law firms management earns less than the average gross salary – EEK 28,460. The management board’s salaries are also so low because about one half of bigger bureaus didn’t pay them at all.

There’s nothing illegal in taking dividends, but the question is whether it is salary. Tax and Customs Board (MTA), bigger law and auditor companies currently are discussing the question.

MTA may take dividends as tax evasion if there’s enough proof, according to the ruling by the Circuit Court in the spring.

“I don’t see it as a problem, when the company is earning profit and holders divide it. I don’t know such business model where profit is taken out only as dividends,” Aivar Pilv, the chairperson of the advocacy said. He gets EEK 440,627 a month as dividends and gross salary of EEK 51,667.

Leon Glikman, partner at Glikman & Partners said that holders get enough income, which is taxed by social tax, from the law firm and other sources. He earned EEK 222,908 a month as dividends and EEK 0 for being in the management.

Glikman’s law firm paid 38 pct of turnover or more than EEK 12 mln as taxes. Glikman said that, considering world practices, it’s unreasonably much.

Where is the justice ? And Estonia is looking for cash to make both ends meet ... !

Court of Europe decides that Estonia implemented Customs Code lawfully

The Court of Europe in Luxembourg made a decision regarding the implementation of the European Union Community Customs Code in Estonia. The court decided that Estonia acted lawfully when it required Atlantic salmon backbones to be marked as a product suitable for human consumption in customs declarations. This is Estonia’s third experience with the Court of Europe since its accession to the European Union in which the court analysed the Estonian state’s implementation of EU law.

The Court of Europe made its decision during preliminary ruling proceedings that were initiated by the Tallinn Administrative Court, which asked the Court of Europe for counsel regarding the interpretation of the European Union Community Customs Code. The Tallinn Administrative Court asked the Court of Europe to analyse whether Estonia designated the proper customs duty for frozen Atlantic salmon backbones.

The Estonian company OÜ Pärlitigu was importing farmed Atlantic salmon backbones from Norway, declaring them as not fit for human consumption, which meant that they were not required to pay a customs duty on them. The decision of the tax authority, which declared that the product is in fact suitable for human consumption, also led to the company needing to pay an anti-dumping duty. OÜ Pärlitigu approached the Tallinn Administrative Court to dispute the duty decision of the Northern Tax and Customs Centre of the Tax and Customs Board. The company felt that the product should be defined as fish waste, meaning that it is not fit for human consumption.

Estonia’s representation in the Court of Europe is organised by the Foreign Ministry and Estonia’s representative in the Court of Europe is the Foreign Ministry’s European Union law division director.

SPOKESPERSON’S OFFICE
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Some light has been shed on taxation of dividends as salary

Because of the high social tax rate it is quite common in Estonia to pay dividends instead of salary. The tax authority has issued several notices of assessment reclassifying dividends as salaries. The consequence is that social tax, unemployment insurance payments, and in some circumstances also contributions to mandatory pension fund are payable in addition to income tax.

Source: Sorainen Law Offices

Estonia : Entitlement to unemployment insurance benefit

Entitlement to unemployment insurance benefit

The unemployment insurance benefit is intended to provide compensation to insured persons, upon their losing employment, which helps them cope during the search for new work.

In order to receive unemployment insurance benefit three main requirements have to be met: 

• Registration as unemployed. Only those unemployed persons who are registered as unemployed in a regional office of the Labour Market Board are eligible to apply for unemployment insurance benefit.   

• Required insurance periods. In order to receive an unemployment insurance benefit, a person must have worked and paid unemployment insurance premiums for at least 12 months during the 36 months preceding the registration as unemployed. One month towards the insurance period is calculated for each calendar month during which an insured person received remuneration from which unemployment insurance premiums were withheld. The insurance period is deemed to be zero as of the date when an unemployment insurance benefit is granted to an insured person. Until 31 December 2006 the insurance period was deemed to be zero as of the date when an unemployment allowance was granted.

• Involuntary unemployment. Only those unemployed persons who lost their job involuntary have the right to receive unemployment insurance benefit. The benefit is not granted if a person left employment or service on his/her own initiative (upon personal request), except in the cases of leaving employment due to the violation of contractual terms by the employer or changes in production or work arrangements, or if a labour dispute committee has declared the termination of employment contract unlawful and stated that person left employment on his/her own initiative. Likewise, the benefit is not granted if person left employment or service by agreement between the parties or due to a breach of duties of employment or service, loss of confidence, an indecent act or act of corruption.

In other cases of the termination of employment or service relationships (e.g. dismissal for redundancy, liquidation of the company, inadequate performance during the probationary period, expiry of the term of employment or service relationships, long-time incapacity for work) the person is entitled to an unemployment insurance benefit.

Application for and grant of benefit

In order to apply for an unemployment insurance benefit, an insured person must visit a regional office of the Labour Market Board where he/she can complete a form of application for registration as unemployed and for a grant of an unemployment insurance benefit.

Estonian tax rules again under criticism from the Commission

Iren Koplimets
PricewaterhouseCoopers

Less than a month ago, the Commission closed infringement proceedings against Estonia over discrimination of foreign pension funds but on 16 October 2008, a new infringement proceeding against Estonia was announced (Commission’s press release IP/08/1532).

The goal of infringement proceedings is to ensure uniform and common application of Community law in the Member States. It represents the second step of three-step proceedings and Estonia has two months to react to it. If the outcome is not satisfactory to the parties, the Commission may bring the matter before the European Court of Justice.

This time, the problem is the taxation of pensions paid to non-resident pensioners in Estonia. Namely, Estonian resident pensioners have the right to deduct up to 63 000 kroons (personal allowance of 27 000 kroons plus additional personal allowance of 36 000 for pensions) from income in the calendar year. Similar allowances are made available to residents of another Member State of the European Union only in case income received in Estonia exceeds 75% of their total income.

The case-law of the European Court of Justice has repeatedly indicated that different taxation of a resident and a non-resident persons who are objectively in the same situation, may lead to indirect discrimination which is in conflict with the principle of free movement of persons laid down in the Treaty establishing the European Community. When a person relocates to another country, the tax burden with regard to pensions received in Estonia may increase because he/she may lose the right to the personal allowance.

Russian military pensioners living in Estonia file suit with Strasbourg court

Forty-seven Russian military pensioners living in Estonia have filed a lawsuit against the Estonian government with the European Court of Human Rights.

The complaints drawn up with assistance from the Estonian Human Rights Information Center claim that Estonia refuses to pay civilian pensions to these people, while people living in Latvia and Lithuania and receiving Russian military pensions do not have such problems, the Moskovsky Komsomolets newspaper reported on Thursday.

The claimants have exhausted all possible resources to have their complaints granted in Estonia, first filing their complaints with the Pension Department and then taking their case to the administrative, district, and state courts, the newspaper says.

Mstislav Rusakov, a lawyer from the Estonian Human Rights Information Center, said the problem was engendered by an Estonian-Russian agreement on social guarantees to pensioners of the Russian armed forces, which was concluded in 1994 and Article 5 of which rules out the possibility that the same person can receive two pensions simultaneously.

"You have to choose between receiving a Russian military pension or an Estonian civilian one," he said.

Estonia releases first life prisoner

TBT staff in cooperation with BNS

TALLINN - The Harju County Court agreed to the early release of Estonia's first life prisoner, Mikhail Talyshanov.

Talyshanov, 40, who murdered two people in 1990, will be set free after the court ruling comes into effect in 10 days. Talyshanov will then be deported from Estonia to Russia's Kaliningrad region.

The Supreme Court of Estonia, then a republic of the formerSoviet Union, sentenced Talyshanov, a military school cadet, to death in 1991 because of the two murders that shocked the country in summer 1990.

In March 1993, then President Lennart Meri condoned the death sentence to life imprisonment, making Talyshanov Estonia's first life prisoner, but in October 2002 Meri's successor, Arnold Rüütel, granted him a pardon, cutting his jail term to 20 years.

Talyshanov, who has been behind bars since Sept. 1, 1990, would have finished serving his sentence on Aug. 31, 2010, information provided by the Justice Ministry shows.

The Estonian parliament banned capital punishment in 1998.

The European Commission requests Estonia to amend its discriminatory taxation of pensions paid to non-residents

The European Commission has sent Estonia a formal request to amend its rules that provide for higher taxation of pensions paid to non-residents in comparison to pensions paid to resident taxpayers. The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 226 of the EC Treaty).

If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the Court of Justice of the European Communities.

The reasoned opinion concerns non-resident pensioners with a modest income which is comparable to the tax exemption allowances applicable to pensioners in Estonia (EEK 63 000 or ca EUR 4026).

If such taxpayers receive all their income in Estonia, they can benefit from the Estonian personal allowances and do not have to pay tax on their income. However, where the income earned in Estonia does not exceed 75% of their worldwide taxable income, non-resident taxpayers are not able to benefit from the personal deductions available to residents.

The Commission is of the opinion that, in these particular circumstances, Estonia cannot assume that the Member State of residence is in a position to take account of the taxpayer's personal circumstances and should therefore also make the personal deductions available to such non-resident taxpayers.

The Commission considers that the restrictive application of personal allowances in the Estonian legislation constitutes a discrimination prohibited by Article 39 the EC Treaty concerning the free movement of workers, as the favourable treatment is not open to non-resident taxpayers who are effectively in the same situation as resident pensioners.

The Commission's case reference numbers are 2006/4221 and 2008/4640.

For the press releases issued on infringement procedures in the taxation or customs area see :

http://ec.europa.eu/taxation_customs/common/infringements/infringement_cases/index_en.htm

For the latest general information on infringement measures against Member States see :

http://ec.europa.eu/community_law/infringements/infringements_en.htm 

Tallinn may propose to exempt from land tax "the land under the construction"

Sandra Taimre
sandra.taimre @ aripaev.ee

City of Tallinn's council will discuss the draft act according to what the city proposes the Finance Commission to exempt the land under house from land tax.

Indrek Raudne from IRL faction said the high land tax is punishing people for owning a home and has worsened the normal living of plenty of homeowners, postimees.ee writes.

City government decided to raise land tax 2.5 times last December and this should add EEK 320 mln to the city wallet.

Laws relaxed for Non-EU nationals

TALLINN - The Interior Ministry announced this week that the laws governing work permits for non-EU nationals are to be reformed.

At present, an employer has to advertise a vacancy six months in advance for the Interior Ministry to allow someone from outside the EU to take the position. This is to be reduced to two months.

At the same time the overall quota of guest workers in Estonia is to be increased from 0.05 to 0.1 percent of the Estonian population.

A ship arrest in ESTONIA

By Sorainen Law Offices

Background.

Estonia’s main sea port is Tallinn and since 1990 it has experienced considerable growth of transit of cargo. Estonia has ratified the 1999 Convention On Ship Arrests and it has also incorporated the principles of the Convention into the national legislation regulating arrest of the ships. Such legislation is mainly Law of Property of Ships and Code of Civil Proceedings.

Jurisdiction.

The presence of a ship in Estonian territorial sea is sufficient to found jurisdiction in Estonia. A claim on ship arrest, as a tool to secure the claim, should be presented, as a general rule, to the same court, which according to jurisdiction rules will decide over the principal claim.

General possibility of arrest.

The Law Of Property of Ships determines the meaning of maritime claim and provides that a ship may be arrested to secure a maritime claim only. Maritime claim in Estonian legislation has wider meaning than in the above-mentioned arrest conventions.

Time available to submit the Statement of Claim.

If the Court applies the arrest of ship, as a provisional security measure, before a principal claim is submitted to the Court then the principal claim shall be submitted in 30 days. In case of failure to submit the principal claim to the Court within the specified term by the Court, the interim security measure shall be repealed.

Estonia agrees to enforce sentences imposed by UN war crimes tribunal

Estonia today became the fourteenth European country to agree to enforce a sentence imposed by the United Nations war crimes tribunal that was set up to deal with the worst crimes committed during the Balkan conflicts in the 1990s.

Anyone convicted by the International Criminal Tribunal for the former Yugoslavia (ICTY) and given a jail term can now serve that sentence in an Estonian prison after an agreement was signed in Tallinn, the capital.

Italy, Finland, Norway, Sweden, Austria, France, Spain, Germany, Denmark, the United Kingdom, Belgium, Ukraine and Portugal have already entered into similar agreements with the Tribunal.

More than 35 people convicted by the ICTY either have served, or are currently serving, their sentence in one of the European countries which have signed an agreement. Seven others are awaiting transfer to one of the States.

Under today's agreement, which must be ratified by the country's Parliament, Estonia will only enforce ICTY sentences when the length of the jail term does not exceed the highest maximum sentence for a relevant crime under its domestic laws.

Estonia may enlarge list of reasons for aliens' expulsion

TALLINN - Estonia's government gave consideration at a meeting on Thursday to proposed legislation to enlarge the list of reasons for which an alien or a stateless person may be expelled from the country.

Today's law permits expelling and imposing a 10-year entry ban on those who have committed any of so-called "first degree" offenses - crimes such as murder, rape and robbery.

The proposed amendments to this law would extend the category to those who have committed "second degree" offenses - less serious crimes, Justice Minister Rein Lang told reporters after the government meeting.

According to the Russian Embassy in Estonia, there live about 110,000 Russian citizens and about 120,000 stateless persons in the Baltic country, whose total population is estimated at 1.34 million.

The projected amendments would "primarily apply to aliens who have repeatedly broken Estonian laws, for example have committed serious breaches of the peace or crimes against property or have been staying in Estonia illegally," Lang said.

Citizen of European Union Act

Citizen of European Union Act

Passed 20 November 2002

(RT¹ I 2002, 102, 599),

entered into force 1 May 2004,

amended by the following Act:

17.03.2004 entered into force 01.05.2004 - RT I 2004, 19, 134.

Chapter 1

General Provisions 

§ 1. Scope of application

• This Act regulates the bases for stay in Estonia of citizens of the European Union and their family members.

• The provisions of the Administrative Procedure Act (RT I 2001, 58, 354; 2002, 53, 336; 61, 375) apply to the administrative proceedings prescribed in this Act, taking account of the specifications provided for in this Act.

§ 2. Citizen of European Union

- For the purposes of this Act, a citizen of the European Union is a person who is a citizen of another member state of the European Union than Estonia.

§ 3. Family member of citizen of European Union

- For the purposes of this Act, a family member of a citizen of the European Union (hereinafter family member) is a person who is not a citizen of Estonia and who is:

• a spouse of the citizen of the European Union (hereinafter spouse);

• a child under 21 years of age or a dependent adult child or grandchild of the citizen of the European Union;

• a dependent parent or grandparent of the citizen of the European Union or of his or her spouse;

• a person not specified in clauses 1)-3) of this section who is dependent on the citizen of the European Union or residing with him or her and has a shared household with him or her.

Chapter 2

Stay in Estonia

Who does not need a visa to visit Estonia ?

As of 21 December 2007, Estonia is a part of the Schengen visa area.

Nationals of the member states of EU and EEA - Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Germany, Greece, Finland, France, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, The Netherlands, United Kingdom - and Switzerland.
The bases for their stay in Estonia are regulated by the Citizen of European Union Act (the text is available on the homepage of Estonian Legal Language Centre).

Schengen States - Austria, Belgium, Denmark, Germany, The Netherlands, Greece, Finland, France, Iceland, Italy, Luxembourg, Norway, Spain, Sweden, Portugal, Czech Republic, Poland, Hungary, Slovakia, Slovenia, Latvia, Lithuania, Malta.

Although documents are not checked when one crosses an internal Schengen border, it is still necessary for EU citizens (including Estonians) to carry a passport or ID card. Authorities (police, immigration officials) in Schengen states do have the right to check identifying documents, if necessary.