BONJOUR L'ESTONIE

Estonian Tax Board not satisfied with VAT collection in 2013

Estonian Tax and Customs Board head Marek Helm states that the situation with collection of VAT is sad in Estonia and the few companies that VAT collection depends on have to be treated with utmost respect, LETA/Public Broadcasting reports.

Fresh statistics of the Tax Board indicated that while there were 72,000 persons liable to VAT in Estonia last year, 5,690 companies paid altogether 2.08 billion euros of VAT that formed 90% of the collected VAT, Äripäev wrote on Monday.

Helm said in national radio that the whole so-called tax gap forms 450 million euros a year in Estonia and a half of it is unpaid VAT which is the second-biggest tax that after social tax that the state budget collects.

Helm said that the problems are not new. He explained that the VAT system is complicated as companies are entitled to reclaim it from the state too but in simplified terms, there were around 70,000 companies liable to VAT, two thirds paid more VAT to the state budget than they reclaimed and one third reclaimed more than they paid.

Helm said that possible incentives could be created for the 6,000 companies on whom VAT collection depends, for example faster VAT returns.

Postimees Online wrote that Estonian Chamber of Commerce Industry director general Mait Palts said that the Tax Board's statement surprise shim. "The majority of active companies are micro-companies and a large part of them are family companies with a few employees who have a small turnover and there isn’t much to pay on that," said Palts. "Yes, there are spheres where companies complain about the problem of hiding VAT but it cannot be said that this is a problem of all spheres of activities."

Work restrictions on foreign specialists to ease

TALLINN - The government approved on April 18 amendments to the Aliens Law and sent it to the Riigikogu; when the amendments come to force, it will be possible to hire a foreign specialist to work in Estonia after just a couple of days instead of the current regulations that make the wait last several months, reports Postimees. According to the agreement, a foreigner could stay in Estonia to permanently work in the country, and apply for a residence permit to do so while already being in Estonia.

To the proposal by the Foreign Ministry, an amendment to the Business Code was added, to enable foreign companies to open in Estonia branch offices that considerably facilitate the development of the Estonian economy. Currently it isn’t possible to register in the Business Registry a branch office that has one employee (manager) who doesn’t have a residence permit in Estonia.

Also, when a foreigner gets a short-term Estonian work visa, a visa with the same conditions is granted to his/her spouse and minor child and adult child if the latter isn’t capable coping independently due to health conditions or disability.

The easing concerns top level specialists who, according to the bill, are foreigners who have a professional preparation in any sphere. The bill also aims to change the part concerning foreign students to simplify starting doctoral, master’s degree or bachelor’s degrees studies in Estonia.
The draft law is supposed to come in force Sept. 1 next year if approved by parliament.

Riigikogu seeks solutions to citizenship law gap

TALLINN - The Estonian Parliament [Riigikogu] discussed on Tuesday the proposal of the Legal Chancellor to find a solution to the situation that children of people, who received Estonian citizenship via naturalization, don’t get automatically Estonian citizenship, Public Broadcasting reports.

The topic has been discussed at the parliament's constitutional committee and received its support. The problem is that if people who received Estonian citizenship via naturalization, don’t apply for a residence permit for their child, a situation emerges that the legal status of the child is undetermined when the child gets to be 15 years old.

Usually this happens when the parent misleadingly assumes that since they are Estonian citizen, the child is an Estonian citizen which is not the case. The Legal Chancellor thus made a proposal that such people could get Estonian citizenship automatically. There are around 500 such children in Estonia now, but not all of them could be interested in getting Estonian citizenship.

The government has so far taken a position that if a child has de facto lived in Estonia for 8 years, then he/she can get Estonian citizenship even if the child lacks a residence permit due to parents’ mistake. So far there have been 13 such cases that have found a positive solution. Legal Chancellor said that since he cannot make a proposal for through revision of citizenship rules, he continues making proposals case by case.

Court rules in favour of City of Tallinn in dispute over Blackheads House

The Administrative Court ruled yesterday in favour of the City of Tallinn in its dispute with the central government over the future ownership of the Blackheads House in Tallinn Old Town.

The court did not offer an opinion on whether the building should be returned to the Blackheads, but abolished the government resolution in which the government rejected the proposal of the Tallinn City Council not to return the building to the historic brotherhood. The court found that it was not clear whether the building would remain open to public once it is transferred to the brotherhood.

According to the court, the government has not properly interpreted the law in handling the return issue, but the court did not provide a justified opinion on whether the building should be returned to the organization. In principle, the court found that the building can be returned to its rightful owners only if there are guarantees that it will not make it more difficult for the local government to fulfil its public duties.

Estonian Supreme Court refuses to consider claim of VEB's holders

The Supreme Court of Estonia has turned down a complaint from 12 holders of VEB Fund certificate who were aiming to receive compensation from the state for their deposits lost in the Soviet-era Vneshekonombank (VEB) 20 years ago, the Estonian national broadcasting corporation ERR said in an article on Tuesday, November 20.

The companies wanted courts to strike down a decision made by Parliament in February to liquidate the VEB Fund, set up in 1993 to compensate depositors for money frozen in the bank, and pay creditors from the proceeds, writes LETA.

The Parliament and the central bank created the state-insured compensation plan after Russia froze Estonian accounts in the bank. Over the last two decades the government has not been able to unfreeze the accounts – it was reported in a separate story last month that much of the money in the Russian bank disappeared into a shady holding company in the 1990s.

The companies wanted their claims paid at face value, plus compensation for the period when their funds were unavailable to them.

However, the general chamber of the Supreme court said today that the companies in the suit had right of claim only against the VEB Fund itself. Other claims – against the state or the central bank, for example – could not be linked to Parliament's decision, the court said.

Tax authority and police discover large-scale VAT fraud

The tax authority and the police suspect Marko Kalev who is business partner of real estate developer Jürgen Järvik and supermodel Carmen Kass of large-scale VAT fraud, writes Äripäev.

The tax authority and the prosecutor’s office are suspecting that Kalev had masterminded a large-scale VAT fraud scheme through Soldina oil terminal in Northeast Estonia which is a bonded warehouse and sold fuel to companies that were controlled by Kalev and his business partners. They drew up fictious pledge contracts and purchase and sale contracts to avoid paying VAT.

All in all, the authorities are investigating 13 private persons and one legal person in connection with the fraud scheme.

Authorities estimated that in the first three months, the state lost EUR 1.3m in unearned VAT as a result of the fraud scheme. It means that the Soldino oil terminal had sold at least 6.5m worth of fuel and other oil products. However, it is believed that the actual extent of the fraud was much bigger.

A year ago Äripäev wrote that Kalev had set up a web of companies and acquired five small service stations. The central connection point was the Soldina oil terminal that is rented by Soldina Õlibaas and belongs to law firm Mullari ja Koch.

Kalev himself has been detained. He was arrested in September in connection with another VAT fraud where a company had issued fictious invoices. His lawyer refused to comment.

Toomas Hõbemägi

Subpoenas to be served via Facebook and Twitter in Estonia

According to a report from AFP, crime suspects may be contacted by a court using their email, Facebook or Twitter accounts. The message would contain a short link leading to court documents.

It’s a draft bill at the moment and a subpoena would only be delivered if the person receiving it clicks on the enclosed link. Then they would have to visit the official site that can be accessed with an electronic identification ID-card, one that is issued to all adult Estonians. Not quite frictionless then.

Justice ministry spokesman Priit Talv told AFP that court cases in Estonia take a long time because of the slow delivery method for documents. He also noted, “In addition to those criminal suspects who deliberately try to hide their mail or residence address there are many people whose address is either not registered or they travel a lot. Reaching people via electronic means is both cheaper and quicker.”

Digitally legal

The process of signing documents digitally is already becoming well practised, naturally, there’s an app for that. Evidence in divorce cases is also taking into account our social media activity. If you were considering insurance fraud, you might also want to re-arrange your social networking links as this too can be considered when investigating possible crime.

AFP quotes a study saying that, “65 percent of all Internet users in Estonia; a figure rising to 80 percent for those under 40, visit their Facebook account at least once a week.” If those figures are correct, then it is hardly surprising that this system makes sense as a way to contact people.

Though, unless you are following your local court on Twitter, it would also be a rather public way to be served your papers.

Estonian motorists evading taxes

Nearly half of all Estonian cars in Finland have legally dubious status, estimates the Customs Board. Many are kept here permanently but still registered in Estonia to avoid paying Finnish taxes. Estonia does not levy annual car taxes.

There are some 50,000 foreign-registered vehicles in the country, most of them from Estonia, which is Finland's nearest neighbour to the south.

By law, an automobile must be registered in the country where its owner primarily lives and works. A foreign vehicle may be driven in Finland for up to six months before it must be registered here -- but only as long as its user is a permanent resident of another country.

This may of course be open to interpretation, but by law Customs officials can make the decision in uncertain cases. The state of Finland loses out on hundreds of thousands of euros annually due to improperly registered cars.

"Most don't pay"

"Sure, I know people who live and work in Finland but don't pay car taxes here," says Mare, an Estonian who has lived here for six years. "There are lots of them. Some pay, but most don't. I don't think it's fair. If you live and work in Finland, then you should follow Finnish laws, too," she adds.

Trial over Estonian doctors accused of clinical trials on humans started in Tartu

Trial in the criminal case concerning unauthorised clinical trials on humans started in the Tartu County Court on Monday, writes LETA/National Broadcasting.

Charged with the crimes are well-known medical doctors Andres Sell and Lembit Allikmets.

According to charges, in 2006, 64 orthopaedic surgeries were carried out in the outpatient surgery centre Medex and in the Tartu University Hospital, using the anaesthetic drug for which there was no authorisation by the State Agency of Medicines and whereby patients were also not informed in accordance to the regulations.

The prosecutor has stated that Sell incited Allikmets to forge a permit for the trials and the latter did so.

If convicted in carrying out illegal clinical trials on humans, the court may sentence the accused with a monetary fine or a prison term of up to three years.

The Tartu County Court ruled on Monday that the trial would not be open to the public. The Southern Circuit Prosecutor Kristiina Laas requested that the sitting be declared closed in order to protect the private lives of the victims as the case would reveal the data on their health records which are considered delicate personal data.

Defence lawyers also agreed with the prosecutor’s request.

Juhan Tere

Personal bankruptcies on the way up in Estonia

70% of bankruptcies that were declared in Estonia in October 2011 were personal bankruptcies of private persons. According to experts, declaring one personally bankrupt is cheaper than paying debts to bailiffs, writes Eesti Ekspress weekly.

A typical case: a resident of Tallinn who owns 116,000 euros, has no assets, earns 640 euros a month and has two children.

While a year ago a total of 1,655 bankruptcy applications were filed last year, of which 20% were personal bankruptcies, the ratio is now at 30%.

One of the most prominent persons to be declared bankrupt recently was Viktor Levada who was once one of Estonia's richest businessmen and who had guaranteed a business loan in the amount of over 6 million euros. Also his company that had paid about 700 million kroons for a vacant lot opposite Hotel Olympia is now bankrupt.

Another is Väino Pentus, father of Estonian minister of environmental affairs Keit Pentus, owned 195,000 euros and whose transport company Autorollo went bankrupt in spring.

Toomas Hõbemägi

Estonian justice ministry will start compiling a cohabitation law in 2012

Estonian justice minister Kristen Michal sent a letter to Riigikogu factions on Monday informing them of intentions to start creating the cohabitation law in 2012, LETA/Postimees Online reports.

“In Estonia, the share of cohabitation couples has increased and that of traditional marriages has decreased for a long period of time,” Michal writes. “For example, in the past decade, the majority of children were born outside registered marriages (58% of children in 2007). At the same time the property and legal relations of partners have become more complicated,” wrote Michal.

Michal said that thus the feeling of security and protection of rights of the weaker side of tens of thousands of couples, be it a woman or a man, has become so much more important and a very sensitive subject for all.

Michal announced that after analyses and consultations, the ministry includes in its working plan for next year creation of a cohabitation law to regulate non-marital cohabitation better.

Juhan Tere

Court sentences businessman into prison in record time

Tallinn Administrative Court has sentenced Indrek Vürst who was accused of masterminding a VAT fraud in the total amount of 80,000 euros for three months in prison, writes Äripäev.

This is one of the VAT fraud cases where a sentence was handed down in only 48 hours instead of lingering in courts for years. The court found that Vürst had a significant role in the VAT fraud case.

Terje Leng from the tax and customs board said in comment that a prison sentence is an unusual punishment in tax crimes because in most cases the guilty get a fine or a conditional sentence.

The court found that Vürst had participated in a scheme where a company was incorporated, buys fuel from the Estonian excise duty warehouse at zero percent VAT, sells it while adding VAT and then terminates its existence or is sold.

According to the prosecutor, FuelPRO, the company of Vürst, committed the VAT fraud in just one month.

Toomas Hõbemägi

Land tax exemption passes final reading

The bill exempting homeowners, as opposed to property investors, from the land tax, was finally passed in Parliament after its second reading had dragged on for three sessions.

The amendment to Land Tax Act - exempting 0.15 hectares of land in settled areas and 2 hectares in the open countryside from the tax - was passed 54 to 39, with the divide running more or less along the power distribution line between the governing Reform-IRL coalition and the opposition.

Attempting to filibuster the second reading at all costs, the opposition disagreed with what it saw to be a political move to drain local governments of their revenue. Although the coalition made a pledge to compensate for the loss of local revenue ensuing from the exemption, the mechanism was not included in the draft act itself.

The land tax has been the only nationwide tax that does not create revenue for the national budget but for municipalities alone. Prime Minister Andrus Ansip has proposed making up the lost revenue, an estimated 10 to 14 million euros per year, by increasing the share of income tax allotted to the local governments, which was, despite much criticism from the opposition, cut down during the recession years. Currently, 11.4 percent of the income tax goes to the local governments.

The Centre Party-run city of Tallinn, whose land tax rates were considered to be abusively high and were allegedly the main cause prompting IRL and the Reform Party to come up with the exemption bill, is bound to enforce a similar exemption a year before the national law comes into force in 2013, having submitted a corresponding motion to the City Council last week.

Erkki Sivonen

Refusing a wage cut deemed unreasonable grounds for redundancy

The Civil Chamber of the Supreme Court found in a case involving a Kuressaare nursery school teacher who had been made redundant that if the work load is not reduced or the work of the institution reorganized, then reducing the wages is illegal and refusing to take the cut does not provide grounds for redundancy.

The long-winded court action arose from an incident in March 2009, when the employer started pressuring the nursery school employees to agree to amending the employment contract in such a way that their wages would be reduced, but the work load would remain the same. Soon after, the head of the institution announced the implementation of an 18 percent retroactive pay cut beginning April 2009, wrote Postimees.ee.

The notice of dismissal said that based on a ruling made by the Kuressaare City Council, the salary fund of the municipal institutions had been reduced by 18 percent, which made it impossible to uphold the employment contract under the same wage conditions. The employee, who disagreed with this proposal, was made redundant and began a long court battle.

The court of first instance found for the employer, but the district court took the opposite view, finding that the employer had no need to lay off the plaintiff and ruling that the employment contract in question was still in effect.

"The refusal of an employee to agree to amending the terms of an employment contract (including the wage conditions) cannot be viewed as a redundancy situation that provides grounds for terminating the contract. Amending the terms of a contract of employment in any way does not mean that employment has been terminated under the terms contained in it," noted the Civil Chamber of the Supreme Court.

So all of you who are having the same trouble as ever so many had during these past 2 years, perhaps that this is the time to get listen to and to get the law on your side. Most of us never had this chance, as we were all dismissed, by the "Work Inspection", body on the employers' side in Estonia.

Sigrid Maasen

Nordea confused by tax law amendment

A seemingly innocent amendment of the income tax act has made alarm bells ring in one of Estonia’s largest banks, Nordea, writes Äripäev.

The amendment in question concerns Estonian representative offices of foreign companies or so-called affiliates and taxation of their dividends.

Until now, such representative offices like Nordea in Estonia were taxed when the amount of dividends they paid to their parent company exceeded the amount that the parent company had invested in Estonia

However, under an amendment that took force in January 2011, they will be taxed at the moment they are paying out dividends to their parent company.

According to Nordea, the amendment seems to create a retroactive tax claim on dividends paid out by 2011. To avoid the risk of facing a large tax claim with interest, the bank on its own initiative transferred 8 million euros to the account of the Estonian tax authority and is demanding an explanation from the finance ministry.

It seems to be a case of bad wording of the law and the finance ministry has already informed the bank that there will be no retroactive tax claim.

Toomas Hõbemägi

Estonia gets a law of cemeteries

Estonia will get a law of cemeteries that will starting in 2012 implement common rules for cemeteries and burial in all of Estonia, LETA/Äripäev.ee reports.

There was no general regulation on graveyards and burial before in Estonia. So far the matters concerning cemeteries have been up to local municipalities to decide.

Regional affairs minister Siim Kiisler said that the freshly adopted law will fill a legal gap an end an undetermined and unregulated situation.

The law prescribes now for example that the usage purpose of cemeteries closed for burial can be changed in 75 years and the buried have to be reburied elsewhere; the minimum period over overburial is 20 years from the last burial and that there is a 50 metres peace zone around the outer borders of cemeteries.

Juhan Tere

Riigikogu approves of new language law

The Estonian Riigikogu approved on Wednesday of the new language law that aims to guarantee survival of the Estonian language for a long time to come, LETA/Postimees Online reports.

The language law that was initially approved in 1995, had been amended 17 times and the volume of amendments exceeded the law’s initial text volume, education and science ministry spokesperson said.

The new language law regulates the use of the Estonia language and foreign languages in public matters, requirements and evaluation of Estonian language skills, state supervision and responsibility. Mainly the law’s structure has been updated, made clearer and more logical.

Some of the more important changes in the content of the law include appointing Estonian language council at the law level and determining the language tasks of the state.

Juhan Tere

2010 income must be declared in Estonian kroons

Users of SEB’s Internet bank will be able to check the information on their pre-completed 2010 tax returns through the e-Tax Board starting from 8 February 2011.

Salaries, other remuneration, mandatory pension payments, unemployment insurance payments withheld, training costs paid, pensions and voluntary pension payments will be reflected on the tax returns in Estonian kroons.

Since the other information on the tax returns is in kroons, bank information is also being given in the former national currency. Clients should also note that income tax incentives on interest earned on student loans were scrapped in 2010, as a result of which this information is not being forwarded to the Tax and Customs Board by the bank. Nor is confirmation provided of this in the Internet bank.

Confirmation will also be available in the Internet bank as of 8 February 2011 for interest paid on home loans and leasing in 2010, as well as for life insurance payments and payments made into pension funds.

Taxpayers will be able to begin confirming and lodging their pre-completed tax returns as of 15 February 2011. The Tax and Customs Board, via the e-Tax Board, will begin issuing rebates on submitted returns as of 28 February 2011. The deadline for submission of all tax returns is 31 March 2011.

Media law limits press freedom in Estonia

The parliament in Tallinn approved changes in media law which include a loosening of source protection and compensation during illness.

The daily Eesti Päevaleht is worried:

“Journalism does not need this new law because it was just nodded through and endangers the democratic values of Estonian society, including freedom of the press, a main foundation of democracy. So this new law affects not only the media but society as a whole, because the threat of punishment will put a damper on courageous citizens who might otherwise speak freely.

Every critical statement becomes punishable if it is determined ‘inappropriate’. And journalists aren’t the only ones who write every day about the offences committed by officials – the average retiree on the street will also be banned from calling the prime minister a robber for reducing his pension. This law benefits only those who have enough money for a good lawyer.”

 

Estonia wins case on retired military pensions in European Court of Human Rights

Today the European Court of Human Rights ruled in Estonia’s favour regarding the complaints* of 45 retired Russian military servicemen against the Republic of Estonia, finding that Estonia had not violated any rights protected by a convention.

The applicants of the complaints alleged that they have been discriminated against and their proprietary rights—the right to a pension—had been violated. The accusers felt that if they are being paid a pension on the basis of 1994’s “Agreement between the Republic of Estonia and the Russian Federation concerning social guarantees for the military pensioners of the Russian Federation staying on the territory of the Republic of Estonia”, then they are left without a pension and they have been discriminated against, because generally it is not a condition for receiving a pension in Estonia that a person may not be receiving a pension from a foreign country as well, but the aforementioned Estonia-Russia agreement does contain this stipulation. In their complaint, the accusers based their argument on the European Convention for the Protection of Human Rights and Fundamental Freedoms and its Protocol No. 1.

In its ruling today, the Human Rights Court found that the complaint is admissible; however, in the course of its analysis it reached the conclusion that the rights of the applicants were not violated. The court noted that a situation can only be called discrimination when equals are not treated equally. The court found that, in the given case, the plaintiffs were a special case bound by a special set of rules, and therefore their different treatment was justified.