KPMG InfoCourier December 2016 | KPMG | EE

KPMG InfoCourier December 2016

KPMG InfoCourier December 2016

InfoCourier is a monthly newsletter which gives an overview of the latest changes in legislation.

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KPMG Infokuller Detsember 2016

Court decision: Adjustment of input VAT of a dwelling

On 1 December 2016, the Administrative Law Chamber of the Supreme Court made decision no. 3-3-1-19-16 in relation to the application of the Value-Added Tax Act (subsection 32 (4) and section 33) on the adjustment of input VAT deducted on the acquisition of fixed assets.

The Estonian Tax and Customs Board came to the conclusion that at the end of each calendar year, OÜ Ostecon has to adjust input VAT deducted on the acquisition of an apartment, as the intended use of the apartment, which was originally acquired for taxable supply, changed and the apartment was used for exempt supply.

The Supreme Court took the position that the only right thing to do in the above case, is to take into account the actual use of the apartment. Adjustments to input VAT have to be made in each year when the apartment is rented out for exempt supply. Also, it has to be taken into consideration that in those years input VAT may not be deducted. The tax accounting based on proportional deduction principle, which under the circumstances would have produced a completely opposite result, i.e. 100% deduction of input VAT, would produce a distorted result and be in conflict with the general assumption for the deduction of input VAT. Therefore, the Supreme Court agreed with the Tax and Customs Board’s decision on the adjustment of input VAT.

The Estonian text of the Supreme Court’s decision is available here.

For further information, please contact Merike Oja, tax adviser, moja@kpmg.com

 

Court decision: Grounds for exemption from fuel excise duty

On 23 November 2016, the Administrative Law Chamber of the Supreme Court made decision no. 3-3-1-45-16 in relation to the application of exemption from fuel excise duty on international road transport.

Confiscation of fuel by the Estonian Tax and Customs Board gave rise to a dispute as to whether subsection 68 (4) or another provision of the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act sets out additional conditions for the exemption from excise duty of fuel imported from the Russian Federation to Estonia in the standard fuel tank of a vehicle performing international road transport.

The tax authority decided that exemption from excise duty applies only if it can be proven that the fuel is used in the same vehicle for international transport. The tax authority justified its position by saying that the purpose of exemption from excise duty is not the importation of cheaper fuel but a faster and smoother border crossing.

The Supreme Court took the position that subsection 68 (4) of the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act cannot be interpreted so that a vehicle and the fuel in its tank can only be used for international transport. What is more, it surely does not mean that the amount of fuel found in the vehicle’s tank on the border has to comply with the amount necessary for completing the transport. For the application of exemption from excise duty it is important that the purpose of the vehicle should be international transport, the ride should take place in at least one direction with a load or passengers and the fuel should be in the standard tank of the vehicle. It is impossible to prove or verify on the border whether the fuel transported to Estonia will be used in the same vehicle.

Accordingly, the pumping out and withholding of fuel by the Estonian Tax and Customs Board was declared unlawful.

The Estonian text of the Supreme Court’s decision is available here

For further information, please contact Merike Oja, tax adviser, moja@kpmg.com

© 2017 KPMG Baltics OÜ, an Estonian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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