KPMG InfoCourier September 2017 | KPMG | EE

KPMG InfoCourier September 2017

KPMG InfoCourier September 2017

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

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KPMG Infokuller - september 2017

InfoCourier – an overview of the latest changes in legislation

This InfoCourier introduces the Act to Amend the Social Tax Act and Income Tax Act presented by the Ministry of Finance to the Estonian Government to simplify the taxation of self-employed people.

It’s time to submit claims for VAT refunds. Estonian businesses can apply for a refund of VAT paid in another member state by 30 September at the latest, if during 2016 they purchased goods or services from another member state with the VAT paid in the member state.

And as usual, we discuss some significant court decisions.

Enjoy!

Taxation of the self-employed becomes simpler

The Ministry of Finance has presented the Act to Amend the Social Tax Act and Income Tax Act to the Estonian Government to simplify the taxation of self-employed people.

Among other things, the principle of deducting social tax paid on business income will become more precise, the amount of social tax that exceeds business income will be carried forward to subsequent taxable periods, and the tax exemption on gifts with a value of up to 10 euros (excluding VAT) granted for the purpose of advertising will also apply to the self-employed.

For further information, please contact Einar Rosin, tax adviser, erosin@kpmg.com

Deadline for submitting claims for VAT refunds

Estonian businesses can apply for a refund of VAT paid in another member state by 30 September at the latest (in some member states, an earlier deadline may apply) if during 2016 they purchased goods or services from another member state with the VAT paid in the member state. Claims for VAT refunds are submitted electronically. For claimants the procedure is similar in all member states. In Estonia, the application is submitted via the section EL Tagastustaotlused ( EU Claims for Refund ) on the e-Tax Board website.

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

Court decisions

Application for preliminary ruling from the European Court of Justice on sales tax 

The Supreme Court has pending case no. 3-3-1-70-16. The dispute is about whether the sales tax, which to date has been declared invalid, was in accordance with article 401 of value added tax directive 2006/112/EC which prohibits member states from introducing or maintaining other taxes (taxes other than VAT) payable on turnover. According to the Chamber’s regulation of 1 August 2017, in addition to the value added tax system in force, the sales tax established in Tallinn could have had a negative impact on the functioning of the common VAT system. In order to determine a possible contradiction with article 401 of the value added tax directive, the Supreme Court has decided that an application for a preliminary ruling has to be submitted to the European Court of Justice and proceedings in the matter have to be suspended until a response has been received. 

 

Participation in VAT fraud through shadow companies 

As a result of an audit, tax authorities came to the conclusion that a company had recognised the invoices issued by two suppliers (companies) in its accounts to obtain tax benefits while being aware that the suppliers were not the actual sellers of the goods but the goods were bought directly from Latvian and Lithuanian companies. The idea of such fraud is that the company used as an intermediary generally fails to pay VAT to the state but the buyer wishes to deduct input VAT on the basis of an invoice. According to the Supreme Court’s practice, participation in fraud includes situations where the buyer knows that the seller will not transfer the VAT shown on the invoice to the state. In the above case, it appeared that the suppliers did not operate independently but followed the buyer’s instructions. Therefore, the buyer must have known that it was dealing with shadow companies. 

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

© 2018 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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