KPMG InfoCourier December 2017 | KPMG | EE
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KPMG InfoCourier December 2017

KPMG InfoCourier December 2017

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

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KPMG InfoCourier December 2017

InfoCourier – an overview of the latest changes in legislation

This issue covers - among other topics - articles regarding:

— New form for submission with form TSD*

— Taxation of self-employed persons changes

— VAT e-commerce package

— Recent Supreme Court cases

Please feel free to contact KPMG’s tax advisers with any queries you may have. We hope you are enjoying reading it!

New form for submission with form TSD*

The Ministry of Finance has issued a regulation that, among other things, provides a form for declaring compensation for use of a personal automobile, coverage of training and health promotion expenses and loans between related parties, as well as the procedure for its submission and completion. 

* Form TSD is used for declaring income tax, social security tax and unemployment and mandatory funded pension contributions. A detailed overview in Estonian is available here.

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

Taxation of self-employed persons changes

The Estonian Parliament is planning to simplify the taxation of self-employed persons by changing the Social Tax Act, Income Tax Act and other acts.

For example, under the revised legislation:

— Self-employed persons whose main activity is studying will be exempted from making advance tax payments and the obligation to pay the minimum amount of social security tax.

— Self-employed persons will be allowed to deduct verified entertainment expenses of up to 32 euros (per each calendar month).

— Quarterly accounting for advance payments will be replaced by summarised annual accounting.

A detailed overview in Estonian is available here.

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

Board members’ right to unemployment insurance

From 2018, a board member will be able to register as unemployed and receive unemployment insurance benefits provided that:

— he/she does not receive any remuneration for fulfilling the obligations of a board member;

— his/her unemployment insurance period has lasted for at least twelve months during the thirty-six months prior to registration as unemployed;

— he/she did not terminate his/her employment contract, the employment contract was not terminated by mutual agreement of the parties and his/her employer did not terminate his/her employment contract extraordinarily due to a wrongful act.

Subject to certain conditions, the same right will be granted to self-employed persons and their spouses that are engaged in their activity.A detailed overview in Estonian is available here.

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

VAT e-commerce Package adopted

On 5 December 2017 the European Union adopted new legal provisions which affect both EU and non-EU businesses involved in the sale of goods cross-border to EU consumers. The new provisions change the VAT compliance obligations for such businesses, extend VAT compliance obligations to online platforms and may impact reporting obligations of postal operators and couriers. Introduction of an annual EUR 10,000 threshold of registration for the suppliers of digital services will come into effect on 1 January 2019. Most part of the changes are not expected to enter into effect before 2021. 

Read more on the newsletter prepared by the KPMG Global Indirect Tax Digital Sector Group here

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

Court decisions

Dispute over the transaction price

Companies B, C and D purchased a piece of real estate from company H for 3,900,000 euros and resold it to company A for 5,380,000 euros. The tax authority took the position that company A had actually acquired the real estate for 3,900,000 euros and the amount exceeding the purchase price was subject to income tax because it constituted withdrawal of money from the business. The tax authority justified its position by claiming that company A had financed the transaction from the start since companies B, C and D did not have sufficient funds. Moreover, companies B, C and D had used the cash received to provide loans to persons related to company A. The Supreme Court did not agree with the tax authority, stating that based on evidence collected it could not be concluded that a hidden sales transaction of 3,900,000 euros had taken place between companies A and B, C and D. Also, it is common to resell goods for higher prices and the prices charged depend on the agreements made between the parties, and the tax authority and courts do not have any right to interfere in pricing. 

A detailed overview in Estonian is available here.

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

 

Taxation of compensation received from the Republic of Estonia

The Tax and Customs Board withheld income tax from compensation for non-patrimonial and patrimonial loss received by a natural person from the Republic of Estonia on the basis of a compromise. Although the person submitted an application to the Tax and Customs Board stating that income tax should not have been withheld, the Tax and Customs Board did not change its decision. 

The matter reached the Supreme Court. According to the Supreme Court, in order to determine whether compensation for loss meets the definition of income, one should assess what the injured party’s income would have been if the loss had not been incurred. This means that from the point of view of the definition of income one should differentiate between compensation for unearned income and compensation for non-patrimonial loss. In the case under dispute the loss incurred was caused by damage to health. Compensation for damage to a person’s health cannot be considered the person’s income. 

A detailed overview in Estonian is available here.

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

 

Acquisition of an apartment for business purposes

A limited liability company purchased an apartment and furnishings for the apartment. The company deducted the full amount of input VAT from the purchase invoices as it had bought the furnishings for business purposes, i.e. for taxable supply. The tax authority took the position that the furnishings were purchased for the personal use of a board member and decided not to refund the VAT reclaimed by the company and to impose income tax on the transaction. The Supreme Court disagreed with the tax authority with regard to the income tax liability. A company may lease out an apartment as a dwelling and generate revenue by doing so. Thus, assets acquired for that purpose cannot be regarded as assets acquired for non-business purposes. In respect of VAT the Supreme Court stated that leasing out an apartment constitutes tax-exempt supply. Therefore, input VAT may not be deducted from the expenses incurred in connection with acquiring the apartment and its furnishings.

A detailed overview in Estonian is available here.

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.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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