Since Estonia has adopted the euro as the official currency, all companies in Estonia have to convert their share capital and register changes in the capital in the Commercial Register. The conversion to the euro also entails amendments to the companies’ articles of association.
Although no final deadline has been established, the registration of the converted share capital and the amendments to the articles of association is exempt from state fees only up to the end of 2011. From 1 January 2012, state fees are applied. Also, amendments to a company’s articles of association and changes in its share capital are entered in the Commercial Register only if the capital has been converted into euros.
According to the amended Commercial Code, the minimum share capital of a limited company defined as osaühing (OÜ) under the Estonian legislation is 2,500 euros; the minimum value of a share is one euro and the value of a share exceeding one euro is a multiple of one euro. The new minimum share capital of a limited company defined as aktsiaselts (AS) is 25,000 euros; the minimum nominal value or book value of a share is 10 euro cents. If the nominal value of a share exceeds 10 cents, it is a multiple of 10 cents.
In addition, an AS may issue shares without nominal value. In addition to amendments to the articles of association, conversion to the euro usually calls for an increase or decrease in the company’s share capital.
For further information, please contact: Anu Ahas-Saaron, aahas@kpmg.com or Karen Root, kroot@kpmg.com
On 7 December the Riigikogu (Parliament of Estonia) passed the 2012 State Budget Act and the Act on Amendments to the Associated Acts. In terms of taxation, amendments include the following:
- The monthly rate established by the state budget which is the basis for the minimum social tax liability remains at the same level as in 2011 (278.02 euros).
- The rates for unemployment insurance premium contributions also remain unchanged compared to 2011. However, according to the accompanying letter of explanation, on forecasting tax revenue yields, the government also considers reducing the rates for unemployment insurance premium contributions from 1 January 2013.
- Excise duty rates for alcohol will rise 5% from 1 February 2012.
Other amendments specified in the letter of explanation as having impact on the budgetary tax revenues include lowering the limit applied to deductions from taxable income from the current 3,196 euros to 1,920 euros, and a 10% rise in excise duty rate for tobacco in 2012.
For further information, please contact: Einar Rosin, erosin@kpmg.com
The Riigikogu passed the Amendment to the Income Tax Act. According the Amendment, from 1 January 2012 the tax exempt threshold on accommodation expenses incurred during assignments will be abolished. This means that from next year accommodation expenses incurred during assignments, regardless of the amount of expenses, will no longer be subject to income and social tax on fringe benefit.
For further information, please contact: Einar Rosin, erosin@kpmg.com
From 1 January 2012, the threshold on tax-free sales will be 38 euros. Currently, the threshold of 38.35 euros (enacted for a terminal period from 1 January 2010 to 31 December 2011) is effective.
According to the VAT Act, goods may be sold tax-free to an individual resident of a third country who takes the goods in unopened packaging out of the Community. Tax-free sales may be applied in cases where the sales price of the goods together with VAT exceeds the established threshold and the taxpayer has a document with customs’ confirmation certifying that the purchaser has taken the goods out of the Community. In addition, in order to apply the tax-free sales procedure, conditions stipulated by the Minister of Finance regulation No 102 of 7 April 2004 have to be met.
For further information, please contact: Jekaterina Antsiferova, jantsiferova@kpmg.com
On 14 October 2011, the Estonian Accounting Standards Board (EASB) uploaded a draft of amendments to Accounting Standards Board’s guidelines (ASBGs) at its website. The draft has been prepared based on the EASB’s decision to harmonise the Estonian GAAP with the International Financial Reporting Standard (IFRS) designed for use by small and medium-sized entities (IFRS for SMEs).
The amendments are of fundamental significance. Since the current Estonian GAAP was derived from the IFRS framework, the new version is based on IFRS for SMEs published by the IASB (the International Accounting Standards Board) in 2009. The standard for SMEs stems from IFRSs but an attempt has been made to simplify accounting principles and reduce the amount of data to be disclosed.
Draft amendments to ASBGs provide several substantial changes. For instance, under the new guidelines, goodwill must be amortised, all development costs must be derecognised from the balance sheet, borrowing costs may no longer be capitalised and government grants must be recognised using the gross method.
If the draft is approved, the amendments will have a significant impact on companies’ equity and assets which can be expected to reduce, and problems may arise as regards meeting equity requirements provided in the Commercial Code and special terms and conditions for loans established by banks. Start-up companies in technology, pharmacy and other innovation-oriented sectors aiming for high added value who have previously capitalised their development costs under ASBG 5.48 will bear the brunt. The amendments also have a serious impact on all companies with significant goodwill recognised in their balance sheet or who are involved in developing real estate for own use or in order to sell it.
For further information, please contact: Andris Jegers, ajegers@kpmg.com
InfoCourier does not cover all amendments to Estonian legislation.