Infocourier - April 2022

AIn accordance with an amendment to the Income Tax Act that took effect on 6 April 2022, donations to support Ukrainian people in the current situation of war are exempt of tax if made through the following organisations: MTÜ Eesti Pagulasabi, MTÜ Mondo, Ukrainian Cultural Centre (Ukraina Kultuurikeskus), National Defence Promotion Foundation (Riigikaitse Edendamise Sihtasutus), Estonian Red Cross, Päästeliit and Rotary Club Tallinn Vanalinn. The tax exemption applies to gifts and donations made from 24 February to 31 December 2022.

The bill is available here (in Estonian).

Further information: Tax Advisor Ave Rego, averego@kpmg.com

AIn March 2022, the Riigikogu passed a bill amending the Taxation Act and the Income Tax Act. The new provisions require reporting on the chain of contractors and on time spent on the construction site, entailing the installation of an electronic registration system. This should be done primarily by the general contractor, who specifies the contractor, approves the construction works subject to the reporting requirement on the basis of the pre-completed form on the Tax and Customs Board website, and reports the required data about the customer. The reporting obligation applies to construction works expected to last over 30 business days with at least 20 persons working simultaneously on the site or over 500 man-days.

It applies to construction sites where works start on 1 October 2023 or later. Construction works started before 1 October 2023 are also subject to reporting if expected to be completed by 1 October 2024 or later.

The bill is available here (in Estonian).

Further information: Tax Advisor Ave Rego, averego@kpmg.com

Tartu Circuit Court recently ruled on an appeal over whether a company may be required to present a bank statement for tax inspection purposes.

The appeal related to a case where the tax authority issued an order requesting a printout of the bank statement to inspect the payments that the company had made to a board member. The appellant considered the tax authority’s request disproportionate.

According to the tax authority, the appellant’s view that companies may use their discretion in submitting information to the Tax and Customs Board was flawed, as was the view that the proportionality of the tax authority’s request may be judged based on the size of the relevant amount. The tax authority pointed out that where there is doubt that a company has not reported correct information regarding the use of its funds, the tax authority must ensure the accuracy and credibility of evidence, and one way to do this is by asking the company to present a printout of an unfiltered bank statement.

Tartu Administrative Court supported the tax authority’s view and did not grant the appeal. The tax authority’s and the Administrative Court’s positions were upheld by Tartu Circuit Court, who explained its ruling as follows:

• The fact that the appellant has previously received dividends from the company is not relevant to the proportionality of the tax authority’s order if it has been given with a view finding out how a specific amount has been used in the company’s business.
• In a situation where the company can filter the information on its bank statement at its own discretion, the tax authority cannot be convinced that the information received is correct. It is up to the tax authority to decide by analysing and evaluating the data, if, and to what extent the information collected is relevant.
• The receipt orders submitted by the company with regard to cash payments to the company do not constitute sufficient evidence that the funds have indeed been paid back to the company, as receipt orders do not represent the actual transfer of funds, nor do they exclude the possibility that the documents may have been fabricated.
• The fact that the tax authority has received a full bank statement from the bank does not rule out the option that it may obtain the information from alternative sources in accordance with § 146 (2).

In conclusion, the court decided not to grant the appeal and found that the order requesting a printout of the bank statement can be considered proportionate in this case.

The report of the case is available here (in Estonian).

Further information: Tax Advisor Einar Rosin, erosin@kpmg.com