• Amendments to the Packaging act
  • Judical decision - cross-border merger
  • Foreign Investment Reliability Assessment Act (FIRAA)
  • Digital Operational Resilience Act (DORA)

Amendments to the Packaging Act

On 1 May 2023, several amendments to the Packaging Act enter into force.
We will give an overview of the amendments concerning the packaging reporting.
• Specifications concerning smaller packaging undertakings
From 1 May, all packaging undertakings must similarly start fulfilling the obligations arising from the Packaging Act or transfer their fulfilment to a recovery organisation. 
Until 1 May, the obligation to submit a packaging report to the packaging register and accept from the consumers the return of sales packaging and sales packaging waste of the sold goods free of charge, did not extend to undertakings who place goods on the market in the plastic packaging with a mass of less than 100 kilograms per year or in other packaging material with a mass of less than 200 kilograms per year. 

• Single-use plastic products  
Packaging undertakings will have to submit data to the packaging register on the quantity of single-use plastic products. The information shall be submitted on the content of recycled plastic in the beverage bottles, placed on the Estonian market, calculated as an average for beverage bottles placed on the market.

As the goal is to consume less single-use plastic food containers and cups for beverages, an additional obligation is placed on the undertakings to prepare and disclose an action plan for reducing the consumption of such products. The consumption must decrease by 2026. Also, the recovery targets for single-use plastic beverage bottles are stipulated. 

• Plastic carrier bags designated to be handed over at the place of sale
From 1 May 2023, all packaging undertakings are required to maintain records at the place of sale concerning lightweight and specifically concerning very lightweight plastic carrier bags sold and supplied free of charge to consumers and to submit the data to the packaging register, regardless of the size of the place of sale. This obligation also extends to e-traders. So far this had to be done only when the area of the place of sale exceeded 100 square metres.

• Appointing an authorised representative  
The Packaging Act stipulates that foreign packaging undertakings, who place packaging on the market in Estonia and whose seat is not in Estonia, must appoint an authorised representative. For this purpose, a written authorisation of limited or unlimited duration must be drawn up, specifying the tasks to be performed by the representative on behalf of the foreign packaging company. 

Further information on these amendments and other amendments made to the Waste Act, Packaging Act and Tobacco Act is available HERE.

Cross-border merger of companies

The Supreme Court annulled the tax assessment notice and the decision on challenge of the Tax and Customs Board (TCB) and satisfied the appellant’s appeal in cassation in the dispute concerning the date on which a balance sheet should be drawn up and the payments from equity subject to taxation be calculated.

The parent company STMT Telco Trading OÜ merged with the subsidiary UAB STMT (a legal person established in Lithuania). In the merger agreement, the merger balance sheet date was set at 1 October 2018 and the parent company STMT Telco was deleted from the commercial register on 21 March 2019.

Upon merger, STMT Telco made a payment from equity, on which the TCB issued an assessment notice obliging the subsidiary, as the acquiring company, to pay income tax. The tax authority held that a payment from equity is made as at the merger balance sheet date and not as at the date of deleting from the register. In addition, the TCB pointed out that upon merger, the final balance sheet shall be prepared as at the day preceding the merger balance sheet date. After this date and assuming that the merger is completed, all transactions are economically made by the merged company.

Although the courts of lower instance found that the decision of the TCB is to be upheld, the Supreme Court took an opposite position, as the rule of substantive law had been incorrectly applied. The Administrative Law Chamber of the Supreme Court justified its decision as follows:

– Proceeding from the merger balance sheet date is not consistent with the content and purpose of subsection 50 (22) of the Income Tax Act. It is an error to maintain that subsection 50 (22) of the Income Tax Act does not specify a time for fixing the amount of taxable equity. This time is specified through a taxable event, being the deletion of a person from the register;

– upon cross-border merger of companies, in order to apply subsection 50 (22) of the Income Tax Act, the income tax liability must be calculated on the company’s equity payment as at the moment of deleting the company from the Estonian commercial register and not as at the merger balance sheet date. Income tax shall be reported and paid by the legal successor, i.e., the foreign company;

– pursuant to section 57 of the Taxation Act, the company retains its accounting obligation even after the merger balance sheet date, and although the company is no longer required to prepare an annual report, the accounting records make it possible to ascertain the size of equity and, accordingly, the tax liability on making an equity payment.

The judicial decision can be viewed HERE.

The state will start assessing the reliability of certain foreign investments made in Estonia

In January 2023, the Riigikogu adopted the Foreign Investment Reliability Assessment Act (FIRAA), on the basis of which the state will start assessing the reliability of certain foreign investments made from non-EU countries to Estonia, to ensure the security and public order of Estonia and other Member States of the EU. The Act will enter into force only on 1 September 2023, however it is important for the undertakings already now, when planning to involve investments from outside the EU. 

For the purposes of the Act, in certain cases a foreign investment requires an authorisation from the Consumer Protection and Technical Regulatory Authority (CPTRA), which is granted by assessing the impact of the foreign investment on the security and public order of Estonia or another Member State of the EU. The completion of a foreign investment subject to an authorisation is prohibited before the authorisation is obtained. 

DORA takeaways for Legal and IT Departments

Koos finantssektori üha suureneva digitaliseerumisega pööratakse üha enam tähelepanu sellega seotud riskidele. Viimased juhtumid Eestis (SEB, Luminor), Rootsis ja juba mõne aasta eest Soomes on näidanud, et info- ja kommunikatsioonitehnoloogiaga (IKT) seotud intsidente tuleb ette sagedamini. Küllap on turuosalised juba märganud, et Eesti ja Soome finantsjärelevalves on hakatud panema suuremat rõhku IKT-riskide juhtimisele. Seega muutuvad IKT-riskide maandamise kvalitatiivsed nõuded üha olulisemaks. 

17. jaanuaril 2025 jõustub EL-i määrus nr 2022/2554, mis käsitleb finantssektori digitaalset tegevuskerksust (DORA) ja mida kohaldatakse suure osa finantssektori suhtes. Enne DORA The increased digitalisation of the financial sector also shines more light on the risks related to it. Recent cases in Estonia (SEB, Luminor), Sweden and Finland have shown that information and communication technology (ICT) related incidents are occurring more frequently, and as market participants may have already noticed, financial supervision  in Estonia and in Finland is now focusing more on ICT risk management. Therefore, the qualitative requirements for ICT risk mitigation are becoming more and more important.
On 17 January 2025, the Digital Operational Resilience Act (DORA), EU regulation 2022/2554, will come into effect and will apply to a broad scope of the financial sector. There are also a number of Regulatory Technical Standards (RTS) as well as Implementing Technical Standards (ITS) related to the provisions in DORA that will be published before 2025. 

DORA aims to improve the operational resilience of the financial sector and mitigate the risks associated with ICT. Although not all the requirements in DORA are completely new, it is worth noting that DORA aims to consolidate and update the requirements related to ICT risk as part of operational risk requirements, which to date have been dealt with separately in various EU legislation or in non-binding ICT standards and specific authority guidelines. Previous requirements have primarily focused on operational risk (including ICT) from a quantitative perspective, rather than targeted qualitative standards that address the ability to protect, detect, mitigate, recover and remediate ICT incidents or reporting and digital testing capabilities. Therefore, DORA strives to eliminate the existing gaps and harmonise the qualitative requirements on ICT risk management at an EU level.