Corporate CbC reporting and the Minimum Tax Directive

An act amending the Tax Information Exchange Act, the Taxation Act and the Income Tax Act recently took effect, providing that the tax authority shall publish information about multinationals' country-by-country reports on its website.

The country-by-country report (CbC report) is a report filed by multinational groups, which discloses information on the group's revenue, profit/loss, income tax paid and accrued, share capital, retained earnings, tangible assets, the number of employees, and the core operations of the group's members. The report is prepared separately for each country in which the group operates. The reporting requirement applies to companies with a consolidated revenue of at least 750 million euros in the previous financial year. The report is usually provided by the group’s parent or another entity designated by the group. An Estonian entity that is a member of a large multinational group must inform the tax authority about which member of the group is filing the CbC report and the jurisdiction where the reporting entity is a resident for tax purposes.

According to the new law, the tax authority will publish the above information on its website no later than the 10th day of the month following the month in which the data was reported. The disclosure requirement will apply to financial years beginning on or after 22 July 2024.

Estonia has implemented the EU Directive introducing a 15 percent minimum effective tax rate for large groups. The Directive was partially transposed in Estonia, as Estonia and other smaller countries with fewer than 12 ultimate parent entities of multinational groups within the scope of the Directive (i.e., with a consolidated revenue of over 750 million euros) are exempted from the minimum tax requirement until 2030.

A country benefiting from the exemption must, however, ensure that the ultimate parent entities resident in that country designate an entity in a country in which the minimum tax applies as the minimum tax filing entity for the group. In addition, a country that is eligible for the exemption must ensure that the resident entities of the multinational group provide the filing entity with the required information.

Bill to amend the Accounting Act with regard to e-invoicing

At the beginning of May, the Estonian Parliament started the legislative process to amend the Accounting Act. Among other updates, the amendments will implement the European e-invoicing standard in Estonia. Since 2019, e-invoicing has been mandatory for the public sector. In the future, transaction parties will continue to be able to agree on the format and terms of invoicing and issue e-invoices that comply with the Estonian standard.

—    The proposed changes provide that the seller is no longer obliged to e-invoice certain buyers, but the buyer has the right to request an e-invoice from the seller. This applies to all accounting entities registered in the commercial register as e-invoice recipients, including public sector entities.

—    The purpose of setting a format that complies with the European standard is to facilitate cross-border e-invoicing for Estonian businesses.

Similar changes are being introduced across Europe, regarding also the EU VAT Directive 2006/112/EC. On 8 December 2022, the European Commission proposed a series of amendments to the Directive (the VAT in the Digital Age package). Among other updates, the amendments will introduce a digital VAT reporting system requiring the submission of standardised e-invoices. The e-invoicing requirement would apply to all intra-Community B2B sales as from 1 July 2030. 
The amendments should enter into force on 1 January 2025 after the bill has passed three readings in the Parliament. The legislative procedure can be followed here