Important changes in Income Tax Act

On July 1st more than 250 acts came into force or were changed in Estonia. Some of those are also important for entrepreneurs and in the following article we outline the most important points related to changing of the Income Tax Act and other related Acts.

 

  1. If an employee is employed under an employment contract, the employer now has the right to reimburse the costs of accommodating the employee without paying the fringe benefits, if employee’s home is at least 50 km away. The maximum amount of tax-free reimbursement of accommodation costs is up to 200 euros per month in Tallinn and Tartu and up to 100 euros per month elsewhere in Estonia.
  2. It is also no longer necessary to pay a fringe benefit on the transportation of employees whose place of residence is more than 50 km away from the place of employment. Additionally, the employer can also arrange the transportation to the employees living closer without paying fringe benefit, by using a vehicle with at least 8 seats.
  3. A new solution to prevent hidden profits was adopted. If an entrepreneur grants a new loan, increases the existing loan amount or other significant changes are made to the loan agreement from 1st July 2017 to the parent company or its subsidiary, the company must declare it to the tax and customs authorities next year.
  4. The rules for the taxation of participatory options were changed. If an employee realizes a share option (acquires a part of the company) before the expiry of the period of three years from the giving of the option, the employer does not necessarily have to pay the fringe benefit to the proceeds of the realization. A fringe benefit tax must not be payed in the event of the sale of the whole company or in the event of the employee’s incapacity for work or death.

The changes to the law can be found here. In case you need some explanations in English, our lawyers are ready to explain you the changes and how it effects your business.

 

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