An overview of the latest changes in legal acts

Amendment Act of Trading Act, Register of Economic Activities Act and other associated acts

The amendment to the Trading Act specifies the scope of application of the Act and spheres of trading, provides a definition of e-trading, supplements the requirements for traders and extends the range of information to be communicated to the client at a place of sale.   

Amendments to the Economic Activities Act specify the procedures related to the maintenance of the register, simplify the registration procedure and supplement the definition of the areas of activity subject to special requirements.    

The amendment to the Trading Act and the Economic Activities Act called for amending other acts, such as the Alcohol Act, the Building Act and the Tourism Act.

Date of entry into force: 15 May 2008.                                       Estonian text: Kaubandustegevuse seaduse, majandustegevuse registri seaduse ja nendega seonduvalt teiste seaduste muutmise seadus

Amendment Act of Land Tax Act

The amendment to the Land Tax Act regulates the imposition of land tax on protected areas. According to the amendment, tax is not imposed on strict nature reserves and special management zones of protected areas, on special management zones of species protection sites and on land where economic activities are prohibited. In the future, the reduced rate will be 50% of the land tax rate in all cases of reduction.

Date of entry into force: 1 January 2009                                      Estonian text: Maamaksuseaduse muutmise seadus

Advertising Act

The Advertising Act provides a definition of advertising and stipulates general requirements, prohibitions and restrictions on advertising. The amendment also establishes procedures of surveillance and provisions for liability for a violation of the Act.

Date of entry into force: 1 November 2008                                 Estonian text: Reklaamiseadus

Amendment Act of Public Procurement Act

The bases for the elimination from the procurement procedure were amended. The amendment is effective as at 28 March 2008.  Estonian text: Riigihangete seaduse muutmise seadus

European Court of Justice case

European Court of Justice judgement: input VAT deduction and issue of shares

The European Court of Justice judgement of 13 March 2008 in the case C-437/06 (Securenta case) deals with deducting input VAT on the expenditure connected with raising capital for funding business activities.

Securenta acquired capital by the issue of shares and involving non-voting partners (atypical silent partnerships). The case was taken to the Court because the question of how to determine the deduction of input VAT on expenditure connected with such transactions had to be clarified.  Securenta was engaged in different areas which can be classified into three groups: taxable turnover from economic activities, turnover exempt from tax and non-economic activities. The Court concluded that Securenta had the right to deduct input VAT incurred on expenditure only to the extent that it was attributable to the taxable turnover.

This judgement of the European Court of Justice differs from their earlier opinion in a similar case. In the Kretztechnik case, the Court had concluded that the expenditure incurred in connection with the issue of shares formed a part of the company’s general costs (in that particular case, the company was engaged only in taxed transactions and did not perform any non-economic activities).  In view of the above, this judgement may result in imposing restrictions on deducting input VAT not only for companies that are entitled to partial deduction of input tax, but also for companies whose day-to-day activities are not related to selling goods or rendering services (e.g. passive holding companies).