Riigikogu adopts amendments to Income Tax Act

A Riigikogu sitting in progress.
A Riigikogu sitting in progress. Source: Siim Lõvi/ERR

The Riigikogu passed amendments to the Income Tax Act on Wednesday that resolve issues involving several different kinds of benefits, as well as discrepancies in taxation related to third countries.

Of benefit-related changes, the amendments will primarily affect maternity benefits and layoff benefits, benefits for large families as well as an additional basic exemption for parents of three or more children, according to a Riigikogu press release.

For those who receive maternity or layoff benefits in the fourth quarter of the year, the opportunity will be established to delay a portion of their benefits into the next year for taxation purposes in order to be able to continue taking full advantage of their current basic exemption level. By delaying part of their benefits, recipients will, for taxation purposes, receive benefit payouts on a monthly basis.

Subsidies paid from the state budget for the improvement of the living conditions of large families and improving the energy efficiency of small dwellings will also be exempt from income tax. Under the amended law, parents' additional basic exemption will not be reduced should a child receive survivor benefits or a state pension upon the loss of a provider, and parents' additional basic exemption will increase by €100 per month per child beginning with the third child.

EU directive to be implemented

The amendments passed Wednesday will also implement a European Union directive regarding discrepancies in third country-related taxation. The goal of these changes is to avoid double non-taxation caused by differences in the classification of financial instruments, payments and units in different jurisdictions and in the allocation of payments between a main office and a permanent branch or between two or more permanent offices.

As such inconsistencies in taxation may result in double deductions or deductions without their amounts being counted as income, the amended legislation established norms according to which, depending on the situation, either a payment, expense or loss that is deductible in another country and which has been exempted from income tax in the other country is taxed or an income tax exemption is not permitted to be applied to income that has been deducted or exempted from taxation in another country.

The deadline for filing tax returns by natural persons, non-residents, fund managers of contractual investment funds and public limited funds will be delayed to April 30, and the deadline for the payment of taxes owed and refunds alike will be extended to Oct. 1. The threshold of advance tax payments by self-employed persons (FIEs) will also be increased from €64 to €300.

A total of 87 MPs voted in favor of the amendments to the Income Tax Act and related legislation.


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Editor: Aili Vahtla

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