Estonian government backs three tax policy changes

Minister of Finance Sven Sester.
Minister of Finance Sven Sester. Source: (Siim Lõvi/ERR)

At Thursday's Cabinet meeting, the Estonian government gave its approval for lowering the income tax rate for mature companies, restricting withdrawal of profit from subsidiaries in the form of loans as well as easing the taxation of and financial reporting rules for self-employed individuals.

According to Minister of Finance Sven Sester (IRL), the agreements reached would improve Estonia's tax environment, spokespeople for the government said. "The Ministry of Finance can now begin drafting changes to laws which will help make the tax environment fairer and support the Estonian people's entrepreneurial spirit," said Sester.

The minister first presented to the government a plan for lowering the income tax rate on dividends to 14 pecent for so-called mature companies; the current rate of 20 percent favors retaining profits.

He then presented a plan on how to limit the possibilities for Estonian subsidiaries of foreign businesses to move their undistributed profits out of the country untaxed by giving loans to parent companies. The minister's proposal was to introduce a deposit tax which businesses would be obliged to pay on intercompany loans.

The Ministry of Finance was tasked with preparing the necessary amendments to the Income Tax Act which are planned to enter into effect on Jan. 1, 2018.

Finally, Sester presented further proposals to simplify the taxation and accounting rules for self-employed individuals. The aim of the proposals is to create a tax and business environment similiar to that of businesses for self-employed individuals. According to the minister, implementation of these proposals would create more equality for self-employed persons when compared to other forms of business. The suggestions involved changes to the Income Tax Act as well as the Social Tax Act and would be helpful to small businessmen in running their businesses.

Editor: Editor: Aili Vahtla

Source: BNS

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