Estonia

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Business Environment

Business Practices

General information: Kwintessential, Business culture and practices in Estonia
Opening hours and days: Business hours are between 8 am and 6 pm from Monday to Friday.

Public holidays

New Year's day	January 1
Good Friday	Friday before Easter
Easter Sunday	Depending on Easter's date
Spring Day	May 1
Pentecost	Moveable (50 days after Easter)
Victory Day	June 23
St John's Day or Midsummer Day	June 24
Day of Restoration of Independence	August 20
Christmas Eve	December 24
Christmas Day	December 25
Boxing Day	December 26

Periods when companies usually close

Winter holidays	Between Christmas and New Year
Summer holidays	Starting on Midsummer (summer solstice)

Accounting Rules

Tax year: The fiscal year begins on January 1st and ends on December 31st of the same year.
Accounting standards: Two accounting principles coexist in the Estonian law: the Estonian accounting principles and the IFRSs (International Financial Reporting Standards).

Commercial companies can choose whether to comply their annual financial statements with the Estonian accounting principles or with the IFRS. On the other hand, listed companies, credit institutions and insurance companies are required to follow IFRSs.
The Estonian Accounting Standards (RTJ) can be regarded as summarized and simplified translations of the corresponding IFRSs.
At the end of 2006, the Estonian Accounting Standards Board has issued 17 standards.
Accounting regulation bodies: Estonian Accounting Standard Board
Accounting reports: The main financial documents in Estonia are the balance sheet, the profit and loss account and the cash flow statement.
The Accounting Act sets a number of formal requirements to accounting source documents. Each entity has to prepare its internal regulations on accounting and the chart of accounts.
Accounting registers can be maintained as hard or electronic copies. The annual statements should be prepared in Estonian language and must be signed by the management board.
Publication requirements: The publication is rarely used in Estonia.
But since 1997, some accounts of companies are disclosed to the public.
Professional accountancy bodies: European Accounting Association
Certification and auditing: Audit has been compulsory for the majority of companies since 1991. The Authorized Public Accountants Act was adopted in 1999 and determines the requirements for auditors, the bases for passing the examination of professional competence, the legal bases for the professional activities of auditors etc. Under the Commercial Code, an audit is compulsory for all public companies. It is compulsory for a private limited company if its share exceeds EEK 400,000 or if the audit requirement has been established into the law or the articles of association. In addition to the requirements of the Commercial Code, according to the accounting Act, auditing is compulsory for all entities exceeding two of the three following criteria: net sales exceed EEK 10 million, the number of employees exceed 10, total assets exceed EEK 5 million.
Accounting news: Business and accounting in Estonia

Tax Rates

Consumption taxes

Nature of the tax: Value Added Tax (VAT)
Tax rate: 20%
Reduced tax rate: Reduced rates are 0% and 5%.
A lower 5% rate applies to books (excluding educational books), medicines and certain supplies of heating and energy.
The 0% rate applies to exports and intra-Community supply and supplies relating to international transport.
Are exempted of VAT, leasing of immovable property, postal and heath services, social and insurance services among others.
Other consumption taxes: A certain number of other taxes exist in the Estonian system.

To get further information on the taxation system, please visit the Website of the Ministry of Finance.

Corporate taxes

Company tax: 21%
Capital gains taxation: Capital gains are treated as ordinary income of Estonian resident companies but there are taxed only where there is a profit distribution.
Main allowable deductions and tax credit: The 2000 Income Tax Act changed the taxation approach of Estonia and companies became subject to income tax solely with respect to distributions. In other words, under this new law, the corporate entities are exempt from income tax on undistributed profits regardless whether they are reinvested or retained.
Other corporate taxes: Excise duties and stamp duties exist in the taxation system. More information can be found at the following website: http://www.investinestonia.com

Individual taxes

Tax rate

Personal income tax	It varies from residents to nonresidents.
Residents	Taxed on their worldwide income.
Nonresidents	Taxed only on their income received from Estonian sources
Individual income tax	21% in 2009.

Allowable deductions and tax credit: Many deductions are allowed, and some exemptions like capital gains, scholarships paid on the basis of law, fringe benefits, accommodation reimbursements for business trips, insurance contracts, compensation for the use of private vehicles, child allowances and other subsidies and compensation paid from the State.
Special expatriate tax regime: A limited list of taxable items apply to non-residents: income from work under a labour contract or contractor's agreement in Estonia ; income from a business carried on in Estonia, dividends paid by Estonian companies, interest income received from Estonia, royalties.

Double taxation treaties

Countries with whom a double taxation treaty have been signed: See the list of the convention signed
Whithholding taxes: Dividends: 0/21%, Interest: 0/21%, Royalties: 15%/21%

Sources of fiscal information

Tax Authorities: Ministry of Finance
Other domestic resources: Estonian Tax and Customs Board

Intellectual Property

National organizations: The patents office of Estonia was created on 3rd December 1991. It started functioning in 1992. Among its activities were included the implementation of laws concerning trademarks of manufactured products or business trademarks, the law concerning the copyrights of authors, laws concerning patents and finally the laws concerning utility models.
The principle of priority to the first patent applicant is applied.
Estonia is a member of the WIPO (World Intellectual Property Organization) since 1994, and is also a member of Paris and Berne Conventions.
Regional organizations: Estonia has signed several regional conventions on intellectual property. For instance, the Paris and Berne Conventions, Rome convention as well as the Madrid protocol.

National regulation and international agreements

Type of property and law	Validity	International agreements signed
Patent Patent Act, March 16, 1994 (last amended October 27, 1999)	20 years
Trademark Trademark Act, August 1992 (last amended December 1997)	10 years (renewable)	Trademark law treaty Nice agreement Protocol relating to the Madrid Agreement
Design Industrial Design Protection Act, November 18, 1997 (last amended November 25, 1998)	5 years, renewable for two further 5-year periods
Copyright Copyright Act, November 1992, (last amended February 1999)	The term of protection is the life of the author and seventy years after his or her death irrespective of the date in which work is lawfully made available to the public	WIPO copyright treaty
Industrial Models Industrial Design Protection Act, November 1997 (last amended in 1998)	5 years from the date in which the application has been duly filled in.

Legal Framework

Independence of justice: Judiciary is independent in Estonia, and generally free from government influence.
Equal treatment of nationals and foreigners: Foreign nationals can expect a fair trial from the country's judicial system.
The language of justice: The judicial language in the country is Estonian.
Recourse to an interpreter: Having an interpreter is always possible.
Sources of the law and legal similarities: The main source of the law is the Constitution of June 1992 and has been going through a transition period since the Soviet era. The legal system is influenced by German traditions and is based on civil law system. Estonia being a member of the European Union, the national law in the country needs to comply with the conditions of the Community legislation.
Checking national laws online: Estonian legal acts in English

Standards

National standards organizations: Estonian Centre for Standardization
Integration in the international standards network: Estonia being member of the European Union, Europe's standard rules are applicable. It should be noted that many standards in the European Union are adopted from international bodies like ISO.
Classification of standards: The main standards are those based on Europe's standardization system and therefore, CE marking is a good example of compulsory standard for products having an impact on consumers' safety.
Online consultation of standards: More information about national standards in Estonia can be found at: http://www.evs.ee
Certification organizations: Certification Centre of Estonia

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