On 15 April 2020, The Estonian Parliament has issued a press release announcing that the Act on the supplementary budget has been passed to implement the economic measures related to the spread of the COVID-19. The aim of the measures is to mitigate damages, to stimulate the economy and to accelerate the exit from the crisis.
The state budget revenue will be affected in particular by reductions in the excise duties on diesel, gas and electricity, as well as a reduction in the interest rate upon payment of tax arrears in instalments, and a temporary suspension of the interest calculation. The main measures of the budget are as following:
Temporary suspension of second pillar pension scheme payments
Starting from 1 May 2020 until 31 August 2021, the state will suspend its contributions payments made out of social tax (4% of gross remuneration) to the accounts of the funded second pension pillar. Exception will be made to persons born from 1942 to 1960, who will continue making regular payments until the end of November 2020.
Tax deduction on forest revenue
Both sole proprietors and non-entrepreneur natural persons will be able to claim tax deduction on revenue earned from selling timber or cutting right, for up to €5,000 a year. The tax deduction on forest revenue will not have an impact on the state budget in 2020.
Value added tax on electronic publications
The value added tax rate on electronic publications will be reduced to 9% so that the tax rate will equal that of print publications. The value added tax rate on audiobooks on physical carriers will also be reduced. This will cost the budget will be €0.8 million.
Measures for the minimum social tax rate
To ease the tax burden of employers, the minimum social tax requirement will be suspended for three months. Despite the suspension of the minimum requirement, the validity of the health insurance subject to social tax payments will not be suspended for members of the management board, providers of services under a contract under the law of obligations, and owners of a business account. This will cost the state budget €3.3 million.
Tax debt relief for entrepreneurs
To assist in coping with economic difficulties, the Tax and Customs Board will not claim interest on tax debts in March and April. Furthermore, the interest rate payable on tax debts will be reduced to 0.03% from 0.06% now and the tax administrator will have the right to reduce the interest rate to zero instead of the current 50% when rescheduling tax debts.
Lowering of excise duties
To mitigate transportation and domestic expenses, the government will lower the excise duty rates on several types of fuels, and electric power, for two years, that is, from 1 May this year until 30 April 2022.
The Act amends the State Loan Guarantees Act, the Estonian Defence League Act, the Environmental Charges Act, the Funded Pensions Act, the Value-Added Tax Act, the Creative Persons and Artistic Associations Act, the Taxation Act, the Maritime Safety Act, the Social Benefits for Disabled Persons Act, the Health Insurance Act, the State Budget Act, the State Assets Act, the State Pension Insurance Act, the Social Welfare Act, the Health Services Organisation Act, the Income Tax Act, the Unemployment Insurance Act, and the Work Ability Allowance Act.
