Estonia - Value Added Tax Act and Act Regulating Excise Duties Amended
- Estonia
- 11/03/2009
- Raidla Lejins & Norcous
On 18 June 2009, the Estonian Parliament (Riigikogu) passed the Act Amending Acts Associated with the Second Supplementary Budget Act. Changing economic conditions necessitated the adoption of the act. The most significant amendment concerns the Value Added Tax Act. Starting from 1 July 2009 the VAT rate is increased from 18% to 20%.
Pursuant to the amendments alcohol with an ethanol content exceeding 22% by volume contained in a sales packaging with a volume of 0.05 liter or more is now subject to excise duty. The excise duty on cigarettes and motor fuel is increased by 5% as well and the amounts of cigarettes and tobacco allowed to be taken into Estonia across the border are reduced. Amendments in the Environmental Charges Act introduce new thresholds and ceilings for the rates of extraction charges on mineral resources owned by the state. The amendments mostly entered into force on 1 July 2009.
The changes regarding excise duties on alcohol and cigarettes are to enter into force on 1 January 2010. The sale of alcohol without revenue stamps released for consumption prior to 1 January 2010 is allowed until 31 January 2010. The change of the VAT rates at such a short notice caused problems to many entrepreneurs. The Legal Chancellor concluded that the provisions prescribing the hasty entry into force of the new VAT rate were in contradiction with the Constitution and called upon the Riigikogu to eliminate the contradiction and bring the amendment in line with the Constitution. This led to the adoption of an implementation act by the Riigikogu in September, which addressed the problem.
