At today’s sitting, the Riigikogu passed the Act under which only the transfer of unimproved plots of land on which no construction is planned must be exempted from VAT. Differently from the Act that had been in force so far, tax exemption is no longer applied in the case of plots of land in respect of which no detailed spatial plan has been prepared but which are still used for construction.
The Act on Amendments to the Value Added Tax Act (556 SE), initiated by the Government, amends the regulation of the taxation with VAT of immovable property intended for construction. The amendment concerns persons liable to value added tax, in particular the sale of plots of land between enterprises.
Under the current procedure, transfer of immovables is treated as supply exempt from tax, with the exception of the cases specified separately in the Act. According to the current procedure, tax exemption is not applied for example when a land area planned for construction is sold. According to the current Act, plot of land planned for construction means a land area which is defined in a detailed spatial plan and in respect of which building rights are granted.
Sometimes, however, plots of land in respect of which no detailed spatial plan has been prepared are used for construction. Therefore, the Act amends the concept of plot of land subject to taxation, and introduces the concept of building land. Building land means an immovable, within the meaning of the General Part of the Civil Code Act, without construction works, except for utility networks and technical infrastructure, that is planned for construction according to design specifications, a detailed spatial plan, or a national or local government designated spatial plan, or concerning which a building notice has been submitted, or the intended purpose of the cadastral unit of which is residential land or commercial land, or both of them jointly, to the extent of more than 50 per cent.
The Act is connected with the Council of the European Union’s Directive 2006/112/EC on the common system of value added tax. The aim is to tax similar objects uniformly and to achieve better conformity to the directive. Under the directive, only the transfer of unimproved plots of land on which no construction is planned must be exempted from VAT.
Besides, the Act excludes certain metal products from the list of goods subject to the reverse charge: cold-formed or cold-finished flat-rolled products, for example, profiled (ribbed) sheets, and ventilation, aspiration, smoke and rain water pipes. The motion to amend was submitted by undertakings and the Association of Construction Material Producers of Estonia.
Under the reverse charge procedure, the purchaser, instead of the seller, is liable to pay VAT. The Act eliminates the requirement to issue a separate invoice regarding goods subject to the reverse charge, except in the case when supply has not been fully effected by the time of the issue of the invoice. The aim of the amendment is to reduce the administrative burden for undertakings.
An amendment made during the second reading was necessary because, under the value added tax directive, greenhouse gas emission allowances must be subject to VAT. The deadline for entry into force of the Act was also changed.
66 members of the Riigikogu voted in favour of the Act and seven were against.
The Riigikogu passed two other Acts:
The Act on Amendments to § 34¹ of the Traffic Act (480 SE), initiated by the Economic Affairs Committee, extends the regulation established for special carriage of unprocessed roundwood also to other types of carriage. During the second reading, an amendment was incorporated into the Bill, according to which the amendment enters into force on 1 July.
According to the Act, special carriage of divisible goods may be performed under the conditions established by the relevant Regulation if it is done with a vehicle belonging to EURO 5 or a less polluting EURO-emission class. At the same time, all axles, except the axle with turning wheels, of the vehicles in the road train have to be equipped with dual wheels. The laden mass of the road train must not exceed 48 tonnes in the case of a six-axle road train and 52 tonnes in the case of a seven- or more axle road train.
Under the Act, special carriage is performed on the road network designated by the road owner. The road owner grants the special permit. The owner has the right to set additional conditions on the carriage, but also to refuse to grant a permit if the special carriage may considerably harm the road or the conditions of safe road use cannot be fulfilled, for example.
61 members of the Riigikogu voted in favour of the Act and seven were against.
Under the Act on Amendments to the Identity Documents Act and the Obligation to Leave and Prohibition on Entry Act (European travel document for return) (585 SE), initiated by the Government, in the Identity Documents Act, the list of documents issued is amended by including the European travel document for return, the purpose of which is to facilitate the return and readmission of third-country nationals staying illegally on the territory of the Member States. The competence to issue and revoke the document is given to the Police and Border Guard Board.
The Act is connected with the Regulation (EU) 2016/1953 of the European Parliament and of the Council.
Up to now, the recommended European Union travel document of uniform format has been used when returning illegally staying third-country nationals.
65 members of the Riigikogu voted in favour of the Act and seven were against.
Three Bills passed the second reading in the Riigikogu:
The Bill on Amendments to the Identity Documents Act (period of validity of digital identity card) (569 SE), initiated by the Government, will provide that a digital identity card is issued with the period of validity of up to five years, instead of three years. The aim of the Bill is to make the use and application for a digital identity card more convenient through extension of the period of validity of digital identity cards, as well as to harmonise the periods of validity of identity documents.
The Act is planned to enter into force on 1 May. During the second reading, a motion to amend the Bill had been submitted, according to which the period of validity of a digital identity card issued before 1 May can be extended by two years by way of remote updating as of 1 November if the document has valid certificates.
The Bill on Amendments to the Consular Act and the Identity Documents Act (584 SE), initiated by the Government, will transpose the European Union directive that facilitates consular protection for unrepresented citizens of the Union in third countries. The aim of the directive is to specify when and how EU citizens in an emergency situation in a country outside the EU are entitled to receive assistance from the embassies and consulates of other EU Member States. The deadline for the transposition of the directive is 1 May.
The Bill will specify that, in the future, unrepresented citizens of EU Member States will receive consular assistance from foreign missions of Estonia on the same conditions as Estonian nationals. The Bill will define who is an unrepresented citizen. It will also provide that an unrepresented citizen in an emergency can submit a request for consular assistance to a foreign mission of Estonia directly without a request of the Member State of his or her nationality.
It will also provide for a financial mechanism for reimbursement of financial obligations to other EU Member States in the event of consular assistance cases involving Estonian nationals. In the case when an EU Member State provides unsecured financial assistance to an Estonian national staying in a third country who is in an emergency, the person in emergency will have to repay the unsecured financial assistance to the Estonian state within 90 days as of the date of receipt of a claim for repayment.
In addition to the requirements arising from the directive, the Consular Act will be amended by introducing two new consular services which consular officers will provide in foreign missions in the cases when the validity of the certificates of an identity document, a residence permit card or a digital identity card of a person needs to be restored, or new PIN-codes need to be issued to a person.
Since acts relating to certificates enabling digital identification and digital signature that are performed under the Identity Documents Act will be established according to the Bill, the Identity Documents Act will also be amended.
The Act on Amendments to the Estonian Defence League Act and the Income Tax Act (593 SE), initiated by the Government of the Republic, will introduce amendments that concern, among other things, simplification of becoming a member, the keeping of records on the members of the Defence League, the medical examination, extension of the social guarantees of the youth leaders, and provision of first aid in the Defence League.
Children (boys and girls) will be exempt from medical examination upon becoming members of the youth organisations of the Defence League. Also, in the future, persons who have a valid weapons permit, or who have passed a medical examination as active servicemen, police officers, prison service officers or assistant police officers, and who therefore have the right to carry a military weapon or firearm, will not have to undergo a repeated medical examination when joining the Defence League.
Records will be kept on the members of the Defence League in a database which will be interfaced with X-Road and will obtain data from the national registers. This will improve the quality of the data collected. Under the current law, records are kept on the members in the database of an agency established by the Commander of the Defence League; the data exchange with national registers is limited and is carried out through single requests.
The Act will also provide for the obligation of a member of the Defence League to inform the organisation of any deterioration in their state of health, when it may no longer comply with the prescribed requirements.
The Bill will also provide that a member of the Defence League who is injured upon the performance of a duty in the composition of the Defence League while involved in the resolution of a rescue event or emergency, in the police activities, or in the obstruction of an attack against a national defence object or of illegal crossing of the state border will also have the right to reimbursement of the costs of medical treatment. Under current law, the costs of medical treatment are covered only for active members of the Defence League who are injured during a military training.
During the second reading, on the motion of the National Defence Committee, amendments were incorporated into the Bill a majority of which are connected with the establishment of a new interim management level of the Defence League, territorial defence districts.
Two Bills passed the first reading in the Riigikogu:
The Bill on Amendments to the Estonian Health Insurance Fund Act and the Health Insurance Act (602 SE), initiated by the Government of the Republic, will provide for reduction of the number of the members of the Supervisory Board of the Estonian Health Insurance Fund from fifteen to seven. The main aim of the amendment is to make the work of the Supervisory Board of the Health Insurance Fund more efficient. The supervisory board will include, by virtue of their office, the Minister of Health and Labour, the Minister of Finance, the Chairman of the State Budget Control Select Committee of the Riigikogu, and members appointed by the Government of the Republic: two members on the proposal of the Estonian Employers’ Confederation, a member on the proposal of the Estonian Trade Union Confederation and a member on the proposal of the Estonian Chamber of Disabled People.
The explanatory memorandum notes that standing advisory committees have been formed at the Supervisory Board of the Health Insurance Fund to involve representatives of the health sector in the development of health insurance and in the decision-making processes of the supervisory board. Through the advisory committees, when making decisions and forming positions, it is possible to involve the opinions of a significantly wider range of representatives of the health sector than those represented in the Supervisory Board of the Health Insurance Fund earlier.
A standing advisory committee to discuss the issues concerning the strategic development of the health insurance fund and the national health insurance was formed under the current Health Insurance Fund Act at a meeting of the Supervisory Board of the Health Insurance Fund already this February. In addition, the committee on the list of health services who will give opinions on amending the list of health services will be established at the Management Board of the Health Insurance Fund under the Health Insurance Act. Starting from January 2018, the activities of the medicinal products committee have also been transferred from the Ministry of Social Affairs to the Health Insurance Fund.
The Bill will provide for additional requirements for the members of the supervisory board appointed by the Government of the Republic in order to reduce the possibilities of conflict of interest in the Supervisory Board of the Estonian Health Insurance Fund.
Eiki Nestor took the floor on behalf of the Social Democratic Party Faction in the debate.
The aim of the Bill on Amendments to the Alcohol, Tobacco, Fuel and Electricity Excise Duty Act and the Tobacco Act (595 SE), initiated by the Government, is to raise the competitiveness of Estonian undertakings in the processing industry or information activities sector with a high proportion of electricity costs by enabling them to consume electricity at a more favourable excise duty rate. The more favourable excise duty rate will be 0.5 euro per MWh which will be nearly nine times lower than the ordinary excise duty rate of 4.47 euro per MWh.
To receive the reduction, the energy management system of the undertaking will have to be effective and economic, and its electro-intensity will have to be at least 20 per cent. Electro-intensity shows the proportion of electricity energy in the added value created. The permit for the consumption of electricity at a reduced rate will be applied for through the Tax and Customs Board, and the permit will be valid for an indefinite period, provided that the undertaking complies with the reporting obligation and other requirements provided in the Bill.
The Bill will also change the issue of a permit for exemption from excise duty on alcohol and a permit for exemption from excise duty on energy. Other amendments will also be made in the Bill, in order to ensure better legal clarity or to solve problems that have arisen in practice. For example, the Bill will specify the procedure for the destruction of excise goods on which excise duty has not been paid, and amend the possibilities for denaturing alcohol. Instead of providing for a specific excise duty rate for solid substitute for tobacco, a principle will be set out that the same excise duty rate will be applied to solid substitute for tobacco as is applied to smoking tobacco.
During the debate, Sven Sester from the Pro Patria and Res Publica Union Faction and Mihhail Stalnuhhin from the Centre Party Faction took the floor.
Video recordings of the sittings of the Riigikogu can be viewed at: https://www.youtube.com/riigikogu
(NB! The recording will be uploaded with a delay.)
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