InfoCourier april 2025

Amendment of the Aliens Act

On 26 March, the Riigikogu (Estonian Parliament) adopted amendments to the Aliens Act. The aim of the amendments is to modernise migration procedures and strengthen migration control. In addition, the amendments seek to prevent the misuse of residence permits and visas, as well as illegal immigration. The most significant changes to the Aliens Act concern the conditions for obtaining a temporary residence permit.

From the entry into force of the legislative amendments, temporary agency work may be registered as short-term employment in Estonia if:

the employer has been entered in the commercial register of Estonia, or is a company registered in another Member State of the European Economic Area;
the employer operates as a temporary work agency;
the employer has had actual economic activity in Estonia or in another Member State of the European Economic Area for at least six consecutive months immediately prior to submitting the application for registration of short-term employment in Estonia.

The requirement to be entered in the commercial register of Estonia for the purpose of applying for a temporary residence permit does not apply if:

the employer is a legal person governed by public law;
the alien is a posted worker in Estonia.

In addition, the employer, for the purposes of whose employment the temporary residence permit is being applied for, must have had actual economic activity in Estonia for at least six consecutive months immediately prior to submitting the application for the residence permit.

The requirement of actual economic activity does not apply if:

the alien is a posted worker in Estonia;
the alien takes up employment as a teacher, academic staff member or researcher in an educational institution or research and development institution that complies with the requirements established by Estonian legislation.

A temporary residence permit may be issued for employment as a temporary agency worker if:

the employer has been entered in the commercial register of Estonia, or is a company registered in another member state of the European Economic Area;
the employer operates as a temporary work agency;
the employer has had actual economic activity in Estonia or in another Member State of the European Economic Area for at least six consecutive months immediately prior to submitting the application for a temporary residence permit in Estonia.

The amendments will enter into force on 1 January 2026.

More information on all adopted amendments is available here (in Estonian)

The European Commission adopted the VAT reform package ViDA

On 11 March 2025, the European Commission adopted a package of legislative amendments entitled VAT in the Digital Age (ViDA). The package includes amendments to Directive 2006/112/EC on the common system of value added tax, Regulation (EU) No 282/2011 laying down implementing measures for the common system of value added tax, and Regulation (EU) No 904/2010 on administrative cooperation in the field of value added tax. The Regulations entered into force following their publication in the Official Journal of the European Union, whereas the amendments to the VAT Directive must first be transposed into national legislation.

In addition to tackling tax fraud, the proposed changes aim to reduce the administrative burden on businesses and modernise regulations that concern an increasingly digital economy. The three main changes affecting the widest range of businesses are:

the introduction of e-invoicing within the European Union. The planned deadline for the transition to e-invoicing is 1 July 2030, although Member States may require suppliers to issue e-invoices compliant with the European standard from as early as 1 January 2028;
the obligation to start using a single digital VAT reporting system, which will enter into force on 1 July 2030 and, by way of exception, in 2035 for Member States already using similar solutions;
the introduction of a single EU-wide VAT registration system.

The fourth major change establishes taxation rules for online platforms. These apply in particular to providers of short-term accommodation and passenger transport services. The ViDA package aims to reduce the differences (and distortion of competition) between the supply of identical services through a platform and without a platform. To this end, under certain conditions, the platform operator will be deemed to be the supplier of the accommodation or passenger transport service, and it will be required to add VAT to the price of the service and remit it. These amendments are intended to enter into force on 1 July 2028. However, under certain conditions, Member States may extend the transition period until 1 January 2030.

More information is available here

Tallinn Circuit Court decision 3-23-613/10

The Tartu Circuit Court recently annulled a decision of the Tartu Administrative Court, which had upheld the position of the Tax and Customs Board (MTA) that a company was entitled to reduce its labour tax liability on the basis of a corrected income and social tax return (form TSD) submitted after the tax assessment had already been issued. The tax liability concerned a payment of 25,000 euros made in 2020 by the company to a member of its management board. In its tax assessment dated 28 October 2021, the MTA had classified this payment as remuneration paid to a member of the management board. In January 2022, the company submitted a revised TSD form reducing the labour tax liability on this payment. It argued that this was not remuneration paid to the member of the management board, but funds temporarily issued to the board member, which had already been repaid to the company in June 2021.

The Harju County Court agreed with the company’s position, finding that if the recipient of a payment subject to labour taxes repays the amount received in a previous tax period, the payer is entitled to file a TSD return adjusting the corresponding tax liability.

The Circuit Court, however, disagreed with the Administrative Court. According to the Circuit Court, the decisive factor was not the nature of the payment or the lawfulness of the MTA’s 2021 tax assessment, but the fact that by 2021 the company had effectively accepted the tax assessment as final and that the payment made to the board member was subject to labour taxes. The Circuit Court held that, by the time the revised return was submitted, the deadline for contesting the tax assessment had expired. The company should have provided its explanation and, if necessary, supporting evidence during the tax proceedings to demonstrate that the payment made to the board member in April 2020 had been returned in June 2021. As in this case the tax assessment had become final, the company was obliged to accept the resulting tax liability, having failed to exercise its legal remedies.

The Circuit Court did not rule on whether the repayment of a board member’s remuneration is, in principle, possible and permissible, as this had no bearing on the outcome of the case. Accordingly, the Circuit Court annulled the Administrative Court’s decision and dismissed the company’s application for a reduction of the tax liability.

The court decision is available here (in Estonian)