Social Tax

Social tax is only imposed on private individuals and as a general rule must be paid by their employers. The tax rate is 33% of personal income, of which 20% goes to the social security budget and 13% to the medical security budget. The social tax is calculated based upon the total income together with the income tax. For example if an employee has a salary of 10000 EEK, the cost to the employer is 10000 EEK + 33% = 13300 EEK. The employee would then receive approximately 7400 EEK after all taxes are collected (inclusive of the 26% income tax source deduction).

Excise Tax

The production and import of articles like tobacco, alcohol, motor vehicles, motor fuel and packages are taxed with an excise tax, the rate of which differs from product to product. Excise taxes reflect the largest portion of the final sales price of tobacco, wines and motor fuel, while in other cases the excise tax is small and constitutes only a small percentage of the sale price.

Property Tax

All landowners must pay property taxes for their land in Estonia. The rate of tax applied depends on the size and site of the plot.

Gambling Tax

Gambling is also taxable in Estonia, but due to its specificity, the gambling tax concerns only the few companies that offer gambling services.

ACCOUNTING LAW

All persons doing business in Estonia must keep their books in accordance with the Accounting Act (in force since Jan. 1, 1995), which generally conforms to International Accounting Standards, though some differences still exist. Additionally, the Estonian Accounting Board has established guidelines and pronouncements which form the generally accepted accounting principles (GAAP) of Estonia, and are based on European directives as well as the standards and principles issued by the International Accounting Standards Board. The annual financial report of a company must be approved by the general meeting of shareholders and submitted to the commercial register within 6 months after the end of the fiscal year. If a private limited company has share capital of more than 400 000 EEK, or if prescribed by law or the articles of association, it must have an auditor, whose conclusion must be appended to the annual report. Each public limited company must have an auditor who shall audit the annual report prior to submission to the commercial register. The Commercial Code also provides for special audits on demand of the requisite percentage of shareholders.

PROPERTY LAW

Basics of Property Law

The Estonian system of property law is similar to the German system. As in most countries the legal regime of property is divided into two main groups: movable property (akin to personal property or chattels in common law systems) and immovable property (akin to real property or real estate in common systems). Immovable property is subject to registration in the Immovables Register, reflecting the data about the immovable, its owners, pledges, etc. trade of immovables is register-centered, which means that ownership passes from one person to another not upon payment of the sales price and signing the sales contract, etc., but from the moment of the registration of the new owner in the register of Immovables. (To be continued)

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