|
IntroductionGeneral facts and informationEstonia is situated in the Eastern Europe, bordering the Baltic Sea and Gulf of Finland, between Latvia and Russia. With an area of 45 227 km² (including 1520 islands in the Baltic See) it is a relevantly small country on the world scale, still remaining slightly larger than for example Denmark, Netherlands and Switzerland.
The capital and also the biggest city is Tallinn with a population of approximately 420 000. Other most populated cities are Tartu, Narva and Kohtla-Järve.
Natural resources: shale oil, peat, phosphorite, amber, cambrian blue clay
Estonia regained its independence on the 20th of August 1991 (from the Soviet Union) and until now maintains parliamentary democracy. Constitution was adopted on the 28th of June 1992.
Estonia has been a member of the United Nations since 17 September 1991, of the European Union since 1 May 2004 and of NATO since 29 March 2004.
With only 1.3 million inhabitants, Estonia is one of the least populated countries in the European Union. There is a problematic negative population growth rate of -0.632% (est. 2008) and also negative migration -3.24 migrant(s)/1,000 inhabitants (est. 2008).
In accordance with statistics provided in 2000 Estonia includes following ethnic groups: Estonian 67.9%, Russian 25.6%, Ukrainian 2.1%, Belarusian 1.3%, Finn 0.9%.
Official and most widely spoken language is Estonian at the rate of 67.3%, but also Russian at the rate of 29.7%.
Level of the Estonian economy development, considered an „Estonian economic miracle”, is often addressed to as the Baltic Tiger. Availability of Scandinavian markets, advantageous location between Eastern and Western Europe, competitive cost structure and high-skill labor force have been the major Estonian comparative advantages since the 1990s.
Estonia has a modern market-based economy and one of the highest per capita income levels in Central Europe. The economy benefits from strong trade ties with Finland, Sweden and Germany. The current government has pursued quite liberal fiscal policies, resulting in relatively balanced budget and low public debt.
GDP (est. 2010):
Unemployment rate: 16.9% (est. 2010)[2] Inflation rate (consumer prices): 2.0% (est. 2011)[3] Investment (gross fixed): 20.45% of GDP (est.2010)[4]
In 2011 joined Estonia to the EURO zone which means the currency in Estonia is EURO.
Estonia imports machinery and equipment (33.5% of all imports annually), chemical products (11.6% of all imports annually), textiles (10.3'% of all imports annually), food products (9.4% of all imports annually), and transportation equipment (8.9% of all imports annually).
Estonia exports machinery and equipment (33% of all exports annually), wood and paper (15% of all exports annually), textiles (14% of all exports annually), food products (8% of all exports annually), furniture (7% of all exports annually), and metals and chemical products. Estonia also exports every year 1.562 billion kilowatt hours of electricity. Export/import relation to other countries (est. 2010)[5]:
Court system and arbitrationThe legal power pursuant to the Estonian constitution belongs to the national courts. The courts can be considered independent from any governmental institutions providing security and reliability towards the system. Judgments from foreign courts are recognized and executed in accordance with legal co-operation and assistance agreements concluded with other countries. Besides that Estonia has joined several international conventions with regard to both civil and criminal matters.
Estonian court system is similar to the most of European countries having three stages of appellation proceedings. The first instance consists of both city and county courts handling civil as well as criminal cases, whereas administrative matters are settled in administrative courts. Under the proceedings in the first instance matters are handled by a single judge often assisted by two assessors. The seconds instance contains district courts, situated in Jõhvi, Tartu and Tallinn, handling the matters of appellations with regard to decisions made in the first instance. The second instance presupposes handling of the matters in question by three judges. The third instance is the Estonian Supreme Court situated in Tartu. The Supreme Court may change the decision of a district court or in some cases make amendments in decision made by lower courts.
A statement of a claim shall be filed to the court of first instance, an appeal to the court of second instance and an appeal in cassation to the Supreme Court. The Supreme Court shall take up the matter only after all previous court instances have been passed. The court decisions are made public in the database of court statistics and court decisions.
In order to avoid the ordinary time consuming processes of litigation, parties may agree on dispute resolution by means of arbitration. The Arbitration Court of the Estonian Chamber of Commerce and Industry handles the matters in question. In order for a case to reviewed, it has to be clear that parties implicitly agreed on the resolution at the Arbitration Court and the claim has to be submitted under condition the actions of the defendant cannot be observed as obstructive to such settlement. There are also situations where international agreements might subject certain disputes to be resolved by the Arbitration Court. Disputes shall be resolved within six month. The decision of the Arbitration Court is final and enforcement does not require any separate procedure.
TaxationGeneral informationAs of 2003, Estonia had one of the most liberal and simple tax regimes in the world. The Law on Taxation of 1994 has been amended several times, and a new Income Tax Law was passed 15 December 1999 (effective 1 January 2000). The corporate income tax rate is 26% on distributed profits, and 0% on reinvested profits. Corporations can choose when they will pay their taxes. Personal income taxes are assessed at the same flat rate of 21% as corporate profits. Some school fees, living allowances, and interest on loans for the purchase of residential housing are deductible from taxable income. A withholding tax of 26% is imposed on dividend paid to nonresidents that hold less than 25% of the share capital in the paying company. However, Estonia has double tax treaties with at least 22 countries in which withholding taxes are eliminated or substantially reduced. A new Law on Social Tax came into effect in January 1999. The rate of social tax is 33% (20% for social security and 13% for health insurance), all payable by the employers and self-employed individuals. There are relatively few allowable deductions from taxable income in the Estonian tax code. The annual land tax varies from 0.1% to 2.5% of assessed value. Main indirect tax is a value-added tax (VAT) set at a standard rate of 20% by a new Law on VAT passed in July 2001 and effective in January 2002. Reduced rates of 0% and 9% apply to some goods and services, including a 0% rate on exported goods and a specific list of exported services. Excise duties are levied on tobacco, alcoholic beverages, motor fuel, motor oil, and fuel oil (but not liquefied or compresses gas), motor vehicles, and packages (imposed to encourage recycling of package material. There is a gambling tax, and a customs processing fee on each customs declaration submitted. Rights of recording are taxed are taxed at 0.4%. Local governments have the authority to impose taxes and municipal taxes range from 1% to 2%.
Overview of the Estonian taxation system
Unemployment insurance premium Taxes payable in the case of cross-border operations If you are doing business in Estonia, you will be responsible for paying taxes in accordance with the tax legislation in force in Estonia. Property, income and benefits are taxable. The general rule is that all companies are taxed equally and on the same substantive basis. State and local taxes Local taxes may be established by a local government – for instance, on the use of infrastructure or other resources in a certain region. State taxes include income tax, social tax, land tax, gambling tax, value-added tax, customs duty, excise duties and heavy goods vehicle tax. In the case of a direct tax, your company will have to bear the tax obligation. This applies to income tax, land tax and heavy goods vehicle tax. In the case of indirect tax, the end consumer is responsible for paying the tax and the tax is reflected in the form of an increased price on goods or services. Such taxes include value-added tax, excise duties and customs duty. As to which taxes have to be paid at which rate, this depends on the specific characteristics of your company.
Taxes are assessed and collected, reviewed and enforced by the Tax and Customs Board, and by local governments in the case of local taxes. If taxes are not paid, not paid on time or paid incorrectly, it is possible that you will be assessed penalties, interest or fines for delay.
All of the important tax-related dates for companies are listed in a tax calendar compiled by the Tax and Customs Board. Keeping track of the calendar helps company executives and financial officers file declarations in a timely manner and pay taxes as required.
Estonian tax system consists of state taxes which are imposed by Acts concerning taxation of relevant areas and taxes imposed by rural municipality or city council. The following state taxes are applied in Estonia:
Income tax;
Separate local tax system contains following tax duties:
In accordance with the principle of legality taxpayers are required to pay only such state and local taxes that are prescribed by law providing the rates and formal framework. The tax authorities for state taxes are the Customs Board and the Tax Board with its local offices. Following persons are considered to be taxable persons:
In order to ensure the performance of functions imposed on tax authorities, taxable persons are required to register in the state register which is established by the Estonian Government. The following persons are required to register themselves in the local Tax Board office of their residence, seat or place of business prior to the commencement of activities:
Application for registration of legal person, sole proprietor and permanent establishment submitted to Tax Board shall include a number of aspects like code enabling identification, residency, area of activity and principle place of business, documents of authorization and agreements having direct connection to registered entities. It has to be mentioned that non-resident employers, including foreign agencies and international organizations, which are not subject to registration requirement, have the right register themselves in the Estonian register of taxable persons.
Estonian legislation gives the protection and provides secrecy for data regarding taxation. The tax authorities, officials and any other staff thereof are required to maintain the confidentiality of information concerning taxable persons, including business secrets and information subject to banking secrecy. The obligation to maintain secrecy remains also after the termination of service relationship. Yet it is important to notice that information regarding taxation debts of a legal or natural person can be accessed by public and databases, providing that information, are therefore often used by loan and credit entities.
The language of tax authorities and their proceedings shall be Estonian pursuant to law unless they agree otherwise. Yet the foreign languages may be used in the communications and proceedings in accordance with provisions of the Language Act.
The Estonian tax authorities may impose tax audit in order to ascertain all the facts relating to the tax liability. The tax audit may cover on ore several types of taxes during one or several taxation periods, but the objective may also be an investigation of a specific issue. In the course of the tax audit, facts relating to the tax liabilities of other persons may be ascertained, if the person subject to the audit is required to withhold tax on payments made to such persons. Finally it has to be noticed that a natural person can only be audited if he operates as a sole proprietor or is a withholding agent. Income taxPersonal income taxPersonal income tax is imposed on the income of a taxpayer from which deductions pursuant to Estonian tax legislations have been made. The income tax shall be paid by natural persons and employers, who are natural persons, who in any way derive a taxable income. The period of taxation of personal income from which the deductions allowed pursuant to law have been made is one calendar year. The period of taxation of fringe benefits is one calendar month. Following tax rates are applied during periods of taxation:
Natural person is considered as Estonian resident if he or she has an actual residence in Estonia or has spent consecutively during the period of twelve calendar month at least 183 days. A person in question is considered a resident, with regard to the above mentioned conditions, from the day of arrival to Estonia. A non-resident natural person shall pay an income tax only on earnings derived from Estonian sources.
Income tax is charged on incomes derived by natural person from sources both within and outside Estonia. The following income is a subject to personal income tax:
If a person derives income in foreign state, the income tax is not charged in case the person has stayed in the foreign state for the purpose of employment for at least 183 days over the period of 12 consecutive months and the specified income has been the taxable in that foreign state. Regarding taxation of employment income, income tax is charged on all monetary remunerations of an employee or a public servant including all wages, salaries, holiday payments and benefits, compensations and extra payments of any kind. Furthermore the income tax is charged on remuneration or service fees paid on the basis of a contract for services, authorization agreement or any other contract under the law of obligations, including amounts paid to sportsmen. Income tax also concerns remunerations paid by legal bodies to members of management or controlling body.
In the list below some of gains which are free of income tax charge are mentioned:
Business is considered person’s independent economic or professional activity and income tax is charged on gains regardless time of receipt. Yet it has to be noticed that transfer of securities owned by a natural person does not automatically constitute business.
Gains from transfer of property include sale or exchange of any transferable and monetarily appraisable objects like real or movable property, securities, registered shares, contributions made to a general or limited partnership or an association, units of investment funds, rights of claim, rights of pre-emption, rights of superficies, personal rights of use, mortgages aso. In case of reduction in capital share of limited liability companies and redemption or return of shares or contributions income tax is charged on the amount in which the payments made to a person exceed the acquisition cost of the holding or the contribution.
All dividends received in monetary or non-monetary form from the foreign legal person by resident natural person are subject to income tax. Income tax is not charged in case the taxation of the share of profit has taken place or if income tax on the dividends has been withheld in a foreign state. Deductions from income of resident natural person:
A non-resident natural person who derives an income from work under an employment contract or in public service or from activities engaged in on the basis of a contract for services, an authorization agreement or a contract entered into for the provision of any other services shall be charged with personal income tax. An important aspect to consider is that the duties or services are performed in Estonia as well as payments are made by an Estonian state or local government authority or resident or a non-resident operating in Estonia as an employer. Payments are also considered if made through the permanent establishment of a non-resident or if the natural person in question has stayed in Estonia for the purpose of employment for at least 183 days over the period 12 consecutive calendar months.
Situations, where income tax is not charged with regard to a non-resident natural person include foreign diplomatic or consular representative, diplomatic delegation, members of international or intergovernmental organizations, who are not a citizen or permanent residents of Estonia.
Corporate income taxIt is important to bear in mind that in Estonia in contrast to a number of European countries there is no systematic monthly corporate tax. Instead a resident company shall pay income tax on profits distributed as dividends or any other profit distributions in monetary or non-monetary form upon their payment. With regard to the distribution the income tax is not charged on profit distributed by the way of a bonus issue.
Furthermore there are several exception situations where taxation on the corporate level is applied. In accordance with Estonian legislation such corporate income tax can be imposed on the resident legal person or a non-resident legal person that has a registered permanent establishment in Estonia. A legal person is considered a resident if it is established in accordance with Estonian law.
The period of taxation of non-resident legal person’s income from which the deductions allowed pursuant to law have been made is one calendar year. The period of taxation of fringe benefits for resident and non-resident legal persons as well as for distributed profit, gifts, donations, costs of entertaining guests and expenses and payments not related to business regarding resident and non-resident legal persons is one calendar month.
Following tax rates are applied during provided periods of taxation:
Payments made upon reduction of share capital or contribution, redemption of shares or liquidation of a legal person shall be taxed pursuant to the procedure of taxation of gains from transfer of property. The payments may be considered dividends if the value of transaction conducted between a resident legal person and a non-resident or natural person associated with the resident legal person differs from the value of similar transactions conducted between non-associated persons. In such case a tax administrator may, determining the income tax, apply value of transactions applied by non-associated independent persons under similar conditions.
An employer that is a resident legal person or a non-resident legal person having a permanent establishment has to pay income tax on fringe benefits granted to its employees. Fringe benefits may include goods, services, different forms of remuneration and monetary benefits which are given in connection to employment service or contractual relationship, membership in the management. In order to draw a line it is important notice that fringe benefits do not include cash payments regarded as salary, wages, supplementary remuneration and payments, remuneration of a management as well as payments for goods or services.
Resident legal person shall also pay income tax on all gifts and donations which have not been taxed under fringed benefits or have not been subject to withholding tax. Regarding those incomes there is a list of non-profit associations and foundations approved by the Government as well as a number of religious associations, hospitals, cultural, scientific, and educational, sports, law enforcement and social welfare institution which have been granted a tax relief.
Resident legal person may be subjected to taxation of expenses not related to business. In accordance with the Estonian legislation following expenses can are classified as not being related to business:
Furthermore a number of payments including acquisitions of property, securities, payment of a fine for delay or a contractual penalty or granting a loan may be considered as payments not related to business and subjected to income taxation, especially if connected to law tax rate territories.
A permanent establishment of a non-resident legal person that is registered in Estonia shall be charged with income tax. All fringe benefits, gifts, donations and costs of entertaining guests granted by a non-resident to its employees or members of the management shall be taxed regardless of whether the recipient is a resident or non-resident. The income tax is also imposed on the cost of property taken out of a permanent establishment, exceeding the total amount of the cost of property of the permanent establishment located in Estonia, payments made through or on account of a permanent establishment to the head office or any third party and remittance of goods for which no return compensation of any value is received. Yet the distribution in question may be tax-free if the receiver owns at least 10% of the shares, stocks or votes of the distributing permanent establishment situated in contract state unless it is considered a low tax rate territory.
Salary taxationAccording to Estonian legislation income taxes should be paid by employee and employer.
Employers obligations:
Employees obligations:
Example of calculating taxes on wages.
We assume that the gross salary per emoployee is EUR 1200. Withheld taxes from gross salary: 2,8% unemployment security, 2.2% pension fund, after that non taxable amount per employee EUR 144, from that sum personal income tax 21%. Thus the employee receives into his bank account EUR 933 net salary. Employers social security taxobligation per employee is 34,4% of employees gross salary. Social tax is EUR 396.00.
Therefore the companyes salary costs per employee is in our case EUR 1612,8
Changes in the corporate tax system
Changes were inquired mostly in order to comply with the “Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States” after the European Court of Justice (ECJ) judgment in Athinaiki Zythopiia vs. Greece (C-294/99). But according to the latest news the ECJ passed a new judgment on the 26th of June 2008 in Burda GmbH vs. Germany which takes a new stand providing that current Estonian legislation does not contradict the above mentioned Directive.
Low tax rate territories
Estonian legislation defines a low tax rate territory as a foreign state or a territory with an independent tax jurisdiction in a foreign state, which does not impose a tax on the profits earned or distributed by a legal person or where such tax is less than two-thirds of the income tax which a natural person who is an Estonian resident would have to pay on a similar amount of business income. In case taxes imposed on the income earned or distributed by different types of legal persons are considerably different, a territory is deemed to be a low tax rate territory only with regard to legal persons in relation to whom the tax meets the conditions for low tax rate territory. It shall be observed that a legal person cannot be considered having its location in low tax rate territory if more than 50% of its annual income is derived from manufacturing of goods, trading and providing of transport, communications, accommodation and tourism services in the home country of the legal person in question as well as chartering of freighting vessels.
Following is the list of countries not considered to be a low tax rate territory: United States of America (except Virgin and Marshall Islands), Austria, Belgium, China (except Hong Kong and Aomen), Spain, Holland (except Aruba and Antilles), Ireland, Iceland, Italy, Japan, Canada, Greece, Latvia, Lithuania, Moldova, Norway, Poland, Portugal, France, Sweden, Germany, Finland, United Kingdom and Northern Ireland (except Anguilla, Bermudas, British Virgin Islands, Cayman Islands, Gibraltar, Jersey, Guernsey, Isle of Man, Montserrat, Turks and Caicos Islands), Denmark, Check Republic, Ukraine, Kazakhstan, Belorussia, Armenia, Malta, Cyprus, Luxemburg, Slovakia, Slovenia, Hungary, Croatia, Switzerland, Turkey, Romania, Bulgaria, Georgia, Singapore. Value added tax
An important aspect to consider is that the VAT registration at the Tax Board is voluntary until the company reaches the annual turnover 16000 EUR. Upon reaching the critical amount the registration becomes compulsory.
Value added tax is imposed on following objects:
A person is charged with the value added tax if it can be considered to engage in business and is registered or required to register as a taxable person. A person is a natural person or a legal person, including a legal person in public law or a state, rural municipality or city authority.
A general current rate of value added tax in Estonia is 20%. There is a 9% value added tax on the following goods and services:
0% value added tax is imposed on following goods:
0% value added tax is imposed on following services:
A person with a limited value added tax liability has to be officially registered as such and shall pay value added tax on imported goods, intra-Community acquisitions of goods as well as services received from a foreign person engaged in business that is not registered as a taxable person in Estonia. Regarding the latter, an Estonian person or a foreign person operating in Estonia through a permanent establishment who receives such services is required to register as a taxable person with limited liability from the on which such service was received. Yet it shall be noticed that this does not apply to taxable persons and natural persons who are not engaged in business. VAT is also imposed on persons with limited value added tax liability if following situations:
Social tax
Estonian legislation defines Social (Security) Tax as financial obligation imposed on taxpayers in order to secure revenue for pension insurance and state health insurance. Social tax shall be paid on following:
Social tax is paid on wages and remuneration received by the employees for every particular month. Yet it is important to notice that there is a minimum monthly wage rate established by the state budget for the budgetary year, which in 2008 was set to 278.02 euro (same for 2011). Certain exceptions also consider the period of taxation for persons receiving a state pensions, employees and public servants with suspended employment contracts or working part-time. A sole proprietor is required to pay social tax annually on a minimum amount of monthly rates established by the state budget.
Following persons are subject to social tax:
The current rate of the social tax in Estonia is 33% of the taxable amount. There are exceptions considering persons receiving unemployment or social benefits, leaving tax rate at 13%. Excise dutiesCurrent rates of excite duty on alcohol in Estonia:
Current rates of excise duty on tobacco in Estonia:
Current rates of excise duty on some of fuel forms are following:
Land tax
Estonian land tax is based on the assessed value of a specific land territory, calculated pursuant to the procedure for contestation by local government authority set out in the Land Valuation Act. Land tax shall be paid by the owner of land or if the use of land has not been re-registered in accordance with the land reform, the user of the land is responsible for paying the land tax. Furthermore the person obtaining the right of superficies, a usufruct or mining of natural resources (appointed by the national or municipality government) is subject for Estonian land tax.
The current rate of land tax in Estonia is 0.1%-2.5% of the assessed value of land. The precise rates are established by the local government council not later than by 31st January of the taxation year and shall be paid annually. It is of importance to mention that the land tax for areas used for agriculture and natural grassland is 0.1%-2.5% of the assessed value.
Following is the list of land exempt from land tax:
Gambling tax
In accordance with Estonian legislation gambling tax is imposed on organizers of gambling activities. Following objects are subject to gambling taxation:
The general taxable period for gambling taxation is one calendar month.
Following are current rates of gambling taxation:
AccountingGeneral information
All the general principles of accounting are set out in the Estonian Accounting Act that provides legal bases and establishes requirements for organizing accounting and financial reporting pursuant to internationally recognized principles. Besides the Accounting Act, there are several guiding principles issued by the Accounting Standards Board in order to simplify the process of accounting and to ensure its compliance with requirements of current legislation. In accordance with the latter all legal persons and branches of foreign companies registered in Estonia as well as sole proprietors are entities which are subject to accounting.
An accounting entity is required to organise its accounts in such a way as to ensure the provision of up-to-date, relevant, objective and comparable information concerning its financial position, economic performance and cash flows. All transactions shall be documented and documents thereof preserved for seven years as of the end of the financial year during which the source document was recorded. Business transaction is an important term in the Estonian accounting legislation and is interpreted as a transaction concluded by an accounting entity, a transaction between third parties or an event relevant to an accounting entity, as a result of which changes occur in the assets, liabilities or owner’s equity of the accounting entity.
Accounting entities are furthermore required to establish accounting policies and procedures with detailed specification of recording of transactions, flow and preservation of source documents, maintenance of accounting journals and ledgers, physical inventory of assets and liabilities, preparation of financial statements, usage of accounting software as well as other aspects relevant to the organisation of accounting and the implementation of related internal audit measures.
Annual reports
The length of a financial year is estimated to twelve months (one calendar year, unless provided otherwise). There are several cases where the financial year may be shorter or longer than the previously mentioned term, yet it shall not exceed eighteen month.
At the end of each financial year an accounting entity is required to prepare an annual report which consists of the annual accounts and the management report. To the annual report shall also be annexed the auditor’s report and, in the case of a company, the profit distribution proposal for the financial year at hand. Still if there is no auditing requirement, adding the auditor’s report is not compulsory.
Preparation and submission of annual reports includes following aspects:
Following is the list of important criteria for an accounting entity to be audited:
In order to give a true and fair view of the financial situation, economic performance and cash flows of the accounting entity the annual accounts shall be prepared. Following statements shall be comprised:
The annual accounts shall be prepared on the basis of the business transactions and adjusting entries recorded in the journals and ledgers during the financial year. For the purpose of preparation physical inventory shall be taken of the balances of the assets and liabilities of the accounting entity. The value of the assets and liabilities shall furthermore be assessed to verify the conformity with previous recordings of entries.
The accounting policies and presentation formats used in the accounting of the entity at hand are required to conform to the international reporting standards and principles generally accepted in Estonia. It is also important to notice that the annual accounts shall be prepared in Estonian using the currency officially applicable in Estonia.
There is a written management’s declaration that shall be submitted together with the annual accounts and signed and dated by the entire management of the accounting entity declaring their liability for the preparation of the annual accounts. Management shall also prepare an overview of the following aspects of the entities’ annual activity:
It is important to observe that there are some specific requirements considering content of the management report if an accounting entity is audited or if the shares of the company are registered for trading on a stock market. The annual report of an accounting entity shall be signed and dated by the members of the management and the members of the highest supervisory body (if that body exists) immediately after the relevant body has approved the report. The final signed annual report shall be submitted by the 30th of June of the following year. Annual Reports of Consolidation Groups
Estonian legislation defines consolidating entity as a parent undertaking or any other accounting entity exercising dominant influence over another accounting entity (consolidated entity). Following are examples of often occurring dominant influence:
Thus consolidation means joining of the financial statements of different accounting entities in order to provide a united annual report as if companies in question were one single entity. The accounting of consolidation groups generally follows the traditional accounting lead as the provisions of the legislation have only a few minor differences. Yet what should be mentioned are situations where consolidating entities are not required to prepare an annual report of the consolidation group:
1. Sales revenue or income 1 000 000 EUR; 2. Total assets as of the balance sheet date 500 000 EUR; 3. Average number of employees 15 people.
CompetitionGeneral information
Framework of commercial competition in Estonia is provided in the Competition Act adopted in November 2001. Estonian legislators working on that Act were following the EC competition legislation and competition guidelines issued by the European Competition Board were also partly implemented and are applied while handling specific competition violation cases. The essence of the competition regulation can be considered relatively new for Estonian legal climate but it has been acquiring more attention during the recent years and obtaining a significant role with regard to most of the current commercial activity branches.
Prohibition on agreements, concerted practices and decisions by associations of undertakings
Prohibition concerns agreements, concerted practices and decisions by associations of undertakings which have as their object, purpose or effect any restriction of competition. Following activities are objects of such prohibition, having a negative effect on competition:
It shall be noticed that in accordance with Estonian legislation the above mentioned prohibitions, with exception of price fixing, do not apply to agreements and practices of agricultural producers unless competition is substantially restricted by such agreements, practices or decisions. Furthermore prohibition on the basis of exchange of information, application of dissimilar conditions and supplementary non-relevant provisions do not apply to agreements, practices and decisions which can be considered to be of minor importance. The term “minor importance” can be taken into consideration if the combined market share of the total turnover of the undertakings in question does not exceed:
Besides aspect of “minor importance” there is an amount of exceptions regarding prohibitions of commercial activity with regard to distortion of completion. In the list below some of those exceptions including also a block exemption are stated:
An undertaking which enters into an agreement, providing a decision or an activity which might be restrictive to competition can turn to exemptions but shall thus also present proof concerning compliance with all the conditions set forth. In case an agreement or a decision or part thereof do not fulfill the conditions for exemptions and can be found as restrictive to competition shall be admitted as void. Dominant position of the undertakings
In accordance with the Estonian legislation an undertaking can be considered to have a dominant position if its position on the market enables it to operate to a considerable extent independently of competitors, suppliers and buyers. Thus dominant position may be presumed if such an undertaking stands for at least 40% of the turnover in the relevant market. Furthermore, the situation of a dominant position may include several undertakings operating on the same market thus jointly creating an independent environment and accounting for at least 40% of the relevant market.
The state or a local government may grant special and exclusive rights to an undertaking by which enable the undertaking to have a competitive advantage over other undertakings in a goods market or to be the only undertaking in the market. Procedure of granting of such an artificial dominant position is granted by the Government of the Estonia.
Furthermore a dominant position of an undertaking might be determined by its ability to control an essential facility. This means that in case an undertaking possesses or operates a network, infrastructure or any other essential facility without access to which or the existence of which it is impossible to operate in the relevant market and this essential facility cannot be or is substantially difficult or costly to duplicate, the undertaking can be considered to have a dominant position.
Any direct or indirect abuse of the dominant position is prohibited. Such an abuse may often include following:
Control of mergers
Pursuant to Estonian legislation mergers (Estonian legislation has a slight linguistic difference using the term concentrations) usually arise in the cases where one or several (jointly) undertakings acquire control over whole or a part of another undertaking. Furthermore there is an option of a natural person already having a part of an undertaking to acquire control through an enhanced partnership. Legal aspects of mergers are governed by the provisions stated in the Estonian Commercial Act.
Competition legislation requires that a merger has to be a subject of a Competition Board control if during the previous financial year, the total turnover in Estonia of the parties of the merger exceeded 6 391 200 EUR and the total turnover in Estonia of each of at least two parties of the merger exceeded 1 917 350 EUR. Yet the merger shall not be a subject of the Competition Board control in case it is controlled pursuant to Council Regulation 139/2004/EC on the control of mergers between undertakings unless appointed otherwise.
Estonian competition legislation sets out the requirement to notify the Competition Board of the relevant merger procedure before entry into force of the latter in case the conditions in the previous paragraph are fulfilled. Such a notification shall be submitted in writing and shall contain following:
Finally it is important to bear in mind that the Director General of the Competition Board or his or her deputy may decide to revoke a decision to give a permission to merge if among the submitted documents can be found false or misguiding information or the merger procedure is executed violating legal provisions. Yet it does not deprive the parties from the right to submit a new application or appeal the decision of the Director General. Unfair competition
There is a clear and definite prohibition of unfair competition in Estonia. In accordance with legislation unfair competition arises in cases of dishonest trading practices and acts which are contrary to good morals and practices. This may also include following:
It might be useful to observe that in cases of misleading, offensive or derogatory information applied as a method of advertising shall be prosecuted in accordance with Advertising Act. Otherwise the existence or absence of unfair competition shall be determined in a dispute between parties held pursuant to civil procedure. Intellectual property rightsGeneral informationSince the declaration of independence Estonia has taken a number of significant steps towards the European level of intellectual property rights’ protection. Following acts have been passed:
Besides implementation of intellectual property rights into legislation, Estonia has ratified several international conventions on protection of intellectual property:
Patents
Inventions in any field of technology may be protected by a patent if the invention complies with the criteria of patentability. In order to obtain such protection the invention shall be registered in the register of patents. In accordance with Estonian legislation the subject of an invention may be a device, process, material, including biological material or a combination thereof. The Patent Act provides also a number of objects that cannot be considered as inventions and thus are not available for patentation and defense. Such objects include for example schemes, rules and methods for performing mental acts or doing business, design and plans documentation (building), symbols, presentations of information aso. Furthermore, there is a list of inventions which even considering their novation cannot be patented on the grounds of immorality or the medical and biotechnological nature.
All the patented inventions are classified according to the international patent classification adopted under the Strasbourg Agreement concerning the International Patent Classification. The above mentioned patentability criteria includes following aspects:
The scope and the content of the patent protection is determined by the wording and composition of the patent claim. Patent claims shall define the subject matter of the invention in words in a clear, concise and short manner, providing the essential features. Descriptions, drawings and any other illustrative material is often used for facilitation of interpretation.
A person willing to obtain an European patent for an invention may file a patent application with the Estonian Patent Bureau. Patent is normally valid for the period from 20 to 25 years, without possibility to extend it. The state payment for the European Patent Application is 224 EUR for online and paper application and additional research fee is 1105 EUR.
If the patent application meets the necessary requirements it will be granted within 3-5 years. Additional validity state fees stars for the first year and are 26 EUR for the 1st and 2nd year, 64 EUR for 3rd year, 77 EUR for 4th year etc.
Patents are available for any inventions in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. The opposition against patent may be filed by third persons claiming the novelty of the patent within 9 months period starting from patent publication and is filed within European Patent Organization. The state fee for opposition is 705 EUR.
All the administrative decisions may be appealed to European Patent Organization within 2 months notification on particular decision date. The state fee for the appeal is 1180 EUR.
Trademarks
Estonian legislation defines trademark as a sign used to distinguish the goods or services of a person from other similar types of goods or services of other persons. Legal protection of trademarks includes thus the recognition and protection of the rights of the person who holds an exclusive right to a trademark. In order to be able to exercise the mentioned exclusive right the person has to be entered in the register of trade and service marks as the proprietor. There is also an option of an international registration valid pursuant to Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks that can be exercised in Estonia by the person entered into the International Register of the International Bureau of the World Intellectual Property Organization.
Following summarizes trademarks which may be protected:
Important aspect of legal protection of trademarks is that they shall have a graphical representation. The scope of protection is based on such representation, whereas well-known trademarks rely on the form that they became well-known for. The scope is furthermore determined by the goods and services which the trademark used to designate when it became well-known or by a list of goods and services entered into the International Register of the Bureau.
Exclusive right of trademark gives to its proprietor a right to prohibit third parties to use any similar or identical sign with regard to identical or similar goods and services. Prohibition of marketing of similar goods and services under an identical or similar trademark also includes an aspect of possible public confusion. In case of dissimilar goods prohibition may take place under condition of unfair advantage or possible detriment towards distinctive features or the status of the trademark.
Trademark validity time registered with the Estonian Patent Bureau is 10 years, afterwards renewable each time for a new 10 year period. State fee for a renewal is 192 EUR. For every more than one class of goods and (or) services for which the mark is registered the additional payment is 45 EUR per each.
Opposition against published marks may be submitted within 3 months from the publication date (state fee is 160 EUR).
Whole registration process of a trademark takes about 1 year, state fees payable are 141 EUR and 45 EUR for every additional class for filing and 45 EUR upon grant. "Likelihood of confusion or perception of mutual relation" is a principle applied in Estonia in determining if two marks may co-exist.
Further, the Customs authorities may be notified on registered marks, and in this way border control against counterfeited goods enforce, down to destruction of seized goods. Owners of trademarks may enforce their rights on removal infringing trademarks of unofficial distributors, traders, etc., from advertisement, documents, goods and services.
Design
Industrial design is given a definition of the two-dimensional or three-dimensional design of a product in. Furthermore, Estonian Industrial Design Protection Act provides that a design means the set of features of a product which either separately or in combination form the shape, configuration, ornamentation, colors, texture and material of the product.
In order for design to obtain a legal protection, it has to be a new, have an individual character and may be applied for manufacturing of industrial or handicraft products. In case the latter conditions are fulfilled the legal protection is acquired by registration in the register of industrials designs.
The design is considered new if no identical or confusingly similar design has been disclosed in Estonia or any foreign state prior to the filing date of the registration application (in case the priority is claimed, prior to priority application date).
The aspects of individual character is considered fulfilled if the overall impression the design produced on specialists in particular field is different from any other design disclosed within the territory of Estonia or in a foreign state prior to the filing date of the registration application. As disclosure is an important aspect of design, it is important to observe that Industrial Design Protection Act regards design disclosed if it is published in a public publication or made otherwise available to a large number of people.
Following is the list of designs which normally are not subjects of protection:
The owner of an industrial design has the exclusive right to manufacture products according to that design, to distribute (including import and export), sell, offer for sale or store for aforementioned purposes products which are manufactured pursuant to the registered industrial design. Similarly to the cases of trademark and patent, the owner has furthermore the right to prohibit other persons from manufacturing without authorization products according to an identical or confusingly similar industrial design and from distributing, selling, offering for sale as well as stocking for the aforementioned purposes any of such products.
The author or person who has acquired the right to apply for the registration of the industrial design from the author or by way of transfer of such right has the right to apply for the registration and to become the owner. Several persons may apply for the registration jointly. The registration application shall be filed to the Patent Office and may include one industrial design, the variants thereof or a set of industrial designs. During the application it is important to pay attention to the following requirements of design representation:
The rights and obligations arising from the Estonian Industrial Design Protection Act and other legal acts regulating the legal protection of industrial designs apply equally to natural and legal persons, regardless of their residence. In order to avoid possible confusion, the Industrial Design Protection Act also specifically provides that the legal protection of industrial designs shall be treated independently from the protection arising from the Copyright Act. Copyright
The copyright protection provides the set of rights with regard to:
The term “works” includes literary, scientific and artistic works, meaning any original results in any of the latter domains which are expressed in an objective form and can be perceived and reproduced in this form.<0} {0>Teos on originaalne, kui see on autori enda intellektuaalse loomingu tulemus.<}100{>A work is considered original only if it can be observed as the author’s own intellectual creation. An interesting aspect to mention is that the purpose, value, specific form of expression or manner of fixation of a work shall not be taken into account as grounds for the non-recognition of copyright.
Copyright in a work arises upon its creation by the author whereas<0} moral and economic rights shall be considered to constitute the content of copyright.
To be more specific, the moral rights grant work’s author the possibility to appear in public as the creator of the work and claim recognition of the fact of creation (right of authorship) as well as decide in which manner the his name shall be designated upon use of the work. Moral rights constitute furthermore the right to make changes, additions or contest any misinterpretations and authorize others to such actions.
Economic rights on the other hand include authorization and prohibition of the use by others while receiving an income from such use. The main actions upon the copyrighted work with regard to economic rights are reproduction, distribution, adoption, compilation and systematization, any public display or performance as well as carrying out the architectural (or any other related) projects pursuant to the copyright in question.
Moral rights are inseparable and non-transferable while the economic rights of an author are transferable.
With regard to above mentioned rights the author has the right to obtain a remuneration for the use of his or her work by other persons. {0>Teose kasutamist teiste isikute poolt ei lubata teisiti kui autori poolt oma varaliste õiguste üleandmise (loovutamise) korral või autori poolt antud loa (litsentsi) alusel, välja arvatud käesoleva seaduse IV peatükis ettenähtud juhud.<}100{>Works may be used by other persons only in a case of transfer (assignment) of the author’s economic rights by him or her or on the basis of an authorisation.
The duration of copyright protection is estimated to the life time of the author and seventy years after his or her death, irrespective of the date when the work is lawfully made available to the public. In the case of anonymous or pseudonymous works, the term of protection of the copyright shall run for seventy years after the works are lawfully made available for the public.
The Copyright Act also sets the scope of related rights. Owners of related rights to a copyright may be performers, producers of phonograms, broadcasting organisations, producers of films or a person who, after the expiry of copyright protection, for the first time lawfully publishes or in any other way makes available to the public a previously unpublished work. The related rights shall not expire before the end of a period of fifty years since the first performance (production) or in case of producers of phonograms since the first fixation and in case of broadcasting organization since the first transmission.
Establishing a companyEstonian corporate legal entitiesAs it derives from Estonian Commercial Act following legal entities may be established in Estonia:
1. Public limited company or stock company (aktsiaselts/AS) The minimum capital requirement is 25000 EUR. The minimum nominal value of a share shall be 0.1 EUR. Shares shall be registered in the Estonian Central Register of Securities. Public limited company may be founded by one or more persons whereas founder might be a physical as well as a legal person. A memorandum of association and articles of association shall be concluded in accordance with principles of Estonian Commercial Act. The company shall be registered with the Estonian Commercial Register. The process of registration usually takes up to three weeks.
2. Private limited company (osaühing/OÜ) Private limited company shall have share capital at least 2500 EUR may be contributed later, after the term shareholders decide in the Articles of Association and a minimum nominal value of share equaling 1 EUR. It may be founded by one or more persons whereas founder may be a physical as well as a legal person. The company shall be registered with Estonian Commercial Register. From filing of notarized petition the process of registration takes usually up to three weeks.
3. General partnership (täisühing/TÜ) This is a form of a partnership where two or more partners operate under a common business name being equally liable for partnership’s obligations with all their assets. No minimum capital requirements are imposed. The relationship between partners, their contribution and dividend shares are regulated by the partnership agreement. The partnership in question shall be registered with Estonian Commercial Register.
4. Limited partnership (usaldusühing/UÜ) Limited partnership is quite similar to general partnership. The minor difference contain aspects of liability, where at least one of the persons, being a general partner, is liable for the obligations of the partnership with all its assets, while at least one person, being a limited partner, is liable only for obligations in regard to his contribution. The relationship between partners, their contribution and dividend shares are regulated by the partnership agreement. The partnership in question shall also be registered with Estonian Commercial Register.
5. Commercial association (Tulundusühistu or Ühistu) Commercial associations are much alike limited companies. The main differences concern voting procedures and payments of dividends. In accordance with the Association Act the votes of association members are equal, dividends are limited and profit is generally distributed with regard to members’ contribution to association’s activities. Commercial association shall also be registered into the Commercial Register. Participation in commercial association is voluntary.
6. Sole proprietor (füüsilisest isikust ettevõtja/FIE) Sole proprietor is liable for all of his/her obligation with all his/her assets. He/she shall be registered into the Commercial Register if he/she is registered with the Tax Board as a taxpayer under the Value Added Tax. Petition to Commercial Register has to be notarized and shall be reviewed in 15 days.
7. Branch (filiaal) Branch is an opportunity for a foreign company to provide goods and services on the Estonian market without establishing a new company. A branch cannot be considered as a separate legal person. Consequently foreign parent company is liable for all obligations connected to branch’s commercial activity. The branch shall be registered with Commercial Register, where notarized petition is usually reviewed in three weeks. The branch is registered in the manner of limited company. The branch shall have its own separate accounting, following the provisions of Estonian Accounting Act.
8. Representative office (non- resident tax payer) Foreign company has the right to start business in Estonia without opening any office in Estonia, enough is one representative person, locating in Estonia. Only registration is made in Estonian Tax and Customs Board, where the foreign company is registered as Non-Resident Tax Payer in Estonia. The Non-Resident is not registered in Estonian Commercial Register and all actions of Non-Resident are managed from the foreign state. If foreign company opens a representative office in Estonia, the registration in Commercial Register is not necessary again, only registration is made in Estonian Tax and Customs Board, where the foreign company is registered as Permanent Establishment in Estonia. The Permanent Establishment is not registered in Estonian Commercial Register and all actions of Permanent Establishment are managed from the foreign state.
Fees and formal aspects of registration
General costs for establishing a company in Estonia include the relevant notary fee. With regard to establishment of general and limited partnership as well as a sole proprietor the state fee 16 EUR has to be transferred to the account of Ministry of Finance upon registration. In case of private and public limited liability company as well as foreign entity branch registration the state fee is 140 EUR. In order to register the company into the Commercial Register an entrepreneur is required to submit several documents which are the basis for an entry, which consists of documents provided by law as well as notarized specimen of board members’ signatures. Still it has to be mentioned that the registry may sometimes demand supplementary documents if these are necessary to determine the facts which are the basis for the registration.
Following documents necessary for registration shall be prepared and attested by the notary: 1. Shareholders’ agreement, signed by all founders, shall include:
2. Articles of association, approved and signed by the founders and annexed to the shareholders’ agreement, shall include:
3. Merger agreements, division agreements and division plans of companies including necessary documents of authorization. A notary shall send to the registrar a petition which he or she has attested or certified and documents appended to the petition, unless all parties have agreed otherwise. A notary has the right to refuse to send a petition if the petition does not comply with the requirements of law or if the documents required by law are not appended to the petition within two weeks. In case of foreign entrepreneurs notarisation may replaced by certification of the signatures on the petition by an official of a foreign state who has the right to attest the identity of persons, if the authorisation of the official has been confirmed by the legalisation of the document in an Estonian consular post. Estonian legislation does not require legalisation of documents to the extent provided by the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents and other international agreements. The registrar shall make an entry no later than on the fifth day from signing ruling on entry. Notification considering positive ruling or refusal of entry shall be made promptly to the entrepreneur but not later than within ten working days from the relevant verdict. Labor lawConcluding of the employment contract
The core of the Estonian labor relations is regulated by the Estonian Employment Contracts Act. It includes numerous provisions governing the entry and the termination of the labor contracts, setting out rules and mandatory requirements in regard to important legal employment procedures. An employment contract is usually concluded for an unspecified period of time. There is an option to limit the duration of contract by certain period of time or connect its durability to completion of a specific task or assignment, but in this case such contract cannot be concluded for a period longer than five years. The contact shall be concluded in written in two exemplars, unless it is entered for the period of less than two weeks. The employment contract shall contain following mandatory information:
There are certain restrictions considering contracts with relatives or persons having direct marital connection. It also has to be noticed that all employees, including minors, have to conclude the labor contract directly with the employer or its representative. Grounds for termination and formal aspects
Termination of the employment contract and firing of the employees are pursued by many rules and requirements strictly and exhaustively shaped in the Estonian Employment Contracts Act. Legal grounds for initiation of a process of termination are following:
Both employers and employees are required to give each other a notice in advance (period of notification is usually included in the employment contract) of the termination, whereas the termination cannot be depending on any conditions. Written notice may still be renounced if consent of the party is obtained. The employer is required to register the termination in the employment contract, stating the basis for termination and providing relevant legislation, date for termination and information considering compensation. Furthermore a natural person employer (on behalf of the company) shall register termination of the contract with the labor inspector of his or her residence within one week after the date following the date of termination. Termination on the initiative of the employee
If an employment contract is concluded for the unspecified period of time, the employee shall notify the employer of termination one month in advance. During the probationary period that time is fifteen calendar days. An employee does not have to justify the cancellation if the contract was concluded for an unspecified period of time. An employee can terminate a fixed term contract only extraordinarily with good reason as provided in the law (unless employee was hired for the period of replacement of another employee). The basis for an extraordinary cancellation is a fundamental breach of an employer’s obligation, in particular if:
An employee may cancel extraordinarily an employment contract only within a reasonable time of learning or when they should have learnt of the circumstances serving as the basis for the cancellation. If an employer or an employee gives advance notice of cancellation later than provided by law or a collective agreement, the employee or the employer has the right to receive compensation to the extent to which they would have had the right to obtain upon following the term of advance notice. If an employee cancels an employment contract extraordinarily for the reason that an employer is in fundamental breach of the contract, the employer shall pay the employee compensation to the extent of three months' average wages of the employee. A court or a labour dispute committee may change the amount of the compensation, considering the circumstances of cancellation of the employment contract and the interests of the parties. Termination on the initiative of the employer
As the termination on the initiative of the employer is in the most cases has a negative impact on employees, Estonian legislation has set out strict rules regarding this matter in order to secure the weaker position. Following is the exhaustive list of arguments that may be used by the employer as a ground for premature termination of the employment contract:
An employer is required to notify employees of contract termination in advance, simultaneously providing the reasons for such termination. Such notification shall also made to an organization or a person representing the employee in question. An employer shall give an employee advance notice of extraordinary cancellation if the employee’s employment relationship with the employer has lasted:
1) less than one year of employment – no less than 15 calendar days; 2) one to five years of employment – no less than 30 calendar days; 3) five to ten years of employment – no less than 60 calendar days; 4) ten or more years of employment – no less than 90 calendar days.
In case of a reach in duty, loss of trust or indecent act including act of corruption of employee the employer can terminate the contract without adhering to the term of advance notification if considering any and all circumstances and mutual interests, it cannot be reasonably demanded that the performance of the contract be continued until the expiry of the agreed term or term of advance notice.
In case of a failure to adhere the rules of advance notification the employer is required to pay compensation to the employee in the amount of the employee’s average daily wages. Yet it has to be noticed that upon the declaration of bankruptcy of an employer, the latter is permitted to terminate employment contracts without advance notice to the employees. However, there is an option to terminate the employment contract by a collective termination. The collective termination is considered in case termination of employment contract is taking place at the initiative of the employer whereby the contract is terminated due to termination of a legal person, termination of work of an employer who is a natural person, declaration of bankruptcy of the employer or a dismissal of employees within thirty days. There is an obligation for the employer to immediately inform representatives of the employees, provide the relevant information and consult them in order to reach amicably the most optimal solution. Upon the termination of the employment contract on the basis of lay-off the employer is required to pay employees one month’s average wages of the employee. Employee may also have the right to receive an insurance benefit based on the length of the employment:
Estonian legislation has also outlined several restrictions regarding termination of employment contracts. There are specific rules considering labor relations with pregnant woman or person raising child under three years of age, underage persons and employee representatives. An employer may not cancel an employment contract due to the following: 1) an employee is pregnant or has the right to pregnancy and maternity leave; 2) an employee performs important family duties; 3) an employee does not, in the short term, cope with the performance of duties due to their state of health; 4) an employee represents other employees on the basis provided by law; 5) a full-time employee does not want to continue working part-time or a part-time employee does not want to continue working full-time; 6) an employee is in military service or alternative service. If an employer cancels an employment contract with an employee who is pregnant or raising a child under three years of age, it shall be deemed that the employment contract has been cancelled due to the reason specified in clauses above, unless the employer proves that it cancelled the employment contract on a basis permitted in the law. An employer may not cancel an employment contract with a pregnant woman or a woman who has the right to pregnancy and maternity leave or a person who is on parental leave or adoptive parent leave due to a lay-off, except upon cessation of the activities of the employer or declaration of the employer’s bankruptcy if the activities of the employer cease. An employer may not cancel an employment contract with a pregnant woman or a woman who has the right to pregnancy and maternity leave due to a decrease of the employee’s capacity for work. During the dismissal due to lack of working tasks, the Estonian legislation constitutes the preferential rights for different kinds of employees. The representatives of employees and those employees raising children under three years of age have a preferential right to remain at work (unless in the cases od bankruptcy and cessation of the activities of the employer). Termination of contract by agreement of parties and upon expiry
The employment contract can be terminated if one of the parties presents a corresponding written request and the other party gives written consent to termination of the contract. A fixed-term employment contract expires upon expiry of the term. If an employee continues to perform work after the expiry of the term of a contract, it shall be deemed that the contract has been entered into for an unspecified term, unless the employer expressed a different will within five working days of learning or when they should have learned that the employee was continuing to perform the employment contract.
Working time
The duration of the working time and guidelines for its organization are set out in the Employement Contracts Act. The general national standard for working time is eight hours per day or forty hours per week. In case of part-time employment the working hours are usually shorter and are regulated on the basis of the relevant employment agreement. Furthermore a person due to its minor age maybe subject to a reduced working time. Reduced hours are also applied for employment hazardous to health, specific list on that matter is established by the Estonian Government. Overtime shall be decided in the agreement between the parties. Yet in cases case of force majeure, an employee is usually required to comply with an order of an employer to work overtime if such work is of necessary and temporary nature and has to be performed promptly. There is the requirement to maintain separate records of overtime concerning every employee and every specific case of overtime. Overtime shall not be required to:
Working time together with overtime shall not exceed an average of forty-eight hours per week during a four-month period. Those standards may be abolished in case force majeure. Finally an employer is required to grant employees a break for rest and meals per six hours of work unless otherwise is provided by the collective agreement. The duration of such break shall be at least thirty minutes. The rest time between working days and working shifts shall be at least eleven consecutive hours, and at least two days per week shall be available for off time.
Immigration and residencyResidence permit for the EU citizen
EU citizens have the right to stay in Estonia on the basis of a valid travel document or identity card for the period of up to 3 months. If the person wishes to stay in Estonia longer, the right of temporary residence shall be applied.
The right of temporary residence is granted for a period of 5 years.
An EU citizen who has resided in Estonia permanently for 5 successive years on the basis of temporary right of residence shall obtain the right of permanent residence. It should be noted that EU citizen has a right to bring their family members to Estonia to whom applies the same residence regulation than for EU citizen.
In order to obtain the right of temporary residence an EU citizen must contact the local government authority nearest to his/her place of residence. Upon the application for an identity card the following documents must be submitted to the Citizenship and Migration Bureau of the Prefecture:
Identity cards are issued within a period of one month from the date of submission of the application. EU citizens must, in order to register their right of permanent residence, contact the customer service of the Citizenship and Migration Bureau of the Prefecture or submit the respective applications by post presenting the documents named above.
Residence permits for persons outside EUTemporary residence permit may be issued to non-EU citizen:
Non-EU citizen may apply for a residence permit for employment if an open competition has been carried out to staff and citizen has qualifications, education, health, work experience, special skills and knowledge required for the job. The Estonian Unemployment Insurance Fund has to give its consent before non-EU citizen can be employed. The consent is valid for 2 months from the moment of its issue. A residence permit is issued only if the wages of an alien ensure his/her subsistence in Estonia. An employer must pay an alien a salary which is at least equal to the product of the recent average yearly wages in Estonia published by the Statistical Office of Estonia and the coefficient 1, 24.
Non-EU citizen is required to have continuous legal income that ensures his or her subsistence in Estonia during the six months preceding the submission of the application. Lawfully earned remuneration for work, income received from lawful business activities or property, pensions, scholarships, support, benefits paid by a foreign state and the maintenance ensured by family members earning legal income are deemed to be legal income.
Documents issued by a foreign state must be translated either into Estonian, Russian or English and the accuracy of the translation must be certified by a notary. Documents must be confirmed by a relevant certificate (apostille) or legalized. Apostille is not needed from the states Estonia has a contract for legal assistance: Lithuania, Latvia, Poland, Ukraine and Russian Federation.
Schengen Visas
The Schengen visa allows the holder to a total stay of up to 3 months days within a period of 6 months for tourist or business purposes. Receiving the multiple entry Schengen visa, is possible to leave and return in any number of times within the 6 months period, but the combined stay within the region must not total more than 3 months (90 days). Schengen visa shall be applied by a citizen of a country whose citizens are subject to the visa requirement. A Schengen visa must be applied in person, not by mail.
Receiving once a Schengen visa, the person may enter one country and travel freely anywhere within the Schengen territory. Internal border controls have been abolished and there are no or few stops and checks. Internal air, road and train travel are handled as domestic trips. The Schengen Agreement still allows customs control as long as there is no passport check, and checks are made randomly, or at real suspicions.
It takes between 2 and 10 working days to get Schengen visa for short-term stays. Processing time may be up to several months for long term visas.
Schengen visas type
An airport transit visa (A) allows a person to transit through the international zone of a Schengen airport without entering the Schengen territory.
A transit visa (B) allows a person to transit no more than 5 days through Schengen countries by car, coach or travelling through different airports on the persons way to another non-Schengen country.
A short stay visa (C) allows a person to visit the Schengen countries for tourism, family or business visits, up to a maximum 3 months in a given 6 months period.
A circulation visa (C) is a short stay visa valid at least a year: It is mainly issued for business visits that have an invitation letter from a Schengen country, to aircrew member, to people having a special interest in the Schengen territory.
A long stay visa (D) allows a person to stay for more than 3 months, e.g., study, work, retire etc.
State fees for processing the Shengen visa application:
Visas are issued at diplomatic missions or consular offices of the Republic of Estonia abroad. In order to get a visa an alien must submit:
|
For questions, please, contact Valters Gencs, attorney at law at info@gencs.eu
