Finance Ministry rethinkingexemptions on small deposits

  • 2005-05-11
  • Baltic News Service
TALLINN - The Finance Ministry said it was planning an amendment to the tax code to specify the extent to which interest paid by credit institutions, particularly on small accounts, can be exempt from tax.

The ministry explained that it was considering an amendment to the bill, as under existing provisions the tax exemption has been extended to different hybrid instruments such as investments or structured deposits.

"As a general rule, interest is taxable income for individuals," said Riin Vandre, public relations officer of the Finance Ministry.

"An exception has been made to interest paid by credit institutions, as one of its main aims was the reduction of the disproportionate costs connected with administration of income tax collected from very small sums of the deposits."

Presently the amendment is under consideration, although it is still too early to say when and what shape it will take, Vandre said.

The business daily Aripaev reported last week that the Finance Ministry was considering an amendment that would cancel the tax exemption on interest earned on investment deposits. The amendment would affect about 5,000 people, according to the paper.

Estonian banks have recently introduced products called investment or structured deposits to the market since the interest paid on them is connected with certain assets, mostly stocks. When the price of the assets rises the yield on the deposits also increases, being higher than the yield on usual time deposits.