From 2008.01.01, the Estonian Tax Board may on request issue a binding preliminary assessment on a future transaction, e.g. whether income tax will be levied on the transaction or not. Previously, the extent of tax liability became evident only after receipt of notice of assessment from the Tax Board.
Tax administrators must make a preliminary assessment within 60 calendar days after receiving a duly formalised application. However, a tax administrator may extend the term by 30 days where good cause exists. Applicants for a preliminary assessment must pay a state fee of EEK 12,000 for legal persons and EEK 3,000 for natural persons.
A notice of assessment differs from a preliminary assessment in that if an applicant disagrees with a preliminary assessment, then they cannot exercise the right of appeal. However, a taxable person may choose not to perform a transaction analysed by the Tax Board.
A preliminary assessment may not be applied for with respect to transfer pricing, i.e. transactions performed between connected parties, such as a parent company and a subsidiary. The exception is mainly due to identification problems and the high factor cost involved in such transactions.
The authors of the draft amendment believe that introducing a binding preliminary assessment will make taxpayers feel more secure about taxation of transactions, facilitate the development of uniform court practice, and increase overall legal certainty.
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