LEXTAL Law Firm Introduction of Tax Law Department
LEXTAL Tax Law Department • Long-term experience in advising of complex business deals, as well as in representing both in tax and court proceedings. • Tight cooperation with other departments of the office (especially M&A, corporate). • Cooperation with professionals from many foreign law firms and accounting companies. • Member of Estonian Taxpayers Association and International Fiscal Association. • The contact person of the Tax Law Department is partner and attorney at lawAnts Karu.
When do you need tax specialist’s help? • We advise you to consult a tax specialist of LEXTAL when: • Planning future business activities • Mapping the existing tax risks • Preparing transactions • Communicating with tax office • Tax audit or control has been commenced • Challenging tax resolutions • Insolvency of the company appears • Investigation of tax offence has commenced
Planning business activities • When carrying out business activities, the tax aspects may essentially increase the hoped-for profit, as well as cancel it out completely. • It is often neglected that it is possible to legally reduce the tax burden, using alternative tax jurisdictions, to avoid double taxation etc. • At the same time it is necessary to map the tax risks, to avoid incorrect declaration of taxes (for instance incorrect declaration of input VAT, incorrect assessment of tax risks) and the related control, additional expenses (e.g. tax interests and penalties) and possible liability (misdemeanour- or criminal liability).
Planning business activities • When carrying out business activities, the help of a tax adviser is necessary at: • Tax efficient implementation of commercial vision (for example choosing the type, party, time and tax jurisdiction suitable for the transactions); especially important when planning profit distribution • Mapping the tax risks (eg transfer prices; fringe benefits; expenses not related to business; input VAT; transfer of the enterprise) • Planning taxes in Baltic, European Union and wider international level (eg tax incentives and tax exemptions arising from tax treaties, European Union law and court practice) • Developing strategies to enter and withdraw from the market • Solving fiscal matters related to mergers, acquisitions (M&A) and transformation of companies • Negotiating with the tax authority, coming into settlement and applying for preliminary ruling if necessary.
Concluding transactions • When concluding transactions, the help of a tax adviser is necessary in case of: • Assessment of tax risks and expenses of forthcoming transaction and tax risk management (choosing the type, party, time and tax jurisdiction of the suitable transactions etc) • Assessment of tax risks and expenses of passed transaction and the tax risk management • Combination of both abovementioned, including legal due diligence as a part of M&A transactions • Extremely essential in the following fields: real estate; merger, acquisition and transformation of enterprises; transition of an enterprise; transfer of major assets.
Daily communication with the Board of Tax • You might need help from a tax adviser in daily communication with the Tax and Customs Board when: • Submitting an application (application of postponement, application to eliminate tax arrears, contesting the demand for security etc) • Requesting information • Peacefully solving misunderstandings (which reduces the risk of fiscal or audit control) • Requesting preliminary ruling • Prior communication with the Tax and Customs Board always consult a tax adviser!
Fiscal or audit control • When initiating fiscal or audit control, the help of a tax adviser is necessary: • For the protection of taxpayer’s rights (the participation of a representative usually changes the communication with the tax authority more constructive) • To dispute illegal rulings or procedures • To file applications to soften the taxpayer’s situation (requests for information, requests to extend deadlines etc) • To dispute the result of fiscal or audit control in court or during pre-trial procedure if necessary.
Fiscal or audit control in Estonia • In the end of fiscal control a fiscal report is composed, or a notice initiating the end of fiscal control. A taxable person may respond to the report. In case tax authorities disagree with the objections of the taxable person, The Tax Board will compose a notice of assessment. • In the end of audit control an audit report is composed, or a notice initiating the end of audit control. The tax authority is not obliged to introduce the audit report before delivery, in case introducing might threat ascertaining the truth in criminal proceedings or collection of tax. In case of non-compliance with the audit report, the taxable person may demand adding his/her dissenting opinion to the audit report. In case the tax authority does not accept the objection of the taxable person, the Tax Board will compose a notice of assessment.
Objecting to the notice of assessment in Estonia • It is possible to object to the notice of assessment in the headquarters of Tax and Customs Board or a notice of appeal to the Administrative Court. In cooperation with the tax adviser the best further strategy is chosen. • Objection is generally recommended, if: • Clear arguments are in favor for the taxpayer (e.g. Tax liability has expired) or there is a need for extra time to collect additional evidence. Filing an objection gives tax authority the last chance to declare its own notice of assessment invalid without court proceedings. • Notice of appeal is generally recommended, if: • An instant solution is requested, the immediate compulsory execution of the notice of assessment causes incurable depreciation (eg bankrupt, serious economic difficulties, difficulties in business relations) or the objection would not likely be met.
Objecting to the notice of assessment in Estonia • When filing the objection to the headquarters of Tax and Customs Board, it should be taken into account that: • Filing the objection is free of state fee. • Filing the objection will not stop execution of the notice of assessment (the chance of compulsory execution remains). The chances to achieve suspension of execution of the notice of assessment are more limited than in turning to court. • Probability of meeting of the objection is smaller. • The legal costs of objection proceedings are not compensated. • In case of non-compliance the taxpayer is entitled to recourse to the court within 30 days as from the delivery of the notice of assessment (please see the next slide)
Objecting to the notice of assessment in Estonia • When filing a claim to the Administrative Court the following should be taken into account: • When filing a claim, the state fee of 5 % of the voidable amount must be paid, but not less than 15,97 euros and not more than 958,67euros. Together with filing the claim (eg claim to suspend execution of notice of assessment) the obligation of additional state fee may follow. • Filing a claim will not stop the enforcement of the notice of assessment, but it may be applied from the court. Suspension of enforcement of the notice of assessment will guarantee, that during the legal proceedings the tax amount will not be compulsory executed (eg the bank accounts will not be seized). • As a result of a successful legal proceedings the legal assistance expenses of the legal proceedings are compensated (although not completely). • It is possible to appeal against the decision of the administrative court to the circuit court. Thereat the same amount must be paid as the state fee, which was paid when filing the claim to the administrative court. • It is possible to appeal against the decision of the Circuit Court to the Supreme Court. The bail is 25 euros. The Supreme Court is entitled not to proceed the case. • The average duration of legal proceedings is 1 to 2 years.
Insolvency of the company • When insolvency of a company occurs, the help of a tax adiviser is necessary: • In restructuring of the company (eg postponing, objection to tax claims) • In bankruptcy proceedings (eg objection to tax claims, concluding a compromise agreement in tax claims) • In reorganisation (eg reformation of tax claims)
Tax offenses • In case of tax offenses the help of a tax adviser is necessary when: • Analyzing, whether the deed is either a misdemeanor or offense • Working out a defense strategy and policy both in misdemeanor and criminal proceedings • Taking part of hearings and other procedural acts; objecting the procedural acts • Currently communicating with the investigative bodies • Representing in potential negotiations to complete the criminal proceedings • Defending in all court instances
Thank you! Contact person of the Tax Law Department: Partner of LEXTAL Law Firm attorney at law Ants Karu Tel. +372 640 0250 Fax +372 640 0260 Skype antskaru firstname.lastname@example.org www.lextal.ee