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LEXTAL elected one of the most attractive employers for law students in Estonia

LEXTAL was elected as one of the most attractive employers in Estonia among legal students. LEXTAL ranked third!

The employer’s branding agency Instar conducted a study of job prospects and the brands of employers among undergraduates across Estonia. Over 5400 respondents participated in the study this year.

“This is a great honor for us. We are very proud for that achievement. We believe that the key to our success was our internship program. Our goal is to provide every year internships that focus on inspiring young colleagues. We have given students the promise that if they do their internship in LEXTAL, they can deal with substantive legal matters and try out the practical aspects legal work. Figuratively speaking, we do not send our young colleagues to just arrange the archives or to deal merely with technical work. What we have learned is that our young colleagues want personal approach and mentoring. An internship program cannot be merely a machine for the firm aimed at finding potential employees – we have rather focused on inspiring and mentoring our interns as young colleagues. This focus made our internship program very popular among Estonian law students,” explained Marge Männiko, the Managing Partner at LEXTAL.

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LEXTAL ranks high in Legal 500 EMEA

We are proud to announce that LEXTAL has been ranked by Legal 500 among other best Dispute Resolution, Tax, Commercial, Corporate, M&A and IP, IT and Telecoms teams in Estonia!

Legal 500 highlighted the following:

LEXTALs ‘efficient’ team is ‘proactive and takes the time to get to know its clients’. Ants Karu provides ‘very detailed advice tailored to each client’s individual circumstances’ and Margus Reiland ‘thinks outside the box’.

LEXTAL’s ‘fast and professional’ team is known for its experience in self-driving vehicles and cybercrime. Associate Rauno Kinkar is ‘very experienced and knowledgeable’.

The ‘diligent and responsive’ Ants Karu at LEXTAL ‘combines a good knowledge of tax and corporate law while keeping a clear focus on what is important and what is not’. Recent work highlights include advising Sevenoil and three other sellers on the sale of seven gas stations.

LEXTAL’s ‘excellent and quick team’ is experienced in both litigation and arbitration. The ‘thorough’ Olavi-Jüri Luik has ‘deep knowledge of contentious insurance contract matters’ and Urmas Ustav heads the team.

You can find further information on the Legal 500 website.

 

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Chambers and Partners ranked Oliver Nääs among the best Dispute Resolution attorneys in Estonia

International legal dictionary Chambers Europe 2018 ranked Oliver Nääs from LEXTAL among the best Dispute Resolution attorneys in Estonia.

According to Chambers LEXTAL has a well-regarded team known for acting on a spectrum of civil and administrative proceedings and white-collar crime cases. Experienced in restructuring and insolvency and insurance-related disputes, as well as commercial issues. Oliver Nääs enters the rankings in recognition of his strong market presence. Commentators recognise him as “one of the most renowned” criminal disputes lawyers, who is active in “high-profile white-collar crime” mandates.

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New regulation on registration of true beneficial owners in Latvia

On 9 November 2017, amendments to the “Law on the Prevention of Money Laundering and Terrorism Financing” have entered into force. The main purpose of amendments is to prevent money laundering and terrorism financing and provide a free access to a correct, actual information on the true beneficial owners of legal entities. Consequently, the amendments provide an obligation for all legal entities, registered in the Register of Enterprises, to provide the information on their beneficial owners.

New regulation on registration of true beneficial owners

The amendments provide that the true beneficial owner of the legal entity is a natural person:

  • who owns, or who directly or indirectly controls at least 25 per cent of the legal entity capital shares or stocks with voting rights, or;
  • who directly or indirectly controls the legal entity in any other way.

We would like to draw your attention to the fact that each situation is individual and provided border of the 25 per cent is the minimal border, which requires the identification of the true beneficial owner. Whereas the total amount of participation is less than 25 per cent, it has to be evaluated whether there is another way to identify natural persons who actually control the legal entity according to the real situation (for example, concluded contracts, other mechanism of control).

New disclosure obligations

New disclosure obligations applies to legal entities, registered in the Register of Enterprises, including, but not limited to, general partnerships, foundations, co-operative societies, limited partnerships, trade unions, limited liability companies, association of trade unions, joint stock companies, permanent trade unions, associations of political parties, European companies.

Amendments provide only two exclusions from the obligation to provide information on the beneficial owner:

  • if information about the true beneficial owner has already been submitted to the Register of Enterprises according to other laws and the way how the control is performed rises from the status of the shareholder, owner, founder or member of the management board;
  • if the beneficial owner is a stockholder in a joint-stock company, stocks of which have been introduced to regulated market and the way how the control is performed rises from the status of stockholder.

We would like to note that there is an obligation to submit information on true beneficial owners to the Register of Enterprises before 1 March 2018. However, in any case, if legal entity submits an application to the Register of Enterprises before 01.03.2018, for registration (foundation) of a legal entity, or changes in composition of shareholders or management board, it shall be provided the information on the beneficial owners.

It is very important to remember that currently both administrative and criminal liability is applicable for such violations. In accordance with Section 1663 of the Latvian Administrative Violations Code, failure to submit the information or documents specified by regulatory enactments on time to the Register of Enterprises, will result in a warning or a fine for an amount from EUR 70 up to EUR 430. If the same violations occur within a year after the imposition of an administrative punishment a new fine shall be imposed for an amount from EUR 210 up to EUR 700.

According to Section 272 of the Criminal law, for failure to submit information stipulated by the law or for submission of knowingly false information, sanction goes from a fine to short-term detention, or community works.

Furthermore, regarding commercial legal entities, the management board may be held liable for failure to provide the information about the true beneficial owners, if the company will suffer damages as a result of the violation, and if the management board could not be able to prove that it acted as a good and proper owner

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New corporate regulation in Estonia: contact person

As from 15 January 2018 Estonian company must designate a “contact person” if its management board is located outside of Estonia. If the management board of is located in Estonia, appointment of a “contact person” is optional.

What does “contact person” mean?

Estonian company (EstCo), as well a foreign company that has a branch in Estonia (branch), may appoint a contact person to whom the procedural documents of EstCo and the declarations of intent addressed to EstCo may be delivered in Estonia. Upon delivery of a procedural document or declaration of intent to the contact person, the respective procedural document or declaration of intent is deemed to have been delivered also to EstCo.
Contact person will be registered in the commercial register.

What are “procedural documents and declarations of intent”?

The procedural documents may be court documents (for example lawsuit filed against EstCo), communication from tax office or other state institutions, etc. The declarations of intent may be letters from business partners (for example notification of renewal or termination of a contract) or any other similar business correspondence.

Do I need to have a contact person?

If the management board of EstCo is located in a foreign state, EstCo must designate a contact person. This obligation also applies to a branch, unless the residence of at least 50% of branch managers is in Estonia, in another EEA member state or in Switzerland.

If the management board of EstCo is located in Estonia, appointment of a contact person is optional.

The location of the management board is undefined vague term. It is generally understood as a place where the management board of EstCo carries out the everyday management of EstCo.

Who can act as a contact person?

If EstCo’s management board is located in a foreign state, then:

a) only a notary, notary’s office, attorney, law firm, sworn auditor, audit firm, tax representative of a non-resident for the purposes of the Taxation Act or a trust and company service provider specified in § 8 of the Money Laundering and Terrorist Financing Prevention Act. The address of such contact person shall be considered the address of EstCo; or
b) if management board member, shareholder or procurator of EstCo has a residence in Estonia, anyone of them.

If EstCo’s management board is located in Estonia, then contact person can be anyone having Estonian address.

How can I appoint a contact person?

First step is to agree the appointment with the contact person and then submit a notarised or digitally signed application to the commercial register, accompanied with the contact person’s consent.

Can I replace a contact person?

Yes, EstCo can replace contact person anytime. In addition, the contact person can resign – how and when shall depend on the agreement between EstCo and the contact person.

Can LEXTAL act as a contact person?

Yes.

If you have any questions about the topic at hand, please do not hesitate to contact partner Ants Karu.

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Seminar: Practical hints on how to start business and win public tenders in Estonia and Lithuania?

Agenda and speakers:

11:00 to 11:30 – Registration and Coffee

11:30 to 11:45 – Welcoming remarks – Armands Jaunzars, LEXTAL Riga

11:45 to 12:05 – Practical guidance on business start in Estonia – Marge Männiko, LEXTAL Tallinn

12:05 to 12:25 – Practical guidance on business start in Lithuania – Tadas Vilčinskas, LEXTAL Vilnius

12:25 to 12:45 – Advantages of Tax system in Estonia – Ants Karu, LEXTAL Tallinn

12:45 to 13:15 – Coffee break, networking

13:15 to 13:35 – Advantages of Tax system in Lithuania – Arūnas Šidlauskas, LEXTAL Vilnius

13:35 to 13:55 – New Public Procurement regulation in Estonia – Alar Urm, LEXTAL Tallinn

13:55 to 14:15 – New Public Procurement regulation in Lithuania – Lina Vaitiekūnienė, LEXTAL Vilnius

14:15 to 14:30 – Q&A session

14:30 to 14:45 – Closing remarks – Armands Jaunzars, LEXTAL Riga

14:45                – Coffee and networking

Attending the seminar is free of charge

When?  Thursday, September 21, 2017

Where? Conference center Citadele,

Republikas laukums 2A, Riga, LV-1010, Latvia

 

Please register by sending an e-mail to Guna Heidemane at guna.heidemane@lextal.lv no later than 18 September 2017.

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Legal alert: recent amendments to Estonian corporate income tax

In the beginning of this summer the Estonian Parliament adopted several amendments to the Income Tax Act. Two amendments are particularly relevant to international groups having subsidiary in Estonia: (i) taxation of loans if they can be deemed as hidden profit distribution and (ii) reduced tax rate for regularly distributed dividends.

These amendments will come into force as of 1 January 2018. The amendments connected to taxation of hidden profit distributions shall apply to loans granted from 1 July 2017.

Hidden profit distributions by way of loans

In accordance with the new provision, Estonian companies shall pay corporate income tax on loans granted to its shareholders or other group companies if the circumstances of the transaction imply that in reality the loan is a hidden profit distribution.  The burden of proof of the ability and intent of loan repayment lies on Estonian company if the loan repayment term is longer than 48 months. The new provision does not apply to loans provided by Estonian company to its subsidiaries.

Key points to consider:

  • Up-stream loans should be granted by Estonian companies only in case these will be repaid. Avoid long repayment schedules;
  • On tax authority’s demand, Estonian company must be able to provide evidence of the ability and intent of loan repayment;
  • The burden of proof will apply on loans granted as from 1 July 2017 as well as on loans where the loan amount is increased, the repayment due date is extended or other material terms are amended as from 1 July 2017;
  • Estonian company is obliged to declare such loans in its tax return in February 2018.

Although the tax authority could impose tax in these circumstances based on general anti-avoidance rule also prior to this amendment, the new provision clearly indicates that the tax authority will start paying more attention to intra-group loans. Therefore, revising all intra-group loan agreements would be advisable.

Lower tax rate on regular dividends

Lower corporate income tax rate (14% compared to regular 20%) will be made available to Estonian companies who pay regular dividends. If the profit distributed as dividends in a calendar year is equal or less than the average of the profit distributed as dividends of the last 3 calendar years, it is subject to 14% income tax rate. Profit distribution that exceeds this amount will continue to be subject to 20% income tax rate.

Key points to consider:

  • The first year when the lower tax rate is available is 2019;
  • The lower income tax rate:
  • Applies in 2019 to one third of the profit distributed in 2018 on which the resident company has paid income tax;
  • Applies in 2020 to one third of the profit distributed in 2018 and 2019 on which the resident company has paid income tax.

Other amendments

In addition, there are other amendments to the Income Tax Act which will come or have entered into force:

  • As of 1 July 2017, employee share options have more beneficial rules related to full exit and employee’s disability;
  • As of 1 January 2018, there is no longer the requirement to keep a logbook when using company’s car for employee’s personal use – fringe benefit can only be declared on the basis of the kilowatts of the car. Value of the fringe benefit shall be €1,96 per kW per month or €1,47 per kW per month if the car is elder than 5 years. For example, the monthly taxes payable for 2 years old 140 kW car shall be €182;
  • As of 1 July 2017, the employer’s expenses on employee’s transportation to work with bus will not be subject to fringe benefit taxation;
  • The employer will be able to compensate employee’s transportation to work by other means of transportation than bus tax free, if the distance between the work place and employee’s place of residence is at least 50 km;
  • As of 1 July 2017, the employer will be able to compensate employee’s accommodation costs (up to €200 per month in Tallinn and Tartu and €100 elsewhere) tax free, if the distance between the work place and employee’s place of residence is at least 50 km and the employee does not own residential real estate within this vicinity;
  • As of 1 January 2018, Estonian banks are required to make quarterly advance payments of corporate income tax at 14% rate from the profits earned in previous quarter.

Should you have any questions related to above, please let partners Ants Karu (ants.karu@lextal.ee; +372 50 625 95) or Margus Reiland (margus.reiland@lextal.ee; + 372 56 905 001) know.

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LEXTAL advised AS Puukeskus in connection with entry into distribution agreement with Cembrit OY

LEXTAL advised AS Puukeskus (www.puukeskus.ee) in connection with entry into distribution agreement with Cembrit OY (www.cembrit.fi) appointing AS Puukeskus as distributor of Cembrit’s fibre-cement products in Estonia.

The transaction involved also the purchase of certain assets from Cembrit’s previous distributor. LEXTAL team was led by partner Ants Karu.

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Margus Poola from the Estonian office takes part in the startup Agrello

Margus Poola, who is an attorney at law in LEXTAL, takes part in the startup Agrello.

Agrello’s goal is to create solutions that use blockchain and AI to sign, organise and draft contracts online.

Read more about Agrello from here.

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Katrin Orav, attorney-at-law and member of the Board of the Estonian Bar Association, joined LEXTAL Estonia

We are very happy to announce that after taking time off for maternity leave and then working for a year as the chief legal officer for a bank in foundation, attorney-at-law Katrin Orav is back in LEXTAL.

“The return of Katrin Orav adds significant value to LEXTAL’s litigation team. Her freshly gained experience as a chief legal officer at a bank in foundation is a valuable addition to our know-how pertaining to banking law,” said Marge Männiko, LEXTAL’s managing partner.

Litigation specialist

Katrin is an attorney-at-law specialising in litigation. She has wide-ranging experience particularly in settling civil disputes, corporate matters and in advising customers on issues concerning family law both in court as well as out of court.

Publicly active contributor to family law matters and member of the Board of the Estonian Bar Association

Katrin was the head of the Family Law Committee of the Bar Association from 2013 to 2016, and advised parents on family law matters within the framework of the “Good Advice to Families with Children” partnership between the Estonian Union of Child Welfare and the Bar Association. Katrin has thus contributed to the development of family law, and by doing community work also given a helping hand to those in need in the field of family law.

Katrin Orav is a member of the Board of the Estonian Bar Association. As such her many duties include coordination of the public projects of the Bar Association as well as the arrangement of foreign relations.

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