The Riigikogu concluded the first reading of four Bills and heard the replies to four interpellations

The Bill on the Ratification of the Convention between the Republic of Estonia and the Principality of Liechtenstein for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Tax  Evasion and Avoidance and its Protocol (718 SE), initiated by the Government.

The Convention regulates the division of taxation right between the parties to the convention, ensures equal treatment of persons and establishes an obligation to prevent fiscal evasion with respect to taxes on income. Estonia has similar conventions with 63 countries. All agreements for the avoidance of double taxation are based on the OECD Model Convention but are still unique due to the needs of specific contracting countries.

According to the tax convention between Estonia and Liechtenstein, the source state has limited taxing rights on dividend income – the maximum limit of withholding tax is 10 per cent of the gross amount of the dividends if the beneficial owner of the dividends is an individual. In other cases, the source state cannot withhold income tax.  In the case of interest, the rate of tax withheld from interest paid to a natural person resident of the other state may not exceed 10% of the gross amount of the interest. Interest paid to companies is exempt from withholding tax. In the case of royalties, the source state has the right to withhold tax up to 5% of the gross amount of the royalties.

The government approved the convention on 8 May this year and it was signed in Rome on 10 July.

The Bill on the State’s Supplementary Budget for 2025 (733 SE), initiated by the Government, will reduce expenditure by EUR 19.9 million and investment by 12 million, while increasing financing transactions by 72.3 million.

When preparing the Bill, requests from ministries and constitutional institutions for budget reallocation from this year to the following years were taken into account. In addition, the budget of the area of ​​government of the Ministry of Defence will be increased by 39 million for assistance to Ukraine and for defence procurements. In financing transactions, the share capital of Elering Ltd will be increased by 45 million in the area of government of the Ministry of Climate. In the area of ​​government of the Ministry of Economic Affairs and Communications, EUR 27.3 million will be transferred from research and development and innovation expenses to financing transactions to provide innovation loans to companies.

According to the State Budget Act, the Government may initiate a draft supplementary budget not later than three months before the end of the budgetary year.

The Bill on Amendments to the Act on Amendments to the Simplified Business Income Taxation Act and the Income Tax Act and the Repeal of the Security Tax, and the Income Tax Act (734 SE), initiated by the Government, will cancel the two-percentage-point increase in income tax and business account tax rates planned for 2026.  In order to continue supporting Ukraine, the special tax exemption regime for donations to eight charitable associations will be extended by two years.

Urmas Reinsalu from Isamaa Parliamentary Group, Rain Epler from Estonian Conservative People’s Party Group, Riina Sikkut from the Social Democratic Party Parliamentary Group and Minister of Finance Jürgen Ligi took the floor during the debate.

The Bill on Amendments to the State Budget Act and the Act on Amendments to the State Budget Act (736 SE), initiated by the Government, is related to the 2026 State Budget Act.

The Bill will implement the renewed framework for fiscal surveillance in the European Union, specify the role and tasks of the Fiscal Council, and update the requirements of the national fiscal rule. In addition, the structure of the annual state budget law will change, the principles for planning the government reserve will be determined, and the conditions for granting state loans will be specified.  The amendments are technical in nature and will not increase the minister’s rights to amend the budget. Ministers will also have an obligation to inform the Finance Committee of the Riigikogu of any ongoing budget changes, along with explanations.  The conditions for granting subsidies from the state budget will also be regulated and the links between local authorities and the state budget will be specified.

According to the Bill, the new budget structure will come into effect as early as the 2026 state budget.  Several special provisions apply to the entry into force of the draft amendments, such as the restriction on the transfer of the government reserve, and domestic subsidies.

Rain Epler from the Estonian Conservative People’s Party Group, Aivar Kokk from Isamaa Parliamentary Group and Maris Lauri from the Reform Party Parliamentary Group took the floor during the debate.

Minister of Regional Affairs and Agriculture Hendrik Johannes Terras and Minister of Energy and the Environment Andres Sutt replied to interpellations.

Terras replied to the interpellation concerning the revenue base of local governments (No. 802). Sutt  replied to the interpellations concerning the necessity and timeliness of establishing a general nesting peace (No. 804), the future of the Climate Act (No. 809) and the closing down of Endla Nature Centre (No. 815).

The sitting ended at 7.51 p.m.

Verbatim record of the sitting (in Estonian)

Video recording of the sitting will be available to watch later on the Riigikogu YouTube channel.

Riigikogu Press Service
Gunnar Paal
+372 631 6351, +372 5190 2837
gunnar.paal@riigikogu.ee
Questions: press@riigikogu.ee

Link uudisele: The Riigikogu concluded the first reading of four Bills and heard the replies to four interpellations

Source: Parliament of Estonia