On 6 June 2007 the Riigikogu adopted the Act Ratifying an Amendment to the Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters. Pursuant to the Convention, the amendments enter into force for Parties having ratified or approved them on the 90th day after the receipt by the Depository of notification of ratification or approval by at least three fourths of these Parties. The act ratifies Estonia’s amendments to the Convention, and specifies the duties of the parties concerning public participation in decision-making on release into the environment of genetically modified organisms. The act entered into force on 22 July 2007.

      

      For further information please contact Raino Paron, Partner at Raidla & Partners in Tallinn.

      On 14 June 2007 the Riigikogu adopted the Act Amending the Alcohol, Tobacco and Fuel Excise Duty Act, Environmental Fees Act and the Road Act. The amendments prescribe an accelerated pace for Estonia to reach EU minimum excise duty levels for fuel, electricity and tobacco products. Introducing these duties will have some inflationary effects. It is hoped that introducing them at an accelerated pace will allow Estonia to get beyond these effects in 2008-2009, before Estonia must meet the Maastricht convergence criteria on inflation (the Consumer Price Index) to gain entry into the Euro zone. The rate increases start in 2008. A change was also made in the Environmental Fees Act, pursuant to which producers of electricity are released from the obligation to pay pollution charges for CO2 emissions, in order to make up for the price increase resulting from the introduction of the excise duty on electricity. The amendments shall enter into force on 1 January 2008.

      

      For further information please contact Raino Paron, Partner at Raidla & Partners in Tallinn.

      On 14 June 2007 the Estonian Parliament (Riigikogu) passed the Income Tax Act Amendment Act. The amendments prescribe a gradual reduction of the income tax rate (1% per year) until 2011. As a result, the income tax rate will be 21% in 2008, 20% in 2009, 19% in 2010 and from 2011 onwards - 18%. The changes also include a step-by-step increase in the basic exemption, which will be 36 000 EEK per year from 2011. From the effective date, parents may deduct from their income the increased basic exemption for each child of up to 17 years of age. Sole proprietors may additionally deduct up to 45 000 EEK a year of income derived from the sale of unprocessed self-produced agricultural products, as well as from the sale of timber derived from immovables owned by them. The amendments shall enter into force on 1 January 2008.

      

      For further information please contact Raino Paron, Partner at Raidla & Partners in Tallinn.

      On 6 June 2007 the Minister of Economic Affairs and Communications adopted Regulation No 41, establishing the procedure for submitting an application for payment for allowing utility works and the application form. The regulation resulted from an amendment to the Law of Property Act, which entered into force in March 2007. Pursuant to the amendment, owners of immovables may demand payment for allowing utility works or utility networks. Payment for allowing utility works or utility networks may be sought retroactively, from 1 November 2004, provided that the corresponding application is submitted by 1 July 2010 at the latest. With the regulation the Minister of Economic Affairs and Communications establishes the application form and specifies the terms and conditions of submitting the application. The regulation entered into force on 22 June 2007.

      

      For further information please contact Raino Paron, Partner at Raidla & Partners in Tallinn.

      On 13 June 2007 the Riigikogu adopted the Waste Act Amendment Act. The amendments introduce the use of digital formats for preparing consignment notes for hazardous waste. Under the amendment, waste handlers may now prepare consignment notes either on paper or in the form of a digital document. As of 1 October 2008, consignment notes may only be prepared in digital format. The amendments entered into force on 14 July 2007.

      

      For further information please contact Raino Paron, Partner at Raidla & Partners in Tallinn.

      On 14 June 2007 the Government of the Republic passed Regulation No 176, establishing occupational health and safety requirements for the workplace. The regulation was adopted on the basis of the Occupational Health and Safety Act and is consistent with the provisions of the corresponding EU directive (Council directive 89/654/EEC). The requirements of the regulation shall be applicable to all workplaces except construction works, mining, fishing vessels, vehicles and field and forest land owned by a company. Workplaces must comply with the requirements of the regulation not later than three months after entry into force thereof. An earlier regulation governing the same issues and dating back to 1999 was repealed. The new regulation entered into force on 1 July 2007.

      

      For further information please contact Raino Paron, Partner at Raidla & Partners in Tallinn.

      On 26 June 2007, the Cabinet of Ministers of Latvia decided to increase the amount of the individual’s tax-exempt income in Latvia from LVL 50 (approximately EUR 71) to LVL 80 (approximately EUR 114) per month. The increase will apply as of 1 January 2008. This allowance does not apply to taxation of the income of non-residents, except those persons who are tax residents in another Member State of the European Union or the European Economic Area and who have obtained more than 75% of their gross income for the relevant tax year in Latvia.

      

      For further information please contact Dace Silava-Tomsone, Partner at Lejins, Torgans & Partners in Riga.

      On 12 June 2007 the Saeima (Parliament) amended the Law on Completion of Privatization of State and Municipal Property and Use of Privatization Certificates, revoking inter alia some of the limitations that were previously imposed in respect of leases of state- or municipality-owned land. The amendments entered in force on 1 August 2007.

      

      While the Law on Completion of Privatization of State and Municipal Property and Use of Privatization Certificates primarily deals with matters involving the sale of state- or municipality-owned land and privatization of the remaining state and municipal properties, it also contains a number of important provisions relating to leases of state- and municipality-owned land. The most restrictive and widely discussed provision was the limitation on the duration of such leases to a maximum of 12 years, which had a deterring effect on development of any state- or municipality-owned land by private investors. This provision has now been repealed.

      

      The amendments have also reinstated the buy-out rights of persons who, pursuant to a lease agreement with the state or municipality, have constructed buildings or have performed other development work on land leased from the state or municipality. The Law on Completion of Privatization of State and Municipal Property and Use of the Privatization Certificates had previously repealed this right, inter alia, due to the concern that buy-out rights were widely misused to create preferential privatization or buy-out rights, thus preventing participation of the general public in privatization or bidding for state or municipality owned land. As distinct from the buy-out rights that existed prior to the adoption of the Law on Completion of Privatization of State and Municipal Property and Use of Privatization Certificates, the reinstated right would only be enforceable on the condition that the lessee has duly completed all construction and development work contemplated by the lease agreement. Thus, it will still exclude the possibility to privatize or buy-out the land solely on the grounds that the lessee has commenced construction work on the land (as it was prior to adoption of the Law on Completion of Privatization of State and Municipal Property and Use of Privatization Certificates).

      

      For further information please contact Dace Silava-Tomsone, Partner at Lejins, Torgans & Partners in Riga.

      On 17 July 2007, the Cabinet of Ministers of Latvia issued new regulations on “Procedures on suspension of commercial activities for the purposes of special investigation in case of failure to ensure proper and complete accounting of the objects subject to tax or duties”.

      

      The regulations contain an extensive set of examples of a tax payer’s failure to ensure proper and complete accounting of the objects subject to tax or duties and which, as such, would allow the State Revenue Service to order the suspension of the tax payer’s commercial activities or the activities of the relevant structural unit in which the breach has been detected. These circumstances include, among others, deliberate or fraudulent offences such as failure to record payments received in cash, or by payment cards or other means of payment (e.g. gift cards, checks, etc) in the cash register; inconsistencies between the amount of cash in the cash register and the amount of cash stated in the X printouts from the cash register; use of improper cash registers; sale of goods which do not have documents of origin and ownership, sale of alcoholic and tobacco products without excise tax marks; failure to obtain a licence for the performance of commercial activities if such is required by law; employment of 2 or more persons without employment contract; failure to withhold (in full, or in any part) taxes from the salaries paid to the employees; use of false documentation or false signatures in performance of commercial transactions; incorporation of the tax paying entity by use of false or stolen documents, or documents of deceased persons, as well as cases when the entity has been incorporated by persons who have agreed to act as the registered shareholders but who did not have any actual intention to engage in the relevant commercial activities. A number of offences, however, may occur by mere negligence and without any actual intent to defraud the tax authorities. The most typical are failure to register the tax payer’s structural unit (i.e. the business or group of persons which are performing part of the tax payer’s commercial activities at the place other than the tax payer’s registered address) with the State Revenue Service, and failure to up-date the data on the tax payer’s legal address in the commercial register.

      

      Upon a finding of any of the offences listed in the regulations, the State Revenue Service may either issue a warning that the commercial activities will be suspended if the offence occurs repeatedly, or to order immediate suspension of the commercial activities, or to take no action at all. Resumption of the suspended commercial activities is subject to permission from the State Revenue Service, which may be granted only when the tax payer’s special investigation or tax audit has been completed.

      

      The State Revenue Service’s decisions on suspension of commercial activities are appealable. The appeal must be reviewed within 5 days of the date of its filing.

      

      For further information please contact Dace Silava-Tomsone. Partner at Lejins, Torgans & Partners in Riga.

      On 21 July 2007, the amendments and supplements made to the Criminal Code of the Republic of Lithuania by the Lithuanian Parliament (Seimas) on 28 June 2007 came into force. The modifications implemented several Council Framework Decisions and Directive No 2005/35/EC of the European Parliament and of the Council of 7 September 2005. The amended Criminal Code establishes stricter criminal liability for certain criminal acts (e.g. homicide, bribery); the maximum fine applicable to legal persons has been increased to LTL 50,000; the structure of some criminal acts has been modified; the regulation of several kinds of penalty and calculation thereof has been changed; amendments have also incorporated certain aspects of the juveniles’ criminal liability and introduced other modifications.

      

      For further information please contact Irmantas Norkus, Managing Partner at Norcous & Partners in Vilnius.

      

      On 28 June 2007, the Lithuanian Parliament (Seimas) amended and supplemented the Lithuanian Code of Criminal Procedure (most of the amendments will come into force from 1 September 2007, while others, accordingly, on 21 July 2007, 1 January 2008 and 1 January 2009). The modifications stem from the need to solve the problems of applying the code and also are aimed at bringing the provisions into compliance with the decisions of the Constitutional Court of the Republic of Lithuania. The Council Framework Decision No 2003/577/JHA of 22 July 2003 on the execution in the European Union of orders freezing property or evidence was implemented. Accordingly, the following provisions have been newly regulated: serious reasons for not attending the criminal proceedings; definition of a court; order on freezing property or evidence; defense of the victim‘s violated rights; the participation and the rights of representatives; extradition procedure; witness examination; specialist’s findings; pretrial investigations; appellate and cassation procedures; private prosecutions etc.

      

      For further information please contact Irmantas Norkus, Managing Partner at Norcous & Partners in Vilnius.

      On 1 July 2007, the Law on Corporate Financial Statements amended 7 June 2007 by the Lithuanian Parliament (Seimas) came into force. The respective amendments have also been incorporated into the Law on Corporate Consolidated Financial Statements and the Accounting Law. The adopted modifications enable companies to choose the standards they wish to apply in their accounting and preparation of financial statements, i.e. International Accounting Standards or Business Accounting Standards. Companies whose accounting period starts after 1 July 2007 have been entitled to invoke such possibility. The amendments are also related to the general requirements for financial statements and accounts, calculation of the financial year etc. The concept of the business secret has been widened so that it now encompasses information which is not disclosed and is not indicated in the annual statement or activity report. In addition, not only the chief financier, the accountant and accounting company, but also other persons managing the accounting (e.g. managers of individual enterprises, individuals engaged in individual activities) have been imposed liability for the correctness of the accounting records.

      

      For further information please contact Irmantas Norkus, Managing Partner at Norcous & Partners in Vilnius.

      On 28 June 2007, the Lithuanian Parliament (Seimas) legislated a new Law on the Nuclear Power Plants which is in force from 10 July 2007. This law was adopted implementing the National Energy Strategy and taking into account the energy policy strategy of the European Union. The law is aimed at diversifying national energy sources, protecting the vital interests and national security of the Lithuanian state, substituting electricity generating capacities that are being lost as a result of the decommissioning of the Ignalina Nuclear Power Plant and creating legal preconditions for the construction of a new nuclear power plant in Lithuania. It further regulates the establishment of the company implementing the project as well as lays down the requirements therefor. In addition, the criteria to be applied to the investors were also set, as well as the provisions on the designation of the construction site and the allotment of land for the construction of the new nuclear power plant. Implementation of the law and construction of the new nuclear power plant are expected to help avoid a high dependence on importable organic fuel, reduce the emission of pollution into the atmosphere and create a positive effect on business conditions and development.

      

      For further information please contact Irmantas Norkus, Managing Partner at Norcous & Partners in Vilnius.