According to the amendments made to the Income Tax Act, which became in force from the 1st of January 2015, all companies and permanent establishments located in Estonia have to declare payments made to the company’s equity.

Deadline for submitting declarations

Payments made before 10th of February will have to be declared with the Tax and Customs Board retroactively. Deadline for submitting the declarations is 10^th of February. Payments which will be made to the company’s equity after 10th of February will be declared following the month of payment.

What needs to be declared?

It is necessary to declare circumstances which enable to decrease the income tax amount from the later payments.

Companies have to declare:

1. Payments made to the company’s equity;
2. Income tax withheld and paid in a foreign state;
3. Received income from where the company can pay out dividends without paying income tax.

If by 10th of February these circumstance are not declared the tax payer will lose the right to use them for tax exemption when making payments in a later stage.

As an example:

Your Estonian company has received dividends from its subsidiary in Latvia. When the subsidiary paid the dividends to the parent company income tax was already withheld and paid in Latvia. In Estonia dividends can be therefore paid out to the shareholders without income tax, reference to Estonian Income Tax Act clause 50 section 1¹ which states that income tax is not charged on dividends if the resident company paying the dividend has derived the dividend which is the basis for the payment from a resident company of a Contracting State or the Swiss Confederation subject to income tax (except for companies located within a low tax rate territory) and at least 10 per cent of such company's shares or votes belonged to the company at the time of deriving the dividend.

In the case, when these received dividends are not declared, your company will lose to right to pay out the dividends it has received without income tax.

Kati Kruut, attorney at law of the Gencs Valters Law Firm in Tallinn.

Practising in fields of Taxation in Latvia, Lithuania, Estonia.

T: +372 61 91 000 

F: +372 61 91 007

kati.kruut@gencs.eu