Estonian black list of low tax territories
Estonia has listed 55 countries that are on so-called black list because of their tax policy. The aim of this list to proof that the person who is involved in business is not located at low tax rate territory The location of the person can be shown, for example, by a certificate issued by local tax authority.
Conditions
A legal person is not deemed to be located in a low tax rate territory if more than 50 per cent of its annual income is derived from actual economic activity or if the state or territory of location of the legal person provides the Estonian tax authority with information concerning the income of a person controlled by Estonian residents.
Income tax is charged on the income of a legal person located in a low tax rate territory and controlled by Estonian residents, irrespective of whether the legal person has distributed any profits to taxpayers or not.
Income tax on business income
Income tax is charged on business income derived by a non-resident in Estonia. If the non-resident is a legal person located in a low tax rate territory, income tax is charged on all income derived by the non-resident from the provision of services to Estonian residents, irrespective of where the services were provided or used. Income tax is withheld from payments to a legal person located in a low tax rate territory for services provided to an Estonian resident.
Income tax on payments not related to business
Resident companies shall pay income tax on payments not related to business, unless income tax has been withheld on such payments pursuant to § 41 (e.g. salaries, royalties etc.) or paid pursuant to §§ 48–51 (e.g. fringe benefits, donations, gifts, dividends, expenses not related to business) of the Income Tax Act.
Black listed countries in Estonia
Anguilla
Antigua and Barbuda
Aruba
Bahamas
Barbados
Belize
Bermuda
British Virgin Islands
Brunei Darussalam
Cooks Islands
Cayman Islands
Commonwealth of Dominica
French Polynesia
Gibraltar
Guam
Guernsey
Grenada
Hong Kong
Jamaica
Qatar
Labuan
Macao
Montserrat
Netherlands Antilles
New Caledonia
Niue
Oriental Republic of Uruguay
Oman
Puerto Rico
Republic of Mauritius
Republic of San Marino
Republic of Venezuela
Saint Kitts and Nevis
Saint Vincent and the Grenadines
St. Lucia
The Principality of Andorra
The Principality of Liechtenstein
The Principality of Monaco
The Republic of Chile
The Republic of Costa Rica
The Republic of Djibouti
The Republic of Guatemala
The Republic of Kenya
The Republic of Lebanon
The Republic of Liberia
The Republic of Maldives
The Republic of Nauru
The Republic of Panama
The Republic of Philippines
The Republic of Seychelles
The Republic of the Marshall Islands
The Republic of Vanuatu
The State of Kuwait
Turks and Caicos Islands
Virgin Islands (US)
Tony Koivula, 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