European Holding Companies

Estonia Holding Company Information

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» Estonia Key Elements

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Estonia Holding Company Overview


Definition

An Estonian Holding Company is a company registered or incorporated in Estonia. Due to its recent entry in the EU, it may benefit from the EU tax directives after 2008.

Legal Form

An Estonian Holding Company can be constituted as an “osaühing” (private limited company- OÜ) or an “aksiaselts” (public company- AS).

Formation

The minimum share capital for incorporation of an Estonian company is €25.000 for an “OÜ” and
€2.500 for an “AS”. The share capital must always be fully paid before registration.
Bearer shares are not permitted.

Taxation

Resident companies and permanent establishments registered with the Estonian authorities are not taxed on their income but they are subject to the corporate distribution tax. Tax at a rate of 24% (22% for 2006 and 20% for 2007) is levied only on profits distributed and not on profits retained. Profits such as dividends and other profit distributions, fringe benefits, gifts, donations and representation expenses and expenses and payments not related with business are still subject to tax.
A company is deemed resident if it is registered in Estonia.
A tax credit is available for foreign taxes paid when the Estonian company repatriates dividends.

Income

Estonian companies are not subject to tax on their income therefore there is no need to determine trading income for tax purposes.
Income is only taxed on profit distributions.

» Dividends Exemption

Dividends received by an Estonian company from its foreign subsidiary are exempt from tax if they are not distributed.
Nevertheless, if dividends are distributed to residents or non-residents, a 24% distribution tax is imposed.

» Capital Gains Exemption

Gains received by Estonian companies and permanent establishments of non-resident companies are exempt from tax. Capital gains from the sale of shares of Estonian companies by non-residents are not taxed in Estonia, unless 10% or more of the shares sold are from a company where at least 75% of the assets are real estate or buildings.

» Interest and Royalties

See income above.

Some Advantages of the Estonian Holding Company

Besides the common advantages of a holding company, the Estonian Holding Company may also enjoy from the following:

» Exemption from Withholding Tax on Payment of Interest

Interest paid to non-resident individuals or companies are exempt from withholding tax unless the interest rate is not on an arms length basis.

» Exemption from Withholding Tax on Payment of Royalties

Royalties paid by Estonian companies to EU companies are exempt from withholding tax if the recipient owns at least 25% of the payer for a minimum period of 2 years.

NOTE: Although there is exemption on withholding tax on payment of dividends, there is nevertheless a profit distribution tax (24%)

Estonia Key Elements

	Formation
	Legal Form:		Private limited company (OÜ); Public limited company (AS)
	Minimum Subscribed Capital:		€25.000 (AS) €2.500 (OÜ)
	Minimum Paid-Up Capital:		€25.000 (AG) €2.500 (OÜ)
	Number of Shareholders:		1 (AG) 1 (OÜ)
	Type of Shares:		Registered
	Substance Requirements:		Nil
	Taxation
	Capital Duty:		0%
	Net Worth Tax:		0%
	Corporate Income Tax:		24%
	Double Tax Treaties:		30
	Dividends Exemption:		100%
	Holding Requirements:		Not distributed
	Capital Gains Exemption:		Yes
	Holding Requirements:		Less than 75% of the company assets are not real estate or buildings
	Tax Credit:		Yes
	Relief of Losses:
	CFC Rules:		No
	Debt-to-Equity Ratio:		No
	Withholding Taxes
	Dividends:		EU Parent Co- 0% Treaty Countries- 0%-15% Others- 0%-26%10
	Interest:		EU Parent Co- 0%13 Treaty Countries- 0%-10% Others- 0%-26%
	Royalties:		EU Parent Co- 0% Treaty Countries- 0%-15% Others- 15%-26%
	Liquidation:		Nil

	Web
Double Tax Treaties	39KB

¹⁰ The lower rate applies if the recipient is a company which owns more than 20% of shares.
¹³ If the recipient is an EU company holding at least 25% of the company for a minimum period of 2 years