Taxation of income of legal persons located in low tax rate territories

(1) Income tax is charged on the income of a legal person located in a low tax rate territory (§ 10) and controlled by Estonian residents, irrespective of whether the legal person has distributed any profits to taxpayers or not.

(2) A legal person is deemed to be controlled by Estonian residents if one or several legal or natural persons who are Estonian residents own at least 50 per cent of the shares, votes or rights to the profits of the legal person directly or together with associated persons (§ 8).

(3) The income of a foreign legal person is deemed to be the taxable income of a resident if the condition prescribed in subsection (2) is fulfilled and the resident owns at least 10 per cent of the shares, votes or rights to the profits of the legal person directly or together with associated persons (§ 8).

(4) The part of the gross income of a foreign legal person specified in subsection (2) which is attributable to a resident taxpayer is deemed to be the income of the taxpayer. The part attributable to a taxpayer is a proportional part of the income of the legal person, which corresponds to the holding of the taxpayer in the share capital, total number of votes or rights to the profits of the legal person.

(5) A taxpayer has, under the conditions prescribed in Chapter 6, the right to deduct the business-related expenses made by a foreign legal person from the taxable income of the foreign legal person. In proportion to the share of a taxpayer in the income of a legal person, the taxpayer has the right to deduct the part of the income tax withheld from the legal person on the basis of § 41 and, in accordance with § 45, the part of the home country income tax paid by the legal person from the income tax to be paid by the taxpayer.

(6) Resident natural persons shall declare the shares, votes and rights to the profits of a legal person located in a low tax rate territory which were held by them in the calendar year in their income tax returns. A resident taxpayer specified in subsection (3) shall include the part of the income of a foreign legal person attributable to the taxpayer in the taxpayer’s taxable income and declare such income in the taxpayer’s income tax return. The formats of income tax returns and the procedure for declaration of the income of legal persons registered in low tax rate territories shall be established by a regulation of the Minister of Finance.

(7) If a resident taxpayer has paid income tax on income specified in subsection (1), dividends (subsection 18 (2)) or other profit distributions received by the taxpayer out of the income taxed in accordance with subsection (1) shall not subsequently be subject to income tax.
[RT I 2000, 102, 667 - entry into force 01.01.2001]

Дата добавления: 2015-11-14