Taxation of permanent establishment of non-resident in Estonia

(1) A non-resident legal person which has a permanent establishment in Estonia (§ 7) shall pay income tax pursuant to §§ 48–52, taking into consideration the specifications stipulated in this section.
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(2) All fringe benefits granted by a non-resident to its employees or members of the management or controlling body through or on account of its permanent establishment are subject to income tax pursuant to § 48, irrespective of whether the recipient of fringe benefits is a resident or non-resident.

(3) Gifts and donations made and costs of entertaining guests incurred by a non-resident through or on account of its permanent establishment are subject to income tax pursuant to § 49, irrespective of whether the recipient of the gifts or donations, or the guest or business partner is a resident or non-resident. Representatives of the non-resident’s head office or other structural unit located outside Estonia are also deemed to be guests or business partners.

(4) On the basis of § 50, income tax is imposed on profit attributed to permanent establishment which has been taken out of the permanent establishment during a period of taxation in monetary or non-monetary form.
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(4¹) The income tax provided for in subsection (4) is not charged on profit taken out of the permanent establishment, the basis for which is the dividend derived through or on account of the permanent establishment, provided that at the time the dividend was derived, the recipient of the dividend owned at least 10 per cent of the shares or votes of the company paying the dividend, and if:
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]
1) the dividend was derived 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);
[RT I 2006, 28, 208 - entry into force 01.01.2007]
2) the dividend was derived from a company of a foreign state not specified in clause (1) (except for a company located within a low tax rate territory) and income tax has been withheld from the dividend or income tax has been charged on the share of profit which is the basis thereof.
[RT I 2006, 28, 208 - entry into force 01.01.2007]

(4²) In the case specified in clause (4¹) 2), only the income tax subject to payment pursuant to law or an international agreement shall be taken into account.
[RT I 2006, 28, 208 - entry into force 01.01.2007]

(4³) If a resident company is deleted from the commercial register without liquidation and the economic activities of the company are continued in Estonia through the permanent establishment, the profit attributed to the permanent establishment shall also include for the purposes of subsection (4) the share of the equity of the company deleted from the commercial register which exceeds the monetary and non-monetary contributions paid into the equity.
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(4⁴) Subsection (4) does not apply in the case of transfer of an enterprise belonging to the permanent establishment to another company in the form of non-monetary contribution, or in the course of merger, division or transformation if economic activities are continued in Estonia through such enterprise. If the enterprise is acquired by a non-resident company, the profit of its permanent establishment shall also include the non-taxed profit attributed to the permanent establishment of the non-resident which transferred the enterprise.
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(4⁵) [Repealed - RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(4⁶) Subsections 50 (4)–(8) also apply to transactions concluded through or on account of the permanent establishment of a non-resident.
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(4⁷) Taking account of the percentage of holding provided for in subsection (4¹) and subsection (4²), the income tax provided for in subsection (4) is not charged on profit taken out of the permanent establishment, the basis for which is the portion of the payments specified in subsection 50 (2¹) which is received through or on account of the permanent establishment of a non-resident.
[RT I, 18.11.2010, 1 - entry into force 01.01.2011]

(5) All expenses and other payments not related to business made through or on account of the income of a permanent establishment are subject to income tax pursuant to § 51 and § 52. Payments not related to business and made through a branch of a non-resident credit institution entered in the Estonian commercial register are subject to taxation on the basis of § 51 and subsection 52 (3).

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