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Estonia's Tax Regime 'Facilitates BEPS,' Says EC

Tuesday, March 13, 2018

Some features of Estonia's corporate tax system might be used by multinational companies for aggressive tax planning, says a new report by the European Commission.

The Commission said in its latest country report on Estonia that the lack of certain anti-abuse rules and of withholding taxes on dividend and interest payments may lead to those payments escaping the tax net completely if untaxed in the recipient jurisdiction.

"This may facilitate aggressive tax planning," the report said. The Commission cited a recent study that showed that Estonia appears to be a key conduit country for dividend income flows.

The report notes that some of these issues might be dealt with when Estonia implements the provisions of the European Union Anti-Avoidance Directives (ATAD), which all member states must transpose into domestic law by the end of 2018 and 2019.

Nevertheless, the Commission concluded that the extent to which implementation of the ATAD limits the scope of aggressive tax planning in Estonia will need to be assessed.