Tax Minimization in Estonia
Tax Minimization in EstoniaUpdated on Wednesday 27th May 2015
What is tax minimization in Estonia?
Estonia is a country with great investment possibilities and our lawyers can draft personalized tax minimization solutions for foreign businessmen wanting to invest in the country. Tax minimization or tax planning is employed whenever clients want to know the best ways to save money. There are a few tax planning methods that provide excellent results when trying to avoid paying too much money on taxes. Among them financial planning is one of the best and probably the most employed method.
Tax planning solutions in Estonia
Tax minimization in Estonia can take the form of tax deductions or exemption. Investors can distribute the additional income to subsidiaries in other countries that have lower tax rates. Another type of tax minimization employed in Estonia is to convert one type of income into another one. Considering the Estonian taxation system and the fact that dividends are not taxed until they are distributed, this could provide a way of drawing a financial plan that implies a minimum distribution of profits, thus making the corporate tax nearly zero. Also, as in many other countries, taxes on income made from labor are higher than taxes on income made from capital. Capital can take the form of capital gains, dividends, interests or property rentals. Even if taxed on distribution, the tax on dividends is still lower that the tax on income made from a salary.
Estonia also has double tax treaties with over 50 countries at the moments which provide high deductions or exemptions to foreign companies. Investors must also know that there is no capital duty or transfer tax and the stamp duty is very low.
Are there any incentives for foreign investors in Estonia?
There is no special tax incentive for foreign investors but the unique corporate taxation system provides a very business-friendly environment for all types of Estonian companies compared to other countries. Also, investors wanting to open agricultural companies will benefit from loans and so will those wanting to purchase warehouses, building offices or production equipment. Estonian companies can also access EU funds and benefit from Enterprise Estonia’s assistance.