Corporate taxation

The Estonian fiscal policy aims at creating favorable conditions for the development of the business and investment climate.

On our behalf, the tax advisers of Grant Thornton Baltic make an effort to provide companies with across-the-board assistance in all issues related to corporate taxes on both the national and international arena. We advise customers in the public and private sector in both typical and more complicated tax issues, exploiting the Grant Thornton international partner network, where necessary.

• Transaction-specific advice within the context of international tax law and tax treaties
• Advice on the suitable legal form and legal structure
• Advice on equity contributions and disbursement
• Exploitation of the income tax paid in foreign countries
• Advice on withholding income tax
• Advice on the effective tax rate of cross-border groups
• Assistance in various fringe benefit issues
• Advice on motivation programs
• Taxation of sole proprietors

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Taxation of disbursement

As corporate income is taxed on the source of income, a suitable legal form should be the first matter to be addressed.

Customers often need help in explaining to the tax authority the tax-neutral nature of an ongoing reorganization instead of unlawful transfer of profits at the expense of the primary source of income. 

The structure and payouts from equity upon profit distribution or exit from the business are also worthy of attention, as well as financing of business activities from related sources.

Prior to distributing and taxation of profit, entrepreneurs are advised to consider the options of using tax benefits (tax exemption or credit) for transactions conducted in foreign countries or via a subsidiary or associate, thus reducing the tax liability. These issues should also be taken into account in liquidation of inefficient companies. We help our customers to map and implement these options.

The disbursements made for the purchase of various cross-border services may be subjected to the obligation to withhold income tax on different bases and at different rates. In many cases, international treaties either establish a discount rate or provide for an exemption. We advise the customer in adhering to and formalizing the required conditions.

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Taxation of labor

The high labour taxes in Estonia are forcing companies to consider the alternatives for enhancing efficiency. More and more companies are searching for various solutions to changing the employment relationship or implementing more favorable compensation strategies. These solutions are often developed without sufficient consideration to the tax-specific consequences, which may trigger a tax liability instead of the desired cost-cut. We assist our customers in implementing a tax-efficient remuneration system, which involves, among other things, the analysis of the employment relationship or other relations under the law of obligations, tax issues and, where necessary, advice on preparing declarations and drafting contracts.

The impact of motivation packages on the employee’s productivity is often overlooked due to fears of a fringe benefit tax of nearly 68%. We have made it our duty to remind customers that the law often provides for exceptions to certain types of benefits. Our tax advisers provide assistance in exploiting these options to the hilt.

By today, the legislator has established guidelines for taxation of options programs, with an exemption provided from fringe benefits in certain conditions. At the same time, many specific motivation programs are still unregulated, leaving employees in a grey zone. We provide assistance in reviewing, preparing and implementing both new and existing options and other motivation programs, exploiting all opportunities.

Sole proprietors

For sole proprietors, we provide accounting services, file tax declarations and communicate with the tax authority.

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