What shall an e-Resident know about cross-border taxation, permanent establishment, avoiding double taxation and for which business cases is Estonian business environment suitable.

1. Andra Larin
E-Residency
Tax view
25 September 2022
Bits&Pretzels 2022
PRIOLAUNCH

2. • There is no corporate income tax on retained
and reinvested profits
• 14-20% tax on distributed profits
• Taxes can be declared fully online
Estonian Tax System – Helicopter View
NO
tax on reinvested and
retained profits
14-20%
tax rate on distributed profits
95%
of taxes are declared
electronically
3 min
to file a personal tax
declaration
NOT taxed
• Corporate capital gains
(Individual CG subject to
normal PIT)
• Net worth/wealth
• Heritage

3. Where an Estonian company
conducts business in/from another
state or has otherwise a nexus there,
both states would seek to tax the
profits/income of the company
and/or the shareholder
Permanent
Establishment
CFC

4. The number of
countries Estonia has
concluded the double
taxation avoidance
treaties with, incl. with
Germany
61

5. Permanent Establishment Rules
Where are the profits / income taxed?
Where are company’s:
• Place of management
• Office, factory workshp...
• Assets (incl. automatic equipment)
• Employees
• The place from where the
customers are served
DTT Article 5:
„Permanent establishment"
means a fixed place of business
through which the business of
an enterprise is wholly or partly
carried on.
Estonia
Germany
PE in Germany.
Germany has a right to tax
Simplified model
Estonia has a
right to tax

6. CFC is defined as a foreign company that is either
directly or indirectly controlled by a German
taxpayer
Legal base: Außensteuergesetz
1. Determination of control
(German shareholders hold >50%
of CFC)
2. Definition of low-tax jurisdictions
(income tax less than 25%)
3. Motive test for EU companies
CFC Definition CFC income
Controlled Foreign Corporations
Passive income is taxed at the
German shareholder level
(Aktivitätskatalog)

7. • Companies that have substance in Estonia
• Digital nomads and other service providers that do not have a fixed place of
business (e.g. programmers, artists, internet performers...)
• e-commerce in some cases
• Holdings, unless passive income is taxed under CFC rules
• Groups active worldwide having an active holding / shared service centre in
Estonia
• Companies with owners / management board from various countries taking
key management decisions in Estonia
Who could benefit from Estonian
business environment?

8. Priolaunch is an e-Residency Marketplace Member
Priolaunch UG
Camerloherstr. 125, 80689 München
andra[at]priolaunch.com
+49 172 3456 185
https://marketplace.e-resident.gov.ee/company/priolaunch