Brussels offers no hope for Estonia

  • 2006-03-22
  • From wire reports
TALLINN - EU Tax Commissioner Laszlo Kovacs has told Estonia that the commission was not planning to make any changes to the Parent-Subsidiary Directive, a matter of contention for the Baltic state.

"It was a common understanding that Estonia will bring its income tax act into line with the directive by the end of the transition period," Kovacz said in a letter to Taavi Veskimagi, chairman of the opposition Res Publica party.
At present Estonian companies' reinvested profit is not taxed. Taxes are imposed on profits only when money is taken out of the company, such as in the form of dividends.
The situation has placed the government in a quandary, and ministers are at odds over what to do with the income tax system once the transition period expires. Prime Minister Andrus Ansip said Estonia should stop imposing taxes on dividends as of 2009 and further act as it has been doing until the present.
Finance Minister Aivar Soerd said that a situation could develop in 2009 where the other European Union countries may start taxing profits of Estonian companies operating there under their own law. This would endanger agreements on the avoidance of double taxation signed with other countries.