Finnish tax rejected by court

  • 2003-12-04
  • Baltic Business News
TALLINN - A court in Finland has ruled in favor of the Helsinki Consulting Group in a dispute over taxes payable in Estonia.

Earlier this year Finnish tax authorities claimed that the group must pay income tax on the profit made by its Estonian subsidiary, Esko Koolitus ja Konsultatsioonid. The subsidiary firm ended 2001 with a profit of 2.1 million kroons (135,000 euros), and it paid out 500,000 kroons in dividends and income tax to the Estonian state.
But Finland's Tax Board claimed that, as the parent company of Esko, the Helsinki Consulting Group must pay income tax in Finland on the subsidiary's retained earnings to the tune of 1.6 million kroons.
Finnish authorities said that they considered that the Finnish parent company must pay income tax on its subsidiary's profit if it is taxed at less than 66 percent.
Lasse Lehis, one of Estonia's leading tax experts and one of the authors of the income tax law, said that such behavior on the part of the Finnish Tax Board showed that Finnish authorities de facto considered Estonia an offshore country.
Esko claimed that such policy clearly violated the treaty to avoid double taxation signed by Estonia and Finland.
There are approximately 1,500 companies that are partly or fully owned by Finnish business in Estonia. Total investments made by Finns in Estonia amount to 19 billion kroons.