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The Use Of Low-tax Estonian Companies

In Estonia, January 1, 2000 has a new income tax law. In accordance with this income tax law of Estonian companies is not subject to tax. In Estonia, there is no profit charged with income tax (similar to Ukrainian corporate income tax). If registered in the Estonian company profits, the tax rate is zero percent. This applies to both the profits earned within the country, and abroad. In fact, the tax has not disappeared completely, tax-exempt income reinvested only. This means that if the company reinvests profits, the tax is no need to pay.

But as only the decision to pay dividends, then there is a need to pay taxes on dividends. It should be noted that, in general, the income of Western countries, as well as Ukrainian, subject to taxed twice, taxed income at its reception, and dividends paid by them. In Estonia, the tax should only be paid dividends. If the profits are reinvested indefinitely, the tax payment no. The purpose of the release of Estonian enterprises from income tax was to increase both local and foreign investments in the Estonian economy. In fact, the new law provides a significant advantage in Estonia competition for foreign investment.

Naturally to create a favorable investment climate, one law is not enough. The Estonian government during the last decade have worked and acted in the name of creating a favorable change in Estonian legislation. As a result, the investment climate in the Baltic country is now one of the most favorable in Eastern Europe. The standard of living in Estonia, as the average wage – the highest among all former Soviet republics. Another attractive aspect is the fact that at present Estonia has signed 19 agreements on avoidance of double taxation, including with Ukraine plans to sign more of a number of contracts. When capital flows in Estonia and from Estonia has no restrictions.

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