09.10.2017

News

New loan declaring obligation in Estonia = new headache for your company

Are you an entity in Estonia that is part of a group? Or are you a branch of a foreign entity in Estonia? Do not forget the obligation to declare all intra-group loans next year!

While the rest of the world is focused on the OECD Base Erosion and Profit Shifting (“BEPS“) Action Plans, Estonia decided to create a retroactive addition to its Income Tax Act, imposing additional obligations to companies that provide intra-group loans.

If you have given a loan to a parent company, or if loans are given horizontally within group, the repayment deadline is of importance: if the loan is longer than 48 months the lender is under an obligation to prove to the tax authorities that the borrower has the ability and intention to repay the loan. Even more, the declaration obligation covers loans retroactively from 1 July 2017, including loans older if the loan terms and conditions have been subject to changes since 1 July 2017.

There appears to be a visible misalignment between BEPS Action Plans and Estonia’s legislative amendments, as BEPS has focused its intra-group loan approach on the economic substance and interest rates of the loans, which the companies can assess and justify. The new legislative amendment in Estonia rather vests the right of risk assessment to the tax authorities.

In order to assure your appropriate intra-group financing, a comprehensive business structure is required. Bearing in mind domestic laws in Estonia, as well as international requirements, NJORD partner Anne Veerpalu and lawyer Anne-Lii Kask will be happy to assist you.

Latest news

Restructuring is not bankruptcy!

Often businesses think that restructuring equals bankruptcy, but that is not even remotely true. Restructuring is not the same as bankruptcy! If the purpose of bankruptcy proceedings is to liquidate the business, then the goal of restructuring is preserving it.

NJORD Estonia gives advice: Submit your restructuring application on time

For a successful restructuring, it’s extremely important to submit the restructuring application on time. There is no point in starting the restructuring proceedings at the last minute if the business has already used up all the resources necessary for a successful restructuring proceeding. According to legal literature, the main cause for a failed restructuring is […]

NJORD Estonia explains: Restructuring – what is it?

The Reorganisation Act defines restructuring (legal term reorganisation) as follows: “The reorganisation of an enterprise means the application of a set of measures in order for an enterprise to overcome economic difficulties, to restore its liquidity, improve its profitability and ensure its sustainable management.” Not the worst definition, but still might be quite confusing.

Get the latest legal news

We gladly share our knowledge with you. Subscribe to our newsletters.

Subscribe here