If my Estonian company has shareholdings in foreign companies, do I pay CIT on received dividends?
Kindly note that determining the obligation to pay CIT in Estonia on the dividends received from a foreign company requires analysing the Double Taxation Relief between Estonia and that specific foreign country, in case there has been signed one.
In general, an Estonian resident company does not have to pay income tax on profits distributed as dividends if the resident company paying the dividend has derived the dividend which is the basis for the payment from a foreign company and at least 10 per cent of that foreign company’s shares or votes belonged to the Estonian company at the time of deriving the dividend.
Please note that the above does not apply with regard to transactions, the objective of which is obtaining a tax advantage. The company needs to provide the information and records requested by the Estonian Tax and Customs Board in case of a tax audit, to prove that a transaction was made for business reasons, which records the economic substance neccessary and appropriate for such business activities.