Tax Treaty Case Law around the Globe 2015

S. 25Finland: Is the Estonian Corporate Tax Covered by Article 2 and Creditable under Article 23?

Marjaana Helminen

I. S. 26Introduction

Since 2000, the Estonian corporate tax system has been very different from traditional corporate tax systems. The tax is not levied on yearly net profits of a company, rather it is levied only when certain payments are made out of a company or its permanent establishment. The special characteristics of the Estonian corporate tax system make it unclear whether the tax is a tax covered by tax treaties and entitling the taxpayer to a credit in the state of residence of a company.

The Supreme Administrative Court of Finland had to rule on whether the Estonian corporate tax was a tax which had to be credited in Finland in accordance with the treaty between Estonia and Finland. In its decision, KHO 2014/2946 (147) from 6 October 2014, the Court decided that the tax did give rise to a credit under the treaty.

II. Facts of the case

A Oy is a Finnish resident company limited by shares, which is subject to unlimited tax liability in Finland. A Oy has a branch permanent establishment in Estonia. The net profits of the permanent establishment were subject to corporate tax in...