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TAX
Direct acquisition of a property
• For stamp duty purposes, a real estate company (sociétés à
The acquisition of a property gives rise to state fee, notary
fee and value added tax (VAT). The state fee and notary fee
may be applied separately to parts of the transaction carried
out by notarised contract (such as transfer of ownership,
establishment of a mortgage etc.).
• The amount of state fee is established by law based on the
value of transaction. For example, transfer of ownership of an
immovable for sales price of EUR 500,000 is subject to state
fee of EUR 754.15.
• The amount of notary fee is established by law based on the
value of transaction. For example, notarisation of an contract
transferring the ownership of an immovable for sales price of
EUR 500,000 is subject to notary fee of EUR 773.95 (VAT
is added).
• The acquisition of a property from a seller liable to VAT is
automatically subject to VAT in the amount of 20% in the
case of (i) a building or a part thereof forms an essential part
of the immovable and the immovable is sold prior to initial
use of the building; (ii) a substantially improved building or
a part thereof forms an essential part of the immovable and
the immovable is sold prior to initial use of the building; (iii)
an immovable that is located in an area with the obligation
of detailed planning and is intended for erecting buildings;
(iv) voluntary application of VAT, if the seller has notified the
Tax and Customs Board about applying VAT to the value of
immovable (excluding residential premises).
Acquisition of shares in a company holding a property
• Acquisition of shares in a company registered in the Estonian
Central Register of Securities (private limited company or
public limited company) does not entail state fees or notary
fees. Acquisition of a share of a private limited company not
registered in the Estonian Central Register of Securities must
be done by a notarised agreement and a notary fee is applied.
The amount of notary fee is established by law on the basis
of share capital of the company or, if the purchase price is
higher than the nominal value of the share capital, the value
of transaction. For example, if the value of transaction is EUR
2,500, the applied notary fee is EUR 21 (VAT is added) and if
the value of transaction is EUR 250,000, the applied notary
fee is EUR 390.50 (VAT is added).
• The earnings from transferring shares by a non-resident legal
entity are subject to corporate income tax, if (i) immovable
compose more than 50% of the assets of the company and
(ii) the entity holds at least 10% of the shares of the company.
The earnings are subject to a flat rate income tax of 21%
(20% as of 2014).
• Estonian resident companies do not pay income tax on
retained or reinvested earnings and are subject to income tax
only in respect of all distributed profits.
Asset deal vs. share deal
• Acquisition of the shares in a company holding a property
may generate tax savings in terms state fees and notary fee.
• Also, a share deal may enable saving on income tax. It would
be advisable to consider the structure of investing in an
Estonian company holding a property through a third legal
entity. The shares of Estonian company could be acquired by
a legal entity registered in a country, which does not enable
taxation of earnings from transferring shares of property
holding company. For example, if the shares of Estonian
company are acquired and later transferred by a company
registered in Netherlands, the relevant earnings would not be
subject to income tax regardless of the proportion of property
in the assets of the Estonian entity.
• The share deal is preferential over asset deal, provided that
the acquired company does not entail hidden liabilities (such
as obligations related to transfer of an enterprise, past tax
liabilities).
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Investors Guide to Europe 2015