Î
Energy-performance label
(ener-
giamärgis)
•
New buildings and leased premises must hold an energy-perfor-
mance label describing the projected or actual energy use of the
premises.
Î
adjustment of rent
•
Rent is usually adjusted annually in the amount agreed by the
parties or on the basis of an agreed index. The changes in the
consumer price index published by the national statistics autho-
rity Statistics Estonia is the most commonly used base index
for commercial leases. The amount of rent is not regulated or
capped by legislation
TaX
Î
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).
Î
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. Ac-
quisition 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).
Investor Guide to Europe 2014
| 25
•
The earnings from transfer-
ring 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.
Î
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 ear-
nings 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 obli-
gations related to transfer of an enterprise, past tax liabilities).
