The amending protocol to the 1996 income and capital tax treaty between Estonia and Germany entered into force on 29 June 2021. The protocol, signed 15 December 2020, is the first to amend the treaty and includes the following main changes:

• The title and preamble are replaced in line with OECD BEPS standards;
• Article 9 (Associated Enterprises) is updated with the addition of provisions for corresponding adjustments;
• Paragraph 2(a) of Article 10 (Dividends) is replaced to provide an additional condition for the 5% withholding tax rate for at least 25% ownership (holding) to require that at least 25% of the paying company's capital is held for a period of at least 365 days including the day of the dividend payment (further amendment to the final protocol to the treaty provides that the minimum period may be met after the payment date);
• Article 13 (Capital Gains) is amended with new provisions for the taxation of gains from the alienation of immovable property in a Contracting State, and new provisions for the taxation of gains from the sale of shares or comparable rights where the value of the shares or comparable rights derived more than 50% of their value from immovable property situated in a Contracting State at any time in the 365 days prior to the sale; and
• A new Article 27 (Prevention of Treaty Abuse) is added, which provides that a benefit under the treaty will not be granted in respect of an item of income if it is reasonable to conclude that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.

The protocol applies from 1 January 2022.