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8.3. Exit Strategies

In practice, Estonia only applies withholding tax on royalties. The withholding taxes are mitigated by routing the royalty stream through jurisdictions having favorable tax treaties with Estonia (‘treaty shopping’) or fulfilling the conditions required by the Interest and Royalties Directive.

The taxation of capital gains from the alienation of participation in real estate companies is generally mitigated by using Dutch holding companies. Under the tax treaty concluded between Estonia and the Netherlands, such capital gains can only be taxed in the country where the recipient of such gains is resident.