Effective 1 January 2020, Estonia introduced new exit tax rules in line with the EU Anti-Tax Avoidance Directive (ATAD1). Under the new rules, an exit tax applies on unrealized capital gains arising from the transfer of assets or tax residency out of Estonia by a resident company to a permanent establishment in another country. The tax is levied on an amount equal to the difference between the market value of an asset and its book value.
However, the exit tax rules do not apply in respect of asset transfers related to the financing of securities, assets given as collateral, or where assets are transferred to fulfill prudential capital requirements or to manage liquidity, provided the assets are returned to Estonia within 12 months.
The payment of exit tax may be deferred and paid in installments over a period of five years if the transfer is to another EU Member State or EEA State with which Estonia has an agreement for mutual assistance in the recovery of taxes.
The exit tax deferral payment ceases and the corresponding exit tax becomes fully payable if:
- The transferred assets or business are subsequently sold or otherwise disposed of;
- The assets or business are transferred to a third country (other than an EEA country with a mutual assistance agreement);
- The company is liquidated; or
- The company fails to meet its obligations for payment and does not correct the same within 12 months.