Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Estonia

Estonia has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) and no recommendations are made. In the prior year peer review report, Estonia was recommended to ensure information is obtained on all potential exchange jurisdictions for future rulings and to exchange information on all rulings as soon as possible. Estonia has now put in place a procedure that requires the applicant to disclose information in the ruling application and all exchange of information has been completed, the recommendation is removed.

Estonia can legally issue two types of rulings within the scope of the transparency framework.

In practice, Estonia has issued 20 past rulings; for the period 1 April 2016 - 31 December 2016, Estonia issued eight future rulings; and for the year in review, Estonia issued 11 future rulings within the scope of the transparency framework.

Peer input was received from one jurisdiction in respect of the exchanges of information on rulings received from Estonia. It was positive, noting that information was complete, in the correct format and received in a timely manner.

Introduction

382.  This peer review covers Estonia’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

383.  Estonia can legally issue the following two types of rulings within the scope of the transparency framework: (i) permanent establishment rulings; and (ii) related party conduit rulings. In Estonia, the legal department is responsible for preparing the rulings within the scope of the transparency framework in co-operation with the Tax Department of the ETCB, which are then signed by the Director General of ETCB. Estonia publishes anonymised summaries of tax rulings on the Estonian Tax and Customs Board (ETCB) website.1

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

384.  For Estonia, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

385.  In the prior year peer review report, it was determined that The ECTB’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. The ECTB’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

386.  For Estonia, future rulings are future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

387.  In the prior year peer review report, it was noted that the information on the ultimate parent company is not always obtained. In the year in review, Estonia notes that ETCB has been explaining to the intermediaries (usually law firms) the need to provide information on the whole structure on the enterprise group and on the beneficial owners for the past year and a half. There is a procedure in place that requires the applicant to disclose information in the ruling application. The ETCB has the right to ask for any additional information if needed. The ECTB’s implementation in this regard remains unchanged, and therefore continues to meets the minimum standard.

Review and supervision mechanism (ToR I.4.3)

388.  In the prior year peer review report, it was determined that the ECTB’s review and supervision mechanism was sufficient to meet the minimum standard. The ECTB’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

389.  Estonia has a procedure in place that requires the applicant to disclose information in the ruling application, especially the ultimate parent company. Estonia has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

390.  Estonia has the necessary domestic legal basis to exchange information spontaneously. Estonia notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

391.  Estonia is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) double tax agreements in force with 57 jurisdictions.2

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

392.  In the prior year peer review report, it was determined that the ECTB’s completion and exchange of templates were sufficient to meet the minimum standard. The ECTB’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

393.  Estonia has exchanged all past rulings before 31 December 2017. For the eight exchanges transmitted in 2017, Estonia notes that it is due to the misunderstanding on the use of European Commission’s Database.

394.  With respect to the completion of the summary section in the template, the ETCB uses the suggested internal guidance. The summary consists of 2 000 – 3 500 characters and gives descriptions of the arrangements with ETCB’s assessment (including indications for possible cross-border impact). All summaries are translated into English.

395.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	8	0	N/A	These relate to the delayed exchanges reported in the prior year peer review report.
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	8	3	N/A	The three delayed exchanges are the delayed exchanges reported in the prior year peer review report and which were exchanged in 2017.
Total	16	3

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

Conclusion on section B

396.  Estonia has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges. Estonia has met all of the ToR for the exchange of information process and no recommendations are made.

C. Statistics (ToR IV)

397.  The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Rulings related to preferential regimes	N/A	N/A
Cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	N/A	N/A
Cross-border rulings providing for a unilateral downward adjustment to the taxpayer’s taxable profits that is not directly reflected in the taxpayer’s financial / commercial accounts	N/A	N/A
Permanent establishment rulings	8	Finland, Ireland, Latvia, Netherlands, Sweden, Switzerland
Related party conduit rulings	11	Denmark, Finland, Latvia, Luxembourg, Netherlands, Norway, United Kingdom, United States
De minimis rule	N/A	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	N/A	N/A
Total	19

D. Matters related to intellectual property regimes (ToR I.4.1.3)

398.  Estonia does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Notes

← 1.  Available at www.emta.ee/et/ariklient/maksukorraldus-maksude-tasumine/siduvad-eelotsused/siduvate-eelotsuste-kokkuvotted (accessed 19 November 2018).

← 2.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Estonia also has bilateral agreements in force with Albania, Armenia, Azerbaijan, Austria, Bahrein, Belarus, Belgium, Bulgaria, Canada, China (People’s Republic of), Croatia, Cyprus, Czech Republic, Denmark, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hungary, Iceland, India, Ireland, Isle of Man, Israel, Italy, Jersey, Kazakhstan, Korea, Latvia, Lithuania, Luxembourg, Malta, Mexico, Moldova, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Thailand, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan and Viet Nam.

Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union. The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.