View Full Version : Estonia's taxation system attracts fast-growing companies

11-06-2010, 05:53 PM
Estonia's taxation system attracts fast-growing companies (http://balticbusinessnews.com/article/2010/11/01/Estonia_s_taxation_system_attracts_fast_growing_co mpanies)

"Estonia has the best laws, very good banks, cheap bookkeeping services and less bureaucracy than, for instance, in Germany or Lithuania. But the most important thing is that Estonia does not tax profits," says Nerijus Strumila, board member of Lithuanian-owned Euroalliance that is registered in Estonia.

The Lithuanian family-owned business that is registered in Estonia sells scrap metal and trades goods abroad, mostly operating in Germany, US, Lithuania and elsewhere in the EU. It is also a textbook example of foreign businessmen whose markets are outside Estonia, but who decide to incorporate the company in Estonia for tax reasons, writes Äripäev.

Euroalliance was founded in 2005 and is 100% owned by Antaninan Strumiliene, mother of Nerijus Strumila. The company made a profit of 70 million kroons at sales of 160 million kroons in 2008 putting its owner on 218th place in the Äripäev list of Estonia's richest businessmen.

Another company that is incorporated in Estonia, but operates in 23 countries abroad, mainly in Poland, is oil trading firm E100 Baltia. "Estonia has created a very good legal framework for companies and has a good business environment," says the company's owner, Belarus businessman Denis Bokhan, who is Estonia's 77th richest businessman.

E100 Baltia is Estonia's fastest-growing company. It was founded in 2005 and in 2009 increased its revenues from 250 million kroons to 957 million kroons. 2009 profit was 63 million kroons.

Tax expert Lasse Lehis says that one of the main reasons why foreign businessmen like to set up companies in Estonia is that such companies do not have to pay income tax on profits unless the profit is paid out as dividends.

"Estonia is definitely not a tax haven," emphasises Lehis, adding that the information in the Estonian commercial register is public and foreign tax authorities can obtain information from the Estonian tax service to check whether the operations of their businessmen are legal. "Such transition of companies into Estonia is also helping Estonia to collect state duties and is boosting sales of providers of accounting services, for instance," he added.

There are also plenty of critics. One of them is Viktor Trasberg, lecturer of economics of the Tartu University. "In the last decade, the Estonian state has failed to collect about 50 billion kroons in income tax," says Trasberg.