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Estonia
attained independence in 1918. Forcibly incorporated
into the USSR in 1940 it regained its freedom
in 1991, with the collapse of the Soviet Union.
It joined both NATO and the EU in the spring
of 2004. Estonia has a land area of 43,211
sq km, situated in Eastern Europe, bordering
the Baltic Sea and Gulf of Finland, between
Latvia and Russia. Estonia continues to press
for realignment of the boundary based on the
1920 Tartu Peace Treaty that would bring the
now divided ethnic Setu people and parts of
the Narva region within Estonia. The mainland
is mostly flat and partly wooded; offshore
lie more than 1,500 islands; it’s natural
resources include oil shale, peat, phosphorite,
clay, limestone, sand, dolomite, arable land
and sea mud (medical). The climate is maritime,
wet, moderate winters, cool summers. The population
was estimated at about 1.3 million in 2007,
ethnically Estonian only Estonian 68%, Russian
26%.
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The
capital of the republic is Tallinn, there
are 15 counties. The President is the head
of state; he is elected by Parliament, for
a five year term. The head of government is
the Prime Minister, appointed by the president
on the approval of the Parliament; The Council
of Ministers is appointed by the prime minister,
approved by Parliament. The Parliament (101
seats; members are elected by popular vote
to serve four-year terms. The legal system
is based on the civil law system; Estonia
accepts compulsory ICJ jurisdiction with reservations.
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Estonia
has a modern market-based economy. The current
government has pursued relatively sound fiscal
policies, resulting in balanced budgets and
low public debt. In 2007, however, a large
current account deficit and rising inflation,
at 6.3%, put pressure on Estonia's currency.
This has delayed Estonia adopting the Euro
till between 2011 and 2013, later than planned.
In 2007, GDP grew an estimated 7.3%, GDP per
capita, $21,800 (2007 est.) one of the highest
levels in Central Europe. GDP comprises agriculture:
3%, industry: 29%, services: 68% (2007 est.).
The 668 thousand workforce (2007 est.) had
a 5.2% unemployment rate.
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These
are the Public or Private limited liability
company, Limited partnership, Unlimited partnership,
Branch and Individual trader. Entrepreneurs
can submit data to the Commercial Register
via the new E-filing portal run by the state
governed Centre of Registers and Infosystems.
One person is sufficient to set up a Private
Limited Company (OU). A minimum registered
share capital is EEK 40.000 (about EUR 2.550),
with a minimum nominal value of EEK 100 per
share. A Public Limited Company (AS) has a
minimum registered share capital of EEK 400.000
(about EUR 25,500), with a minimal value of
EEK 10 per share.
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Distributed
profits are generally subject to 21% corporate
income tax. The tax rates are reduced to 20%
in 2009, to 19% in 2010 and to 18% in 2011.
All undistributed corporate profits are tax
exempt. This distribution tax is not affected
by double tax treaties, any required withholding
tax is in addition to this. Estonia has a
transitional period ending on 31 December
2008 to amend its present taxation system.
The standard VAT rate is 18% and is applied
to all supplies of goods and services, including
imports. A reduced rate of 5% is applicable
to certain categories such as books, hotel
accommodation, listed pharmaceuticals and
the treatment of dangerous waste. Operations
exempt with credit include the export of goods.
VAT exemption without the right of deduction
applies to a range of activities including:
financial services, insurance; most sales
of real estate and health services. Excise
duty is levied on certain goods including
tobacco, alcohol, electricity and motor fuel.
Employers operating in Estonia must pay social
tax on salaries at the rate of 33%.
[Further
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[There
are no special tax incentives in Estonia.] The
whole Estonian corporate tax system which provides
for an indefinite deferral for taxing corporate
profits is an incentive that promotes re-investment
of profits and thus stimulates economic growth.
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There
is no form of consolidation or group taxation
for corporate income tax purposes. Transactions
between related parties (both resident and
non-resident) and between a head office and
its permanent establishment(s) should be conducted
on arm’s length terms.
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Dividends
paid to non-resident legal entities, which
own less than 15% shareholding in the distributing
company, are subject to 21% withholding tax,
but reduced rates may be available under double
tax treaties. Dividends paid to “tax
haven” entities are always subject to
21% withholding tax. There is no withholding
tax on interest payments to non-residents
provided that the interest charged does not
significantly exceed the arm’s length
rate. Royalties and rental payments to resident
individuals are subject to 21% withholding
tax. Royalties paid to non-residents are generally
subject to 15% withholding tax, but reduced
rates may be available under double tax treaties.
Certain royalty payments to associated EU
and Swiss companies that meet certain conditions
are exempt from withholding tax. Payments
to non-resident companies for services provided
in Estonia are subject to 15% withholding
tax, but exemption may be available under
double tax treaties. Service fee payments
to “tax haven” entities are always
subject to 21% withholding tax.
[Further
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Foreign
investment has greatly improved the telephone
service; substantial fibre-optic cable systems
carry telephone, TV, and radio traffic in
the digital mode; Internet services are widely
available; schools and libraries are connected
to the internet, There were an estimated 1.659
million (2006) mobile phones. There were 387
thousand internet hosts (2007) and 760 thousand
users (2006).
[Further
Information]
The
Bank of Estonia is the central bank. The bank
issues the Estonian currency, the kroon. Estonia
maintains a fixed rate of exchange at EUR1=EEK15.64664;
there are no restrictions on transactions.
The currency board arrangement is a special
kind of fixed exchange-rate system where the
upper limit of base money issuance depends
on the amount of the central bank's foreign
reserves. This ensures an automatic cover
for the kroon.
[Further
Information]
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