Estonian Transfer Pricing regulations are stipulated in the Income Tax Law and Regulation No. 53 issued by the Estonian Ministry of Finance on November 10, 2006.

Arm’s Length Principle

The Estonian regulation is based on the Arm’s Length Principle, which requires that prices collected between related parties be similar to collected ones between independent parties performing the same or similar functions under the same or similar circumstances.

Related Parties

Related parties are stipulated in Article 8 of the Income Tax Law. Parties are related to each other if they have a common business interest or if one thereof exercises control over the other. These include:

  • Spouses, cohabitants, direct blood or collateral relatives.
  • Companies comprising a group
  • A legal entity and an individual who owns at least 10% of the capital stock, the total number of votes or rights to profits of the legal entity.
  • A person(s) with whom the person is associated owns over 50% of the capital stock, the total number of votes, or rights to profits of the legal entity.
  • Legal persons, when more than 50% of the capital stock, the total number of votes or rights to profits belong to one and the same associated person(s).
  • Persons owning over 25% of the capital stock, the total number of votes or rights to profits of one and the same legal entity.
  • Legal persons where all the members of the boards of directors or bodies replacing the management boards are the same persons.
  • Employers and their employees, spouses, cohabitants, or direct blood relatives

A person is a member of management or supervisory body of a legal person or the spouse or a direct blood relative of a member of management or supervisory body.

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 Author:       Wolfgang Hartl
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