Tax Treaty Case Law around the Globe 2017

S. 235Estonia: Dalkia International S.A.

Helen Pahapill

1. S. 236Introduction

This paper gives an overview of the case known in Estonia as Dalkia International S.A. The case deals with the taxation of the gains on the sale of shares in a company, the property of which consists, indirectly, mainly of immovable property under the Estonia-France Income and Capital Tax Treaty (1996). The main issue in dispute was the meaning of the term immovable property under the Estonian domestic law and the tax treaty.

2. Facts of the Case

On 20 December 2011, Dalkia International S.A., resident in France, (hereinafter the taxpayer) sold its 85 % holding in an Estonian resident company, AS TEJ Valdus (hereinafter EstCo) to another Estonian resident company, Horn Invest OÜ.

Before the sale of the shares took place, the taxpayer had requested a binding ruling from the Estonian Tax and Customs Board (hereinafter the tax authorities) concerning the taxation of the aforementioned transaction. The tax authorities did not agree with the applicant’s assessment that the planned transaction was not taxable in Estonia under article 29(4)(5) of the Estonian Income Tax Act (hereinafter ITA) (2000).

Initially, the taxpayer paid th...