DT6721 - DT: Estonia: double taxation agreement,: Exchange of notes

1. Article 2 and Article 22
   
   

The United Kingdom takes note of the fact that the existing taxes as listed in the Convention are subject to a substantial programme of reform and wherever:
(i) in respect of Article 2 it is not possible to agree that a particular new tax satisfies the conditions of paragraph 4 of this Article; or
(ii) in respect of Article 22, insofar as this relates to the taxation of items of income of a resident of a Contracting State which are not dealt with in the foregoing Articles of this Convention and which arise in the other Contracting State, the amount of tax involved appears to the competent authority of Estonia to upset the balance of this Convention;
the United Kingdom is ready to negotiate an amending Protocol to the Convention without delay.

2. Article 4(3)
   
   

Where a person other than an individual is a resident of both Contracting States and the competent authorities of the Contracting States endeavour to determine its status by mutual agreement, they shall have regard to such factors as the place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors.

3. Article 5(6)
   
   

The Contracting States agree that:
(i) where the transactions between the agent and the enterprise are made under arm's length conditions, the second sentence of paragraph 6 shall not apply; and
(ii) in considering whether the activities are devoted wholly or almost wholly on behalf of that enterprise, the Contracting States shall have regard to any relevant factors during any 12- month period commencing or ending in the fiscal year concerned. In particular if the relevant activities are devoted wholly or almost wholly on behalf of that enterprise for a period exceeding 9 months within that period of 12 months, they will be considered to have been so devoted in that fiscal year.

4. Article 6(3)
   
   

The Contracting States understand that all income and gains arising from the alienation of immovable property in a Contracting State may be taxed in that Contracting State in accordance with Article 13 of this Convention.

5. Article 7(3)
   
   

In determining the profits of a permanent establishment, it is understood that expenses to be allowed as deductions by a Contracting State include only expenses that are deductible under the domestic laws of that State.

6. Article 11
   
   

The Contracting States confirm that they will meet on a date to be agreed and provided that five years have elapsed since this Convention entered into force with a view to negotiating by means of a Protocol a reduction to zero in the rate of tax to be charged under paragraph 2 of this Article in respect of a loan made, guaranteed or insured by a financial institution of a public character.
Moreover, the Contracting States agree that where following the conclusion of a Convention between Estonia and a third state which is a member of the Organisation for Economic Co-operation and Development at the date of signature of this Convention, a resident of the third state enjoys a rate of tax on interest paid in respect of a loan made, guaranteed or insured by a financial institution of a public character, which is lower than the rate specified in paragraph 2 of this Article, and that Convention enters into force either before or after the date of entry into force of this Convention, the Competent Authority of Estonia shall notify the Competent Authority of the United Kingdom of that Convention with a third state immediately after the entry into force of that Convention and such lower rate of tax that is enjoyed shall be substituted in Article 11 of this Convention for the rate in paragraph 2 of this Article in respect of the interest paid in respect of a loan made, guaranteed or insured by a financial institution of a public character with effect from the entry into force of that Convention, or of this Convention, whichever is the later.

7. Article 12
   
   

8. Article 24(2)
   
   

It is understood that incentives to promote foreign investment shall not include incentives promoting only domestic investment.