Foreign Ministry to send note to Ukraine over inclusion on tax haven list

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The Ministry of Foreign Affairs (foreground) in Central Tallinn.
The Ministry of Foreign Affairs (foreground) in Central Tallinn. Source: (Siim Lõvi/ERR)

The Estonian Ministry of Foreign Affairs is to deliver a diplomatic note to Ukraine with additional information about Estonia's tax system and a call for the Ukrainian government to remove Estonia from its list of countries with a low tax rate, or so-called tax havens, Minister of Foreign Affairs Sven Mikser said on Tuesday.

"In the first weeks of the list being in force, Estonian companies have also encountered some unpleasantness and definitely also some economic loss," Mikser told BNS. "This incident definitely harms the economic relationship between Estonia and Ukraine. The issue has to be solved quickly in order for it to not become a political problem between our two countries."

According to Mikser, the note is a letter by Deputy Secretary General of the Ministry of Finance Dmitri Jegorov to his Ukrainian colleagues in which, responding to Ukraine's request, he explains the peculiarities of the Estonian tax system. "Estonia's position is that us being put on the list is a mistake, because our tax system doesn't allow hiding profit or avoiding paying taxes," the foreign minister said. "Hopefully these explanations will help us reach the goal of Estonia being removed from the list.

"According to the explanations of the Ukrainian side, the list was supposed to only apply to Ukrainian companies that have subsidiaries in Estonia and not Estonian exporters," he continued. "Our position is that us being included on the list is neither justified nor reasoned."

The Latvian Ministry of Foreign Affairs on Tuesday delivered an official note to the Charge d'Affaires of Ukraine, urging the latter country to take the steps necessary to remove Latvia from its list of tax havens, Latvian Minister of Foreign Affairs Edgars Rinkēvičs told BNS.

Inclusion causing issues for Estonian companies

Although according to Ukrainian Prime Minister Volodymyr Groysman the decision to put Estonia on the list of tax havens only concerns Ukrainian residents, practice regarding Estonian companies unfortunately tells a different story, Toos told BNS. She added that the ministry will continue working toward Estonia being removed from the list.

"Last week, thanks to our high contacts, we were able to hopefully come to a solution to the most pressing problem of our companies, as the National Bank of Ukraine sent a letter to banks in which it stated that transactions with Estonia should not be viewed as risky and transaction parties should not be made to present piles of documents regarding their beneficiaries as is done in the case of real tax havens," Toots said.

"Prime Minister [Jüri] Ratas' meetings took place on Thursday and Friday, and in the course of these, we received confirmation from the Ukrainian side that they are working on solving the problem," the press officer said, adding that at the same time, talks between booth countries' respective Ministries of Finance regarding solving the problem would also continue.

According to Estonia's Ministry of Foreign Affairs, Estonia should not be on a list of countries with low tax rates, as in Estonia, the corporate income tax is 20 percent. Putting Estonia on such a list causes unfair problems for Estonian companies and their partners.

On Dec. 27 last year, the Ukrainian government adopted a decision whereby 22 new countries, including Estonia and Latvia, were added to the list of jurisdictions considered by Ukraine to be tax havens.

According to Estonia, the Ukrainian government has misinterpreted Estonia's Income Tax Act.

Editor: Aili Vahtla

Source: BNS

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