Estonia Amends Tax Treatment Of Foreign Charities

by Lorys Charalambous, Tax-News.com, Cyprus

07 September 2009

The Estonian Ministry of Finance has amended the Income Tax Act as regards the tax treatment of charity donations, it announced recently.

Under the previous system, Estonia allowed tax relief for donations to charities, but only if they were established in Estonia. Donations to foreign charities however were excluded from any relief. The beneficial treatment of donations was also extended to certain bodies established by Estonian governmental institutions and to religious organisations registered in Estonia, but no relief was granted in respect of donations to similar foreign bodies and organisations.

According to reports, the amendments allow from January 1, 2010, for the equalization of the tax treatment of religious organizations, government institutions, and not-for profit organizations, allowing them all to benefit from the same reliefs, subject to certain conditions.

The change to Estonian tax law aims to satisfy the European Commission’s earlier formal request, in which it argued that the difference of treatment posed an obstacle to the free movement of capital within Europe.

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