Due to the increase in tax rates in Estonia, many companies have begun to consider the possibility of relocating their business to other EU countries with more favorable tax regimes. EU Directive 2017/1132, along with its amendments in the form of Directive 2019/2021, stipulates that companies from EU member states have the right to transfer their registered office to another EU country while maintaining their legal personality. In Estonian law, the possibility of cross-border relocation of a company is regulated by Articles 433 and 491 of the Estonian Commercial Code, which provide for the procedures of cross-border mergers or transfers (transformations) of companies within the European Union.
However, transferring a company to another EU country may trigger tax liabilities in Estonia, as the Estonian company ceases its presence in Estonia. Specifically, this may involve liabilities under Articles 50 and 545 (so-called Exit Tax).
Currently, countries attracting the interest of Estonian entrepreneurs for relocating companies include those with lower tax rates and favorable business conditions, most importantly featuring a more stable and predictable tax policy. Notable examples include Latvia, Cyprus, Malta, and other EU countries. These countries either have lower tax rates or offer special tax regimes, making them attractive to companies seeking to optimize their tax obligations.
It is important to note that the process of relocating a company requires compliance with certain legal requirements and an evaluation of the tax implications both in Estonia and in the destination country, making this procedure quite time-consuming and costly.