TAX SUPPORT IN ESTONIA
Transfer pricing documentation in Estonia
We help review related-party transactions, organise the source data and prepare documentation within an agreed scope.
THE TASK
When transaction prices need to be reviewed
Transfer pricing rules apply to transactions between related parties. A company needs to support that the terms of such a transaction reflect its economic substance and market value.
Intra-group goods and services
We review agreements, the functions actually performed, the pricing approach and how the transaction is recorded in the accounts.
Loans and financing
We consider the financing terms, currency, duration, security and the allocation of risk between the parties.
Intangible assets
We identify who uses the asset, performs the significant functions and assumes the risks connected with the transaction.
This list is not exhaustive. The rules that apply and the level of analysis required depend on the parties, the transaction and the company’s circumstances.
SCOPE OF WORK
How FPRO helps prepare the documentation
We first identify the relevant transactions and available evidence. We then agree the scope of work: a straightforward intra-group service and a complex financing or intangible asset transaction should not be handled in the same way.
- Define the scope. We clarify the group structure, related counterparties and transactions for the period under review.
- Collect the data. We review agreements, invoices, accounting records and descriptions of what the parties actually do.
- Analyse the terms. We compare functions, assets and risks and determine an appropriate approach to supporting the price.
- Prepare the documents. We assemble the agreed documentation and identify information that is still needed to reach a conclusion.
- Reconcile with the accounts. We check that the documentation is consistent with the accounting records and reporting.
SOURCE DATA
What is needed for an initial assessment
You do not need to prepare a complete archive before contacting us. An outline of the group structure, key transactions and available documents is enough to begin. We will then prepare a data request for the specific task.
- ownership structure and list of related parties;
- material transactions during the period;
- agreements, invoices and accounting extracts;
- description of each party’s functions, assets and risks;
- pricing rules and internal approvals;
- previous documentation and tax authority requests, if any.
QUESTIONS AND ANSWERS
Documentation and transaction reviews
Who is considered a related party in Estonia?
Estonia’s Income Tax Act links related-party status to common economic interests or dominant influence and lists specific cases. Ownership, management and the parties’ actual relationship must be reviewed before reaching a conclusion.
Does every company need a master file and a local file?
No. Additional documentation requirements depend on the company’s circumstances and the criteria in the applicable rules. The first step is to determine which requirements apply rather than preparing the same package for every company.
How is the arm’s-length pricing method selected?
The method is selected after analysing the transaction and the comparable data available. One method should not be assigned to every transaction in advance: goods, services, financing and intangible assets require different inputs.
What should we do if the tax authority requests documents?
Record the scope and deadline of the request, gather existing materials and reconcile them with the accounts. FPRO can help structure the data and prepare documentation within an agreed scope, but does not promise the outcome of a tax review.
FIRST STEP
Define the transactions and documentation scope
Tell us about the company structure and its related-party transactions. We will explain what information is needed for an initial assessment.
This information is general. The applicable rules, documentation requirements and tax consequences depend on the circumstances of the company and each transaction.