GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES
Peer Review Report Phase 2 Implementation of the Standard in Practice

ESTONIA
Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Estonia 2013
PHASE 2: IMPLEMENTATION OF THE STANDARD IN PRACTICE
November 2013 (reflecting the legal and regulatory framework as at August 2013)
This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the OECD or of the governments of its member countries or those of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
Please cite this publication as: OECD (2013), Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews: Estonia 2013: Phase 2: Implementation of the Standard in Practice, OECD Publishing. http://dx.doi.org/10.1787/9789264206113-en
ISBN 978-92-64-20610-6 (print) ISBN 978-92-64-20611-3 (PDF)
Series: Global Forum on Transparency and Exchange of Information for Tax Purposes Peer Reviews ISSN 2219-4681 (print) ISSN 2219-469X (online)
Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.
OECD 2013
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TABLE OF CONTENTS 3
Table of Contents
About the Global Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Information and methodology used for the peer review of Estonia. . . . . . . . . . . .11 General information on the legal system and taxation system . . . . . . . . . . . . . . .14 Compliance with the Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A. Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A.1. Ownership and identity information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 A.2. Accounting records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 A.3. Banking information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 B. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 B.1. Competent Authoritys ability to obtain and provide information . . . . . . . . 58 B.2. Notification requirements and rights and safeguards. . . . . . . . . . . . . . . . . . 66 C. Exchanging Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.1. Exchange of information mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.2. Exchange of information mechanisms with all relevant partners . . . . . . . . C.3. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C.4. Rights and safeguards of taxpayers and third parties. . . . . . . . . . . . . . . . . . C.5. Timeliness of responses to requests for information . . . . . . . . . . . . . . . . . . 69 70 79 81 86 87
Summary of Determinations and Factors Underlying Recommendations. . . . 93
PEER REVIEW REPORT PHASE 2 ESTONIA OECD 2013
4 TABLE OF CONTENTS Annex 1: Jurisdictions Response to the Report . . . . . . . . . . . . . . . . . . . . . . . . . 95 Annex 2: List of All Exchange of Information Mechanisms in Force . . . . . . . . 96 Annex 3: List of All Laws, Regulations and Other Material Received. . . . . . .103 Annex 4: People Interviewed During the On-site Visit . . . . . . . . . . . . . . . . . . .105
ABOUT THE GLOBAL FORUM 5
About the Global Forum

The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by over 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reflected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by fiduciaries, regardless of the existence of a domestic tax interest. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 and Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once adopted by the Global Forum. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
EXECUTIVE SUMMARY 7
Executive Summary
1. This report summarises the legal and regulatory framework for transparency and exchange of information in Estonia, together with the practical implementation of that framework. The international standard which is set out in the Global Forums Terms of Reference to Monitor and Review Progress Towards Transparency and Exchange of Information, is concerned with the availability of relevant information within a jurisdiction, the competent authoritys ability to gain timely access to that information, and in turn, whether that information can be effectively exchanged with its exchange of information (EOI) partners. While Estonia has a developed legal and regulatory framework, the report identifies a number of areas where Estonia could improve its legal infrastructure to more effectively implement the international standard, and its practical implementation. The report includes recommendations to address these shortcomings. The three year review period for the Phase 2 review extended from 1 July 2009 to 30 June 2012. 2. Estonia is a small European country with a diverse economy, mainly based on services (including transport) and industry. Despite the successful monetary reform, banking activities and the local financial sector are very small. Finland and Sweden are the most important trade partners and investors. Estonia became an European Union Member State in 2004 and joined the OECD at the end of 2010. Since January 2011, the official currency in Estonia is the Euro. 3. Estonia has an extensive treaty network of 57 double tax conventions (DTCs) that allows for exchange of information for tax purposes with all relevant partners. Estonia has also initialled four other DTCs and two protocols. In addition to its treaty network, Estonia is also able to exchange information with other EU Member States based on EU legislation. Estonia has postponed negotiations with some jurisdictions on the grounds that they do not have significant economic relations with Estonia. Estonia also states that another reason for this postponement is the lack of resources coupled with previous commitments to negotiate treaties with other treaty partners. 4. As regards availability of relevant information, Estonias legislation generally meets the international standard. There are consistent disclosure
8 EXECUTIVE SUMMARY
obligations imposed directly on all legal persons (including companies, partnerships, commercial associations and foundations) to retain certain ownership, identity, accounting and banking information, and in many instances to provide that information to public authorities. This is complemented by obligations imposed under Estonias anti-money laundering framework applicable to credit and financial institutions, as well as service providers (including notaries, auditors, accountants and attorneys-at-law), creating a second layer of requirements to capture relevant information. Under Estonian law, it is possible to hold securities under a nominee account, but nominees are required to maintain records on the identity of the legal owners of the securities. Bearer shares are not allowed in Estonia. Since the 2011 Report, Estonia introduced amendments to the Taxation Act relating to the obligations of relevant foreign companies to maintain ownership information. 5. The obligations imposed in respect of accounting records are satisfactory, with sufficient specificity in respect of the precise information to be maintained. All legal persons are required to keep accounting records and underlying documents for at least seven years, whereas credit and financial institutions and other relevant service providers are required to maintain transaction records for at least five years after the end of a contractual relationship with a client. 6. In respect of access to information, Estonias competent authority the Tax and Customs Board is vested with broad powers to gather relevant information for civil and criminal tax purposes, complemented by powers to obtain oral and written information from a taxable person or third party, search premises, seize information and inspect property. No special procedures, court order or consent from other authorities are required. Enforcement of these provisions is secured by the existence of significant penalties for non-compliance. No domestic interest requirement exists for Estonias competent authority to exercise their information gathering powers. 7. Estonia has amended the Taxation Act and the Credit Institutions Act to allow the Estonia tax authority to access bank information as long as the client can be identified. This brings the Estonia legal framework in line with the standard in terms of the competent authoritys ability to obtain and provide bank information pursuant to an EOI request. 8. Compliance in respect of all entities obligations to maintain ownership, accounting and banking information is monitored by the Estonian tax authorities and other public authorities, such as the Commercial Registrar and the respective supervisory bodies. Monitoring is carried out via a combination of routine audits and compliance visits. Sanctions are set at the appropriate level to ensure compliance with information keeping requirements and sanctions, such as monetary fines and cancellation of registration, are regularly enforced in practice. According to the feedback received from
EXECUTIVE SUMMARY 9
peers, no issues have arisen with respect to obtaining ownership, accounting and banking information during the review period. Estonia has in place a system of responses to incoming requests that provides all types of information accurately and broadly respects the needs of confidentiality. Peers are generally satisfied with the quality of information provided. Estonia has provided information within 90 days in most cases. Statistics show that of the 774 requests that were received in the three year review period, 714 (92%) were answered within 90 days. 9. Estonia has been assigned a rating 1 for each of the 10 essential elements as well as an overall rating. The ratings for the essential elements are based on the analysis in the text of the report, taking into account the Phase 1 determinations and any recommendations made in respect of Estonias legal and regulatory framework and the effectiveness of its exchange of information in practice. On this basis, Estonia has been assigned the following ratings: Compliant for elements A.1, A.2, A.3, B.1, B.2, C.1, C.4, and C.5, and Largely Compliant for elements C.2 and C.3. In view of the ratings for each of the essential elements taken in their entirety, the overall rating for Estonia is Largely Compliant. 10. A follow up report on the steps undertaken by Estonia to answer the recommendations made in this report should be provided to the PRG within twelve months after the adoption of this report.
1.
This report reflects the legal and regulatory framework as at the date indicated on page 1 of this publication. Any material changes to the circumstances affecting the ratings may be included in Annex 1 to this report.
INTRODUCTION 11
Introduction
Information and methodology used for the peer review of Estonia

11. The Phase 1 and Supplementary assessments of the legal and regulatory framework of Estonia and the practical implementation and effectiveness of this framework were based on the international standards for transparency and exchange of information as described in the Global Forums Terms of Reference, and was prepared using the Global Forums Methodology for Peer Reviews and Non-Member Reviews. The Phase 1 assessment was based on the laws, regulations, and exchange of information mechanisms in force or effect as at January 2011, other materials supplied by Estonia, and information supplied by partner jurisdictions. 12. The Supplementary peer review Report of Estonia was prepared pursuant to paragraph 58 of the Global Forums Methodology and followed the Phase 1 report that was adopted in April 2011. The supplementary report was based on information available to the assessment team including the laws, regulations, and exchange of information arrangements in force or effect as at April 2012, and information supplied by Estonia. 13. The Phase 2 assessment of Estonia was based on information available to the assessment team including the laws, regulations, and exchange of information arrangements in force or effect as at 22 August 2013, on Estonias responses to the Phase 2 questionnaire and supplementary questions, information supplied by partner jurisdictions, other relevant sources as well as information collected during the on-site visit to Tallinn in May 2013. During the on-site visit, the assessment team met with officials and representatives of the relevant government agencies, including the Ministry of Finance, Tax authorities, and the registration and anti-money laundering authorities. The three year review period for the Phase 2 review extended from 1 July 2009 to 30 June 2012. 14. The Terms of Reference break down the standards of transparency and exchange of information into 10 essential elements and 31 enumerated aspects under three broad categories: (A) availability of information;
12 INTRODUCTION
(B) access to information; and (C) exchanging information. This review assesses Estonias legal and regulatory framework and the implementation and effectiveness of this framework against these elements and each of the enumerated aspects. In respect of each essential element a determination is made regarding Estonias legal and regulatory framework that either: (i) the element is in place, (ii) the element is in place but certain aspects of the legal implementation of the element need improvement, or (iii) the element is not in place. These determinations are accompanied by recommendations for improvement where relevant. In addition, to reflect the Phase 2 component, recommendations are made concerning Estonias practical application of each of the essential elements and a rating of either: (i) compliant, (ii) largely compliant, (iii) partially compliant, or (iv) non-compliant is assigned to each element. An overall rating is also assigned to reflect Estonias overall level of compliance with the standards. 15. The assessment was conducted by a team which consisted of two assessors: Dr. Katja Gey, Coordinator for International Negotiations in Financial and Tax Matters, Government of the Principality of Liechtenstein, and Mr. Sleyman Hayri Balci, Acting Head of Group, Ministry of Finance of Turkey; and two representatives of the Global Forum Secretariat: Mrs. Renata Fontana and Mr. Guozhi Foo. The assessment team examined the legal and regulatory framework for transparency and exchange of information and relevant exchange of information mechanisms in Estonia. The Phase 2 assessment was conducted by a team consisting of three 16. expert assessors and one representative of the Global Forum Secretariat: Ms. Katja Gey, Director of Office of the International Financial Affairs, Liechtenstein; Mr. Suleyman Hayri Balci, Head of Department, Turkish Revenue Administration, Mrs. Havva Ozge Gunay, Tax Inspector, Turkish Revenue Administration and Mr. Bhaskar Goswami from the Secretariat to the Global Forum. The team evaluated the implementation and effectiveness of Estonias legal and regulatory framework for transparency and exchange of information and its relevant information exchange mechanisms. The ratings assigned in this report were adopted by the Global Forum 17. in November 2013 as part of a comparative exercise designed to ensure the consistency of the results. An expert team of assessors was selected to propose ratings for a representative subset of 50 jurisdictions. Consequently, the assessment teams that carried out the Phase 1 and Phase 2 reviews were not involved in the assignment of ratings. These ratings have been compared with the ratings assigned to other jurisdictions for each of the essential elements to ensure a consistent and comprehensive approach.
INTRODUCTION 13
Overview of Estonia Governance and economic context

18. The Republic of Estonia is a state in the Baltic Region of Northern Europe. The territory of Estonia covers 45 227 km2 and it is bordered by the Gulf of Finland (north), the Baltic Sea (west), Latvia (south) and the Russian Federation (east). The sole official language, Estonian, is closely related to Finnish. After many years under the Soviet Unions control, Estonia regained its independence in 1991. It has since embarked on a rapid programme of social and economic reform. Estonia was amongst a group of ten countries which were incorporated into the European Union in 2004, becoming one of the 27 EU Member States. 2 Estonia is a democratic parliamentary republic and is divided into fifteen counties. The capital and largest city is Tallinn. With a population of only 1.34 million, Estonia is one of the least-populous members of the European Union. The Estonian economy is diverse: more than 67% of the Estonian GDP is derived from the service sector (including transport), the industrial sector yield over 28% and primary branches (including agriculture) approximately 5.5% of the overall output. Finland and Sweden are the most important trade partners and investors. Since January 2011, the official currency in Estonia is the Euro. The successful monetary reform also meant swift changes in banking and in the financial sector as a whole; the local financial sector is nevertheless very small. As of August 31, 2013 the total assets of commercial banks in Estonia amounted to EUR 18.5 billion.
2.
Austria, Belgium, Bulgaria, Cyprus*, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. *Footnote by Turkey: The information in this document with reference to Cyprus relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey shall preserve its position concerning the Cyprus issue. Footnote by all the European Union Member States of the OECD and the European Union: The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
14 INTRODUCTION
General information on the legal system and taxation system

19. Estonias legal system is based on the Continental European civil law model and has been influenced by the German legal system. Unlike common law countries, Estonia has detailed codifications and issues are solved according to the codifications. Estonian law is basically divided into (i) private law, consisting of civil law and commercial law, and (ii) public law, consisting of international law, constitutional law, administrative law, criminal law, financial law and procedural law. The hierarchy of laws stands as follows: (i) EU law; (ii) the Estonian Constitution; (iii) international law; (iv) laws enacted by Parliament; (v) administrative regulations adopted by the executive branch including local governments; and (vi) administrative decisions made by the executive branch including local governments. 20. The Estonian tax system is mainly based on the Taxation Act which establishes requirements for tax and administrative acts, rights, duties and liabilities of taxpayers, withholding agents, guarantors and tax authorities. It also sets procedures for resolution of tax disputes and main definitions used in all tax acts. The tax authority for state taxes in Estonia is the Tax and Customs Board which is a government agency operating within the area of government of the Ministry of Finance. Local governments have the authority to impose local taxes, but effectively only few municipalities have introduced local taxes. 21. The Estonian state taxes are: income tax (21% flat rate for individuals and companies, resident or non-resident of Estonia), social tax, land tax, gambling tax, value added tax, customs duty, excise duties and heavy goods vehicle tax. In Estonia, a conceptual difference compared to more traditional income tax systems is that instead of taxing the profit of resident corporations and registered permanent establishments upon accrual, profit distributions (as well as transactions that can be treated as hidden distribution of profits) are taxed. As a result, income tax shifts from earned profits to distributed profits. Unemployment insurance contributions and contributions to mandatory funded pension are technically not taxes but are administered as such. The local taxes imposed by a few rural municipalities or city councils in their administrative territory are: sales tax, boat tax, advertisement tax, tax on closure of streets and roads, motor vehicle tax, entertainment tax, tax for keeping the animals and parking charge.
Overview of commercial laws and other relevant factors for exchange of information
22. Most legal entities founded according to Estonian laws, including private and public limited companies, general and limited partnerships, are governed by the Commercial Code and must be entered in the commercial
INTRODUCTION 15
register. Those legal entities are asked to provide the same information about ownership, notwithstanding their owners. Foreign companies with a branch in Estonia must be registered at the commercial register, whereas foreign companies with other types of permanent establishments in Estonia must be registered in the Tax and Customs Boards taxpayers register. Foundations must be entered in the non-profit associations and foundations register. Estonia does not have domestic trust laws and general and limited partnerships are corporate bodies under the Commercial Code. Entries in the commercial register are public and everyone has the right to examine the card register and the business files, and to obtain copies of registry cards and of documents in the business files.
Overview of the financial sector and relevant professions

23. The Bank of Estonia founded in 1919 operates as Estonias central bank. The bank did not exist during the years of the Soviet occupation (starting in 1940) and it was restored in 1990. The Bank of Estonia is responsible for the stability of the financial system. Initially the Bank of Estonia carried out supervision of commercial banks but since 2002 this task belongs to the Financial Supervision Authority which is responsible for the supervision of a number of Estonian financial institutions. In accordance with 52 (1) Money Laundering and Terrorist Financing Prevention Act, only the financial institutions who are not subject to supervision by the Financial Supervision Authority pursuant to 2 of the Financial Supervision Authority Act are required to register themselves in the register of economic activities before commencing operations in the corresponding area of activity. In addition, the Estonian Financial Intelligence Unit, which is an independent structural unit of the Estonian Police and Border Board, exercises supervision over fulfilment of the requirements arising from the anti-money laundering framework. 24. The financial intermediation sector provided 3.0% of GDP and 3.4% of total value added in the Estonian economy in 2009. These shares were a bit higher during previous years, being 4.0-4.2% of total value added and 3.5-3.8% of GDP respectively. The share of employment in this sector was 1.7% of total employment in 2010, the average wage 167% of the economys average and operating surplus over 5% of total operating surplus in 2010. 25. The Estonian financial sector is quite bank-centred, i.e. the majority of insurance, funds, leasing and investment companies belong to banks. Most of the banks in their turn are owned by foreign capital, which is largely of Scandinavian origin (mainly Swedish and Danish). Foreign capital dominates also in insurance, either through direct or indirect holdings. A number of Estonian securities are registered in the Estonian Central Register of Securities, including the shares of public limited companies, units of investments funds listed in stock exchange and pension fund units. Transactions
16 INTRODUCTION
take place either over-the-counter or in the Tallinn Stock Exchange, which was founded in 1996, operates exclusively in electronic form, and is currently owned by NASDAQ OMX, Inc. 3
Recent developments
26. On 29 May 2013, Estonia signed the Multilateral Convention on Mutual Administrative Assistance. Recently Estonia has initialed a protocol with Switzerland that seeks to bring the Estonia-Swiss treaty in line with the international standard.
3.
www.nasdaqomxbaltic.com/en/exchange-information/about-us/nasdaq-omx.
COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 17
Compliance with the Standards
A. Availability of Information
Overview
27. Effective exchange of information requires the availability of reliable information. In particular, it requires information on the identity of owners and other stakeholders as well as information on the transactions carried out by entities and other organisational structures. Such information may be kept for tax, regulatory, commercial or other reasons. If the information is not kept or it is not maintained for a reasonable period of time, a jurisdictions competent authority may not be able to obtain and provide it when requested. This section of the report assesses the adequacy of Estonias legal and regulatory framework on availability of information. 28. Most legal persons formed under Estonian commercial law (including private and public limited companies, general and limited partnerships, and commercial associations) must be registered in the commercial register. Foundations must be registered at the non-profit associations and foundations register. Entries in the commercial register and in the non-profit associations and foundations register are public and everyone has the right to examine and to obtain copies of registry cards and of documents in the business files. If a foreign company has a branch in Estonia, it must be registered in the commercial register. If a foreign company has a permanent establishment in Estonia (other than a branch), it must be registered in the Tax and Customs Boards taxpayers register. Estonia does not have domestic trust laws.
18 COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION

29. While Estonias legal framework provides that ownership and identity information of all entities is maintained by the commercial registry there are instances where companies, in practice, do not provide annual updates to the registry. However, no peer has reported any instance where Estonia has been unable to provide identity or ownership information. 30. Legal entities formed under Estonian law are asked to provide the same ownership and identity information about the shareholders, partners, members, founders and members of the management or supervisory boards, notwithstanding their owners. The disclosure obligations imposed by the Commercial Code, other legislation governing the formation and registration of these entities, and the anti-money laundering rules applicable to credit and financial institutions, as well as service providers, are generally sufficient to meet the international standard. Penalties are generally available to enforce these obligations. 31. Following recent legal changes in the Accounting Act, foundations are also required to maintain identity information about beneficiaries. As regards the practical implementation of these legal requirements, there are effective supervisory mechanisms in place. 32. The obligations imposed on all legal persons in respect of accounting records and underlying documents are generally satisfactory, with sufficient specificity in respect of the precise information to be maintained. For those accounting records which are required to be kept, the obligation exists to retain them for at least seven years. The Commercial Code and Accounting Act provide for the same obligations for companies or partnerships owned by residents or non-residents in Estonia. 33. Estonia has sufficiently strong practical mechanisms to ensure that all entities maintain accounting records and underlying documentation in practice. The Estonian Tax and Customs Board has sufficient powers of discovery and inspection that ensure that persons have to produce any relevant documentation. There are also effective penalties. 34. In respect of banking information, the Estonian anti-money laundering rules applicable to credit and financial institutions, as well as service providers, impose appropriate obligations to ensure that all records pertaining to accounts, as well as related financial and transactional information, are available in Estonia. In practice, compliance with those obligations is closely monitored by the Financial Supervision Authority (hereinafter, FSA) and the Financial Intelligence Unit (hereinafter, FIU). 35. The FSA and FIU have sufficient powers and practical mechanisms to carry out their supervisory functions effectively.
A.1. Ownership and identity information

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
Companies (ToR A.1.1) Types of Companies

36. According to subsection 2(1) of the Commercial Code, there are several types of legal persons in Estonia, characterised by their nature, functions and legal status. The following types of companies can be established under the Commercial Code: private limited company (sections 135-220); and public limited company (sections 221-383).
In Estonia, general and limited partnerships are also considered com37. panies which must be entered in the commercial register (subsection 2(2)). Nevertheless, they will be dealt with separately, in the following parts of this section.
Information kept by public authorities

38. All the companies formed under Estonian commercial law (including general and limited partnerships, as well as commercial associations) must be registered in the commercial register which is maintained by the registration departments of the county courts (subsection 2(2) and section 22, Commercial Code). Entries in the commercial register are public, i.e. everyone has the right to examine the card register and the business files (including the list of shareholders, except for the addresses of shareholders), and to obtain copies of registry cards and of documents in the business files (sections 28, 234 and subsection 541(3), Commercial Code). 39. In Estonia, ownership information on all types of entities is held by the different registering authorities. Most of the information is held by the Estonian Commercial Register. Some information in respect of public limited companies is kept by the Estonian Register of Securities and some is held by the Estonian Register of Economic Activities. The specific details of the role of these registries will be discussed in the subsequent sections of this report.
Private limited company

40. A private limited company (osahing, O) is a company which has share capital of at least EUR 2 500 divided into private limited company shares and which is liable for its obligations to the extent of all its assets (sections 135 and 136). The management board must keep a list of shareholders containing the names, addresses, personal identification codes or registry codes of the shareholders and must promptly record any changes in the ownership upon receipt of a notice of transfer (subsections 182(1) and 150(3)). Subsection 149(4) sets forth that a notary, who notarises the transaction for transferring the shares in a private limited company, must inform the commercial register of the transaction, unless the transfer is entered in the Estonian Central Register of Securities (subsection 149(5)). 41. In order to enter a private limited company in the commercial register, the management board must submit a petition to the commercial register containing the memorandum of association, the articles of association, the names and residences or seats of the founders of a private limited company, information on the members of the management board, on the members of the supervisory board, and on the auditors and procurators, if appointed (subsections 138(2) and 144(1)). 42. According to subsection 179(4) of the Commercial Code, the management board must submit to the commercial register, on an annual basis and not later than six months after the end of the financial year, a list of shareholders as at the date of approval of the annual report, which must be maintained in the business file. The list must contain the names, country of the residence or seat (instead of addresses), personal identification codes or registry codes of the shareholders and the nominal value of their shares. 43. If so decided by the shareholders, the shares may be entered in the Estonian Central Register of Securities. In such case, the management board of a private limited company must ensure timely submission of correct information provided by law to the registrar of the Estonian Central Register of Securities (subsection 182(3)). According to the Estonian authorities, timely submission of the relevant information means that the information has to be provided promptly or as soon as it is reasonably possible. The number of days which is considered timely may vary depending on specific features of each case. Upon entry of shares in the Estonian Central Register of Securities, the management board of the private limited company must promptly notify the commercial register (subsection 182(4)). 44. In practice, in Estonia, a private limited company can be formed electronically by logging into the website of the Estonian citizens portal, which has a link for registering a company on the Estonian Commercial Register. The process is extremely simple and a company can be registered in a matter of minutes.
The applicant has to submit details of his identity and of the other shareholders by way of an Estonian identity card or a unique mobile phone identification number. Both of these are unique to an individual. The system also allows the applicant to prove his identity and that of other shareholders by means of identity documents issued by Finland, Portugal, Belgium or Lithuania. Estonia has explained that the identity documents issued by these countries are accepted as they are compatible with the electronic system used by Estonia. Estonia states that it will accept identity documents from other countries as and when they are compatible with the Estonian electronic environment. These are also unique identification documents. The documents that have to be filed include the names of the shareholders, the amount of share capital, the details of bank accounts, articles of association and details of the planned principal activity. The document has also to be signed digitally. The fees for registering the company can also be paid online. Once the company is provisionally registered online, the electronic documents are sent to the commercial registry of the county courts. 45. There are four county courts across Estonia that have commercial registries. There are a total of 70 persons working in these four registries. They are tasked with carrying out business registration and land registration. The commercial registry of each country court is headed by an Assistant Judge who is the overall supervisor of the registration process. Once the electronic documents are received by the commercial registry, they are checked by the officials of the commercial registry. They check the veracity of the documents submitted and the entries made, regarding identity of the applicants and shareholders by an electronic system called X-Road. This is an electronic system that unifies a number of databases and is capable of picking up pieces of information about an individual from the different databases and collating them to give a complete picture of the person involved. The main databases that it unites are the Land Register, Commercial Register, Taxpayers Register, Population Register, Road administration database, Traffic Insurance Fund, the mobile phone users register (containing only Estonian phone numbers) and many other. The commercial registry does not carry out on-site visits to check the veracity of the information that has been submitted by the applicants as practical experience has shown that the use of X-Road provides an accurate and up to date picture, as the feeder databases are regularly updated. The entire process of business registration takes one to five days, including a final check by the supervising Assistant Judge, and the allotment of a unique number to the entity. 46. All persons who wish to carry out business need to comply with these requirements. There is no penalty for not registering with the commercial registry as it is not possible for any business entity to commence or carry on business without registering with the commercial registry, as quoting of the unique number issued by the commercial registry is necessary for business transactions. The details that the commercial registry maintains in regard to companies include the history of the company, details

of shareholders (including those who may have ceased to be shareholders), details of related parties, beneficial ownership etc. The procedure described in the preceding paragraphs applies to private limited companies, sole proprietorships, partnerships and non-profit associations. The details of the registrations granted by the commercial registry are tabulated below.
Registrations granted by commercial registry during the review period
Number of petitions for registration of a company Foundations 30.06.2009-30.06.2010 30.06.2010-30.06.2011 30.06.2011-30.06.2012 30.06.2009-30.06.2010 30.06.2010-30.06.2011 30.06.2011-30.06.2012 Branches 30.06.2009-30.06.2010 30.06.2010-30.06.2011 30.06.2011-30.06.2012 30.06.2009-30.06.2010 30.06.2010-30.06.2011 30.06.2011-30.06.2012 25 29 23 11 723 13 340 14 648 5 3 6 1027 1 244 1 646 0 0 0 2 4 2 37 33 57 226 489 1 151 7 11 9 24 36 215 0 0 0 1 2 1 Number of orders for eliminating deficiencies in petitions Number of rulings for denying the petition
General partnerships, limited partnerships
Public limited companies, private limited companies, commercial associations
47. Entities that are involved in construction, tourism, accommodation, pharmacy, food, gambling and trade of alcohol and tobacco also need to register with the Register of Economic activities. The Register of Economic Activities, established in 2004, functions under the Ministry of Economic Affairs. There are a total of five persons working in this registry in Tallinn and they are assisted by the local authorities in the registration of persons involved in wholesale and retail trade. 48. The registry has automated access to the Estonian Commercial Register. At the time of application, the only check that is made is whether the details filed match those filed with the commercial registry. The registration is completed within five days.
49. Once the registration is granted, on-going supervision is the responsibility of different arms of the government. For example, businesses that are involved in pharmaceuticals are inspected by the food and drug administration, gambling businesses are supervised by the tax administration. These authorities have access to the database of the Register of Economic Activities so they automatically track the entities that are registered therein. During the course of the supervision, which may include on-site visits, if any breach is found, sanction is applied by the supervising authority as per its rules. That part is not monitored by the Register of Economic Activities. 50. All entities that are registered in the Register of Economic Activities are required to inform the registry whether any change has taken place in the information provided previously, by the end of April every year. Entities will also have to inform the Register if no change has taken place. If such communication is not received by the end of April, the registration of the company is suspended from the first day of May. The company is informed of such suspension. If information is still not received by the end of November, the company is deleted from the register. Estonian authorities have indicated that in the three years under review, 3 000 companies have been struck off the commercial register. These are mostly companies which have ceased doing business. In only a very small number of cases have companies appealed against this action. In most such cases, the registration has been restored.
Public limited company

51. A public limited company (aktsiaselts, AS) is a legal person which has share capital of at least EUR 25 000 divided into public limited company shares and which is liable for its obligations to the extent of all its assets (sections 221 and 222). Upon formation, a public limited company must always have its shares entered both in the Estonian Central Register of Securities and in the commercial register (subsection 228(1), Commercial Code and subsection 2(1)3), Estonian Central Register of Securities Act). However, information submitted to the commercial register or to the Estonian Central Register of Securities does not need to be submitted twice to the other register if such information is available through a computer network (subsection 541(3), Commercial Code and subsection 8(2), Estonian Central Register of Securities Act). In order to enter a public limited company in the commercial register, 52. the management board must submit a petition containing the memorandum of association, the articles of association, as well as identity information on the companys founders, the members of the management board, the members of the supervisory board, the auditors and procurators, if appointed (sections 243, 244, 250 and 251, Commercial Code). Similarly, the following documents must be appended to an application to the Estonian Central Register of

Securities: (i) a list of the owners of the securities to be registered (i.e. share register, list of shareholders, etc.); (ii) upon registration of a founded company, a transcript of the registry card from the commercial register or a notarised transcript of the registration certificate; (iii) upon registration of a company being founded, a notarised transcript of the memorandum of association or foundation resolution (section 10, Estonian Central Register of Securities Act). 53. Section 233 of the Commercial Code and subsection 4(3) of the Estonian Central Register of Securities Act set out the ownership and identity information to be recorded at the share register, including the name, address and personal identification code or registry code of each shareholder, as well as the class and nominal value of the share and the date of subscription and acquisition of the shares. The management board of the public limited company is responsible for ensuring timely submission of correct information to the share register (subsection 233(2)). 54. According to subsection 334(2) of the Commercial Code, the management board must submit to the commercial register, on an annual basis and not later than six months after the end of the financial year, a list of shareholders with more than 10% of the voting rights as at the date of approval of the annual report, which must be maintained in the business file. Except for the addresses of shareholders, this information is public and can be examined through the commercial register as the data of the business file (subsection 541(3)). 55. In practice, the management board of the public limited company is responsible for submitting correct data to the commercial register. If incorrect or incomplete information is submitted to the commercial register, the persons who signed the petition are jointly liable for the wrongful act. The registrar may impose a fine on an undertaking and any other person required to submit the information to the register who fails to submit information provided by law or submits incorrect information to the registrar, regardless of whether or not such information is subject to entry in the register. Besides a fine the registrar could also pass an order of dissolution of the company. The position of fines imposed in the three years under review is discussed in section A.1.6. 56. Estonia has reported that its biggest concern is that companies do not submit their annual reports on time or do not submit them at all. As the annual reports submitted to the Registration Departments of Court are used throughout the public and private sector, it is very important to Estonia that the reports are submitted on time. In the three year review period 73% of all warnings of fine have been made because of the deficiencies in the annual report and 18% of all warnings of fine have been made because the annual report is not submitted. 98% of all rulings on imposing a fine have been made because the annual report is not submitted. The tax authorities have powers
to access this information directly from the company if companies do not file it with the commercial registrar. 57. In respect of public limited companies, the process of registration begins with the Estonian Central Register of Securities. This registry is owned by the Tallinn Stock Exchange. All public limited companies need to first register themselves with this registry. In order to be able to do that, the applicant first needs to approach a notary. Unlike private limited companies, public limited companies cannot electronically file with the commercial registry. Public companies have to approach a notary, who will draw up the application to register shares, details of shareholders, the articles of association, the statement of principal objects of business and other documents that are required to file their application along with details of bank accounts. The documents that are prepared by the notary are not retained by him, but by the company. This is filed with the Central Register of Securities, which will complete the registration within five days. There are 30 persons working in the Central Register of Securities. 58. The company will then submit an application to the Estonian Commercial Registry and the procedure that has been described earlier in respect of private limited companies will be followed. It is the duty of the Central Register of Securities to inform the commercial registry about new registrations that it has carried out. There are about 4 000 public limited companies and another 2 500 private limited companies registered with the Central Register of Securities. 59. Pursuant to section 5 of the Estonian Central Register of Securities Act, any Estonian or foreign person may open one or more securities accounts in the register, on the basis of an application submitted to the registrar directly by this person or indirectly by an the account administrator, provided it enables written reproduction and identification of that person (subsection 11(1)). A securities account for a contractual investment fund must be opened at the request of the management company of the fund. Companies holding the activity licence of a professional securities market participant and registered in a Member State of the European Union or in a country which Estonia has an agreement of mutual legal assistance in force may be account administrators (subsection 32(2)). 60. An account administrator is responsible for ensuring that information necessary for the performance of register acts is communicated to the registrar on time (subsection 31(2)). The owner of a securities account must notify the account administrator promptly of any changes in the information submitted by the owner upon opening the securities account (subsection 11(3)). The following ownership and identity information must be entered in the register with regard to a securities account: (i) name and address of the owner of the securities account; (ii) if a natural person, the personal identification code or,

in the absence thereof, date of birth; (iii) if a legal person, a reference to the register in which the legal person is registered, and its registry code; (iv) the number of the bank account held by the owner of the securities account and the name of the credit institution in which this bank account is held; amongst other relevant information. 61. The supervision of the account administrators is undertaken by the Financial Supervisory Authority. These are licensed by the Central Register of Securities. There are nine account administrators in Estonia. In case a breach of licence is detected, the supervisory authority is empowered to suspend the registration of the account administrator giving him reasonable time to attend to the breach. If no corrective action is taken by the company, the registration can be cancelled. In the three year review period, no breaches were found and no penalties levied 62. The Tax and Customs Board may access and obtain extracts from information (ownership and identity information entered in the register with regard to a securities account) in connection with proceedings concerning tax matters and for the purposes of performing obligations arising from the law (subsection 7(3)6)). In accordance with subsection 7(7) of the Estonian Central Register of Securities Act, the registrar must, to the extent and pursuant to the procedure established by the Minister of Finance, submit regular consolidated reports to the Tax and Customs Board, the Financial FSA and the Ministry of Finance concerning the ownership and identity information of owner of securities. This includes the name, address and personal identification code or registry code (or alternatively, the date of birth) of the owners of the securities, as well as the number of respective securities registered in the securities account opened in the name of each person included in the list of owners of the securities. Therefore, sufficient ownership and identity information is kept by the Estonian public authorities in respect of the owners of securities in public limited companies. 63. There are obligations in Estonia to report on major shareholdings of public companies stipulated in the Securities Market Act (SMA), based on EU directive 2004/109/EC of the European Parliament and Council on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC. Estonia has advised that it has fully harmonised these directives without any significant exemptions.
Foreign company
64. According to section 6(2) of the Income Tax Act, a legal person is a resident of Estonia if established pursuant to Estonian law. European public limited companies (SE) and European associations (SCE) with a registered
office in Estonia are also considered residents therein. The place of effective management is not a criterion for determining residence for tax purposes under Estonian tax law. However, if a non-resident company is effectively managed in Estonia, this may give rise to a permanent establishment in Estonia (subsection 7(1)2), Income Tax Act). 65. According to section 384 of the Commercial Code, if a foreign company permanently offers goods or services in its own name in Estonia, it must enter a branch in the commercial register. A branch is not a legal person and the foreign company will be liable for the obligations arising from the activities of the branch. The foreign company must appoint one or more natural persons with active legal capacity as directors of the branch and at least one director must be in Estonia, in a member country of European Economic Area or in Switzerland (subsection 385(1)). 66. The branch of a foreign company must be entered in the commercial register of its location on the petition of the director of the branch (subsection 386(1)). Section 387 stipulates the information and documents which must be entered in the commercial register, including the names and personal identification codes of the managers and directors of the branch, as well as of the legal representatives of the foreign company. However, it is noted that no ownership or identity information must be recorded at the commercial register in respect of the legal or beneficial shareholders of the foreign company. 67. The Estonian authorities indicated that the annual report which must be submitted by the director of a branch of a foreign company to the commercial register usually contains information about the owners of the companies (subsection 388(2), Commercial Code). Nevertheless, it is unclear whether this provision is sufficient to ensure that ownership information on foreign companies with a branch in Estonia is systematically available to the Estonian competent authorities in all cases. 68. If not entered in the commercial register as a branch, foreign legal persons commencing economic activities in Estonia through a permanent establishment must be registered in the regional structural unit of the Tax and Customs Board prior to the commencement of its activities (subsection 18(1)4), Taxation Act). Likewise, partnerships, communities and other associations of persons or pools of assets without the status of a legal person which are commencing economic activities in Estonia through a permanent establishment are also required to register at the Tax and Customs Board (subsections 18(1)4) and 18(11)2), Taxation Act). 69. Upon application, the following ownership and identity information must be disclosed to the Tax and Customs Board: (i) name, address, place of registration and code (if existent) of the foreign legal person; (ii) names and addresses of the members or co-owners with management rights of the

partnerships, communities and other associations of persons or pools of assets without legal personality; (iii) number of the bank account opened for the permanent establishment and the name of the credit institution in which the bank account is held; and (iv) name of the person responsible for the permanent establishment, and his or her personal identification code (or, in the absence of a personal identification code, date of birth) and residence (sections 21 and 211, Taxation Act). In the event of any changes, the Tax and Customs Board must be notified within five working days (section 23). 70. Amendments to the Taxation Act in 2012 ensured that companies formed outside of Estonia are now required to provide information identifying their owners as a part of registration requirements even if they are effectively managed therein. New section 21(11) of the Taxation Act provides that nonresident legal persons with a permanent establishment in Estonia must disclose identity information concerning their shareholders or members in the application to register at the Tax and Customs Board. In the event of any changes to the information provided under section 21, the Tax and Customs Board must be notified within five working days (section 23, Taxation Act). Failure to comply with such requirements is punishable by a fine of up to EUR 3 200, if committed by a legal person, or EUR 1 200 in any other case. 71. There were, however, two exceptions to this requirement which undermined this obligation with respect to foreign companies which are resident of: (i) a member state of the European Union (EU); or (ii) such a state with which Estonia has concluded an agreement enabling the Tax and Customs Board to obtain the necessary information from the competent authority of that state. In these two cases, the availability of information that identifies the owners of such foreign companies generally depended on the law of the jurisdiction in which the company is formed and it may not be available to Estonian competent authorities. 72. However, Estonia has now amended the Taxation Act by requiring all foreign companies with a permanent establishment in Estonia to disclose ownership information to the tax authority upon registration and in the event of change. New clause (6) which was added to the Taxation Act 21 subsection (1) is worded as follows: In order for the permanent establishment of a non-resident legal person and a sole proprietor specified in clause 18 (1) 4) of the Taxation Act to be registered, an application shall be submitted to the Tax and Customs Board and the following shall be set out in the application: 6) name and registry code or personal identification code, (or in the absence of the personal identity code the date of birth) of each shareholder or member of the legal person. Subsection 21 (11) has been repealed. The amendments of the Taxation Act entered into force on 1st of July 2013. As a result of these amendments, Estonia has bridged the gap that was previously identified in respect to foreign companies. The effect of these amendments is that
ownership and identity information on all legal and benefical shareholders of foreign companies operating in Estonia, is now available with the Tax and Customs Board. 73. The registration requirements for foreign companies are the same as for private limited companies.
Tax Requirements
74. Estonia has advised that domestic tax laws in Estonia do not impose any obligations for taxable persons (i.e. taxpayers and withholding agents, including companies, partnerships and foundations) to furnish on a regular basis information on the identities of their shareholders and owners to the tax authorities. Nevertheless, the tax authorities have the power, as described in Part B of this report, to request such information if the need arises. 75. Persons who are required to register with the Tax and Customs Board prior to the commencement of activities are, (1) legal persons who are not to be entered in the commercial register, (2) non-profit associations and foundations, (3) religious associations, (4) non-resident legal persons, (5) sole proprietors and (6) associations of persons or pools of assets. These persons should be commencing economic activities in Estonia through a permanent establishment which is not entered in the commercial register as a branch. Another class of persons are required to register themselves in the Tax and Customs Board within ten days of the date on which their tax liability arises in Estonia. They are, (1) non-resident employers including sole proprietors, (2) foreign missions, (3) other foreign agencies, (4) international organisations and their representatives if not earlier registered in the register of taxable persons or other register specified in the Taxation Act and (5) partnerships, communities and other associations of persons not having the status of a legal person. All persons mentioned above are required to notify the Tax and Customs Board of the termination of their activities, liquidation of their permanent establishment and changes in the information provided to the Tax and Customs Board (at the time of registration), within five working days. 76. If the information submitted by an applicant, at the time of registration, is incomplete or inaccurate, the Tax and Customs Board has the right to refuse to register it. Failure to submit documents by the due date, failure to register with a tax authority or knowing submission of incorrect documents to a tax authority is punishable by a fine of up to EUR 1 200. The same act, if committed by a legal person, is punishable by a fine of up to EUR 3 200. 77. Tax returns are submitted by taxpayers, electronically. At the time of filing returns, no document needs to be filed along with the tax return. Since the tax authorities receive taxpayer details electronic sources, a prefilled tax return is sent to the tax payer, electronically. This is done only in

the case of individuals. The taxpayer has to check the details and fill in any missing details and send it back electronically to the tax authorities. In case the taxpayer is selected for an audit, based on the risk analysis carried out by the tax authorities, he is bound to provide all relevant documents to the tax authorities. The tax authorities can enter the business premises as part of an on-site visit and they have complete access to all the documents (physical and electronic) as part of this process. They can take copies of documents and hard discs of computers for the purpose of their audit. The number of taxpayers in Estonia is tabulated below. In the three year review period Estonia has levied 24 142 penalties on 16 071 persons. The total amount of penalty levied is EUR 3 697 207.
Number of taxpayers in Estonia
Type of taxpayer Natural persons Legal persons Total % of natural persons % of legal persons Number of taxpayers 1 653 272 198 691 1 851 963 89.3% 10.7% Number of VAT liable taxpayers 4 182 68 257 72 439 5.8% 94.2%
Information kept by companies

78. The management board of a private limited company must keep a list of shareholders, which must contain the names, addresses, personal identification codes or registry codes of the shareholders and the nominal value of their shares (subsection 182(1)). If there are foreign shareholders, other identity information, such as birth date, address of residence or seat, and foreign personal identification code, must be recorded in the list of shareholders, in the absence of an Estonian personal identification code (section 62). Any changes in the ownership must be promptly recorded in the list of shareholders by the management board upon receipt of a notice of transfer (subsection 150(3)). 79. The shareholders, members of the management board and supervisory board, competent state agencies and other persons with a legitimate interest have the right to examine the list of shareholders (subsection 182(2)). Therefore, sufficient ownership and identity information in respect of the shareholder of a private limited company is kept either by the Estonian public authorities or by its management board and it appears that this information is sufficiently accessible by the Estonian competent authorities.
80. As described in the paragraph 58 of this report, in the case of a public limited company details of shareholders are held by the Estonian Central Register of Securities. In the case of private limited companies, if the company decided to register itself with the Register of Securities, this information will be available there. Otherwise it is held by the company itself and the information is also available at the commercial registry. 81. Private limited companies, along with public limited companies and other commercial associations have to file an annual report with the commercial registry. When a private limited company is founded, it needs to provide details of the equity participation to the Registry. In the annual report, it needs to provide details of any changes that may have occurred in the shareholder details. 82. In the event of failure to submit an annual return penalties can be applied. Penalties that have been levied by the commercial registry on private limited companies in this regard are described in section A.1.6. 83. Estonia has reported the number of companies that were obliged to submit their annual return in 2012 were 138 426 (131 580 in 2011). Of these, 60% have filed their annual report on time. 15% have filed their annual returns three months after the deadline. A further 25% of the companies have filed their annual report later than three months after the deadline or not filed it at all. Estonia has reported that that for the accounting year 2011, 28 519 entities did not submit their annual report at all. Of these 216 were found to be in liquidation, 54 were bankrupt and 9 605 have been removed from the Commercial Register. The remaining 18 644 companies were allowed to continue on the commercial register as they subsequently filed their annual returns. The commercial registry can levy a sanction on a company that files its annual report late. In the case of a company that does not file its annual return the registry can delete the entry but not enforce the submission of the annual report. 84. In the three year review period, Estonia has received 70 requests pertaining to ownership information of companies and it has been able to answer all these requests.
Nominees
85. Pursuant to subsection 6(1) of the Estonian Central Register of Securities Act, professional participants in the Estonian securities market have the right to own a nominee account as a special type of securities account. Foreign legal persons and other institutions also have the right to own a nominee account if, according to the law applicable to them, they have the right to hold securities in their own name and on behalf of another person.

86. A notation must be made in the commercial register indicating that the security account is a nominee account and identifying the owner of this account, but no information must be entered regarding the identity of the persons who own the securities (subsection 6(6), Estonian Central Register of Securities Act). Nominee accounts must be maintained separately for securities held on behalf of Estonian legal persons or other institutions, Estonian natural persons, foreign legal persons or other institutions, and foreign natural persons (subsection 6(7)). 87. Nominees are required to maintain records on the securities held in the account containing, inter alia, the following information with regard to all persons with whom he has entered into an authorisation agreement pursuant to which he has acquired securities: (i) name and address of the owner of the securities; (ii) if a natural person, the personal identification code or, in the absence thereof, date of birth; and (iii) if a legal person, a reference to the register in which the legal person is registered, and its registry code (subsections 5(4) and 6(7)). However, it is noted that nominees are not required to maintain records on the beneficial owner of the securities. 88. The Tax and Customs Board may access and obtain extracts from such information for the purposes of performing obligations arising from law and in the event they have a legitimate interest therein (subsection 7(3)6)). The registrar must, to the extent and pursuant to the procedure established by the Minister of Finance, submit regular consolidated reports to the Tax and Customs Board, the FSA and the Ministry of Finance concerning the ownership and identity information of owner of securities. This includes the names, addresses and personal identification codes (or alternatively, date of birth) or registry codes of the owners of the securities, as well as the number of respective securities registered in the nominee accounts (subsection 7(7)). 89. The Estonian authorities report that they have not encountered the use of nominees in practice.
Regulated activities and service providers

90. As of December 2012 there were a total of 8 credit institutions and 8 branches of foreign credit institutions operating in Estonia (i.e. banks), the vast majority controlled by foreign shareholders. At the end of 2012, there were also 4236 financial institutions (other than banks), including 19 savings and loan associations, operating with majority Estonian shareholders, 5 investment firms, operating with majority foreign shareholders, 18 management companies, 5 life insurance companies, operating with majority foreign shareholders, 11 non-life insurance companies and 4 branches of foreign non-life insurance companies, 49 investment funds, and 23 mandatory pension funds. The FSA is responsible for the supervision of a number of credit
and financial institutions operating in Estonia, as well as of the Estonian securities market (sections 2 and 6, Financial Supervision Authority Act). All Estonian financial institutions have to be registered in the Register of Economic Activities. 91. As to other service providers, there were at the end of 2012, 37 intermediaries in the real estate business, members of the Association of Estonian Real Estate Firms, 99 notaries listed in the Chamber of Notaries of the Republic of Estonia, 474 auditors listed in the Estonian Board of Auditors, approximately 15 000 accountants, which belong to 1900 service providing companies, and 846 members of the Estonian Bar Association, including 517 attorneys-at-law, 146 senior assistants of an attorney-at-law, 167 assistants of an attorney-at-law and 16 associated members. 4 92. The FIU exercises supervision over fulfilment of the requirements arising from the Estonian Money Laundering and Terrorist Financing Prevention Act (hereinafter, MLTFP Act) by the obligated persons, as well as by financial institutions which are not subject to supervision by the FSA. The MLTFP Act applies to credit and financial institutions (and foreign branches thereof), including insurers or insurance intermediaries, management companies, investment firms, and savings and loans associations (subsection 3(1)). The MLTFP Act also applies to notaries, auditors, accountants, attorneys, bailiffs, and other persons (i.e. the obligated persons) who provide consulting services if they act in the name and on account of a customer in financial or real property transactions or if they guide planning a transaction or perform an official act, which concerns (subsection 3(2)): the purchase or sale of immovable property, enterprises or companies; the management of the customers money, securities or other property; the opening or managing of bank or security accounts; the acquisition of funds necessary for the foundation, operation or management of companies; or the foundation, operation or management of trusts, companies or other similar entities.
93. Credit and financial institutions, as well as service providers, and their employees are required to comply with the identification and verification
4. According to Article 218 of the Civil Procedure Code, all lawyers with the qualification required (members of the Estonian Bar Association or other lawyers qualified at least at the Masters level) are allowed to represent their clients in the court so that no further specialisation in tax law is required in Estonia. The same applies in criminal proceedings.

obligations provided for in the MLTFP Act. Subsection 13(1) establishes the obligation to perform the following due diligence measures: identification of a client or a person participating in a transaction on the basis of documents and data submitted by him or her and verification of the submitted information on the basis of information obtained from a reliable and independent source; identification and verification of a natural person or a representative of a legal person and the right of representation; identification of the beneficial owner, 5 including gathering information about a legal person, trust, civil law partnership or other contractual legal arrangement on the basis of information provided in pre-contractual negotiations or obtained from another reliable and independent source; acquisition of information about a business relationship and the purpose of a transaction; and constant monitoring of a business relationship, including monitoring transactions entered into during the business relationship, regular verification of data used for identification, updating relevant documents, data or information and, if necessary, identification of the source and origin of funds used in the transaction.
94. Therefore, credit and financial institutions, as well as service providers, must keep sufficient and updated identity information regarding their clients, including identification of the beneficial owners. These obligations support the requirements which are placed on companies themselves and government agencies such as the commercial registries to ensure the availability of ownership information. 95. As has been pointed out above, service providers such as notaries, auditors and accountants are governed by the AML legislation. 96. Notaries are involved in all real estate transactions, transactions that involve sale of shares, establishment of companies, inheritance cases, divorce proceedings and drawing up of power-of-attorney for various transactions. They are required by the AML provisions to identify the person for whom they perform notarial services. This is done on the basis of documents that could include the Estonian identification card, passport, residence permit or driving license. All notaries use an electronic program called e-notary for
5. A beneficial owner is a natural person who, taking advantage of his or her influence, exercises control over a transaction, act or other person and in whose interests or favour or on whose account a transaction or act is performed (subsection 8(1), MLTFP Act).
all their work. This allows then access to all government registers, including the commercial register and the Police and Border Guard Board database. From these databases, it is possible for the notary to see the full name of the person, date of birth, nationality and the numbers of all the documents that these other agencies have issued to the person. The notary can then compare the data on the document before him with documents submitted to the other agencies, which must always coincide. This is also done in the case of foreign nationals who have the right of residence and possess an Estonian identification card. 97. Notaries are obliged to identify the beneficial owner from the commercial register of the company. If the shareholder is a legal person then the notary verifies all the shareholders of that legal person. He can do this through the e-notary program. In the case of foreign companies, the person participating in the transaction is asked to fill out a beneficial ownership form if it is impossible to identify the shareholders. Foreign persons, including representatives of legal entities are asked to fill in a beneficial ownership form in order to identify beneficial ownership. In the case of individuals, politically exposed persons are identified based on the statement of the participant. If the person refuses to fill in the form then performance of notarial acts is prohibited and the notary informs the FIU. 98. Notaries are also obliged to acquire information about the business relationship of the persons involved in a transaction, apart from the nature and purpose of the transaction. They are also obliged to monitor business relationships, transactions entered into during the course of the business relationship and the sources and origin of the funds used in the transaction. If the notary suspects that it might be a case of money laundering or terrorist financing or if the value of the transaction exceeds EUR 32 000 and is paid in cash, the notary is obliged to notify the FIU. The supervision of the notaries is done by the Ministry of Justice. The 99. Ministry forms teams that consist of three persons, two from the Ministry and one from the Chamber of Notaries. In the case of a regular supervisory visit, the notary receives two weeks notice. In the case of special supervisory visits, such a notice is not given. The supervisory visit covers all aspects of the notaries work including his compliance with his AML obligations. During the course of this supervisory visit, the notary is obliged to extend all help to the team and allow them access to all documents that they seek. After the visit, a proceeding is drawn up with the comments of the supervisory team. The notary has two weeks to challenge the findings of the supervisory team. Finally, the Ministry of Justice issues a directive to the notary listing the deficiencies discovered which he is then obliged to remove. 100. There are a total of 94 notaries in Estonia. As per the supervisory schedule of the Ministry of Justice, every notary is visited once in two years.

In the three year review period, 41 supervisory inspections were conducted by the Ministry of Justice. Four of these resulted in disciplinary actions and two in reprimands. Estonia reports that none of the shortcomings were in respect of AML obligations. 101. The duties of auditors are similar to those of notaries, in respect of AML supervision. Auditors provide services that cover tax audit and review work, providing tax advice and management consultancy. There are 250 individuals and 150 companies that provide these services. The AML obligations of auditors are triggered by the client relationship. When they provide services to any person, they have to ensure that they have the proper identity documents of the person concerned. The system followed by them is similar to that followed by notaries. 102. Auditors are supervised by their chamber under the guidance of the Public Oversight Board. The supervision is in the nature of a peer review, with the team consisting of three auditors. Every year about 40-50 inspections are carried out. The auditor, who is inspected, is bound to extend all cooperation to the inspecting team. The way the inspections are planned, individual auditors are inspected once in six years and audit companies are inspected once in three years. In case a breach is detected, an audit is carried out again the following year on the same person to check whether the deficiencies have been plugged. The sanction that can be applied varies from a monetary penalty of EUR 50 000 to the revocation of the license of the auditor. In the three years under review, fines were levied in four cases. 103. Another body that has members who are charged with AML obligations is the Estonian Bar Association. The Bar Association has 850 members (700 active members) who are arranged into 187 law firms. There are some practicing lawyers in Estonia who are not members of the Bar Association. These lawyers are supervised by the FIU for their AML duties. The members of the Bar Association are generally engaged in advisory work and legal representation. The advisory work exposes them to their AML obligations. It includes acting as proxy for a client in a transaction. 104. The members of the Bar Association follow the AML practices discussed in the preceding paragraphs on notaries. The Bar Association has issued AML guidelines for its members along with some related guidelines on management of law firms. AML related training is mandatory for all members of the Bar Association. The Bar Association also cooperates with the FIU in the matter of training and guidance. 105. The Bar Association is managed by an eight member management board headed by a Chairman. This management board supervises the work of the members. About 20 supervisory visits are carried out in a year. These inspections cover general compliance as also matters related to AML
procedures. This on-site visit also includes interviews of the partners of the law firm to see whether client identification procedures are correctly followed. 106. Where a breach is discovered in the course of these inspections, the person can be asked to appear before the disciplinary committee of the Bar Association. The sanctions that can be applied are a fine ranging from EUR 64 to EUR 16 000 depending on the seriousness of the breach. The person can also be suspended from practice. In the three year review period, three members have been barred from practice and fines have been levied in two cases. 107. In conclusion, Estonia has a good system of AML supervision on the part of these professionals. There are systems in place to ensure that they carry out their AML obligations and that are supported by effective sanctions. In practice, Estonia has not faced any problem in obtaining information from service providers and no peer has reported that Estonia has not been able to provide any information that was held by these service providers.
Bearer shares (ToR A.1.2)

108. According to Estonian law, shares must always be registered, and bearer shares are thus not allowed.
Partnerships (ToR A.1.3) Types of Partnerships

109. Under Estonian law, general and limited partnerships are considered legal persons, as companies (subsection 2(1), Commercial Code). 6 The following types of partnerships may be established under the Commercial Code: general partnership (sections 79-124); and limited partnership (sections 125-134).
110. A general partnership (tishing) is a legal person in which two or more partners operate under a common business name and are jointly liable for the obligations of the general partnership with all of their assets (section 79). A limited partnership (usaldushing) is a legal person in which two or more persons operate under a common business name, and at least one of the persons (general partner) is liable for the obligations of the limited partnership with all of the general partners assets, and at least one of the persons
6. The Law of Obligations Act provides for another type of civil law arrangement (seltsing), based on a contract, which is not considered as a legal person and is transparent for tax purposes.

(limited partner) is liable for the obligations of the limited partnership to the extent of the limited partners contribution (section 125). The provisions concerning general partnerships also apply to limited partnerships unless otherwise provided for in the Commercial Code (subsection 125(2)).
Information kept by public authorities

111. Information about the identity of the partners of general or limited partnerships, and therefore information on their ownership, is recorded in the commercial register. The same procedural requirements and updating obligations described above under ToR A.1.1 are equally applicable to partnerships. According to subsections 84(4) and 127(1) of the Commercial Code, the names, personal identification codes or registry codes of the partners of a general or limited partnership must be entered in the commercial register. However, in respect of partners which are legal persons, it is noted that no ownership or identity information must be recorded at the commercial register in respect of the legal or beneficial shareholders of the partner. Nevertheless, sufficient ownership and identity information is kept by the Estonian public authorities in respect of the partners of a general or limited partnership formed under Estonian law. 112. In Estonia, partnerships are treated on a par with companies, as far as reporting procedures are concerned. In the three year review period, Estonia has not received any request pertaining to ownership information of partnerships. The number of general and limited partnerships registered and the level of compliance is tabulated below.
Details of partnerships registered and filing of annual returns with the commercial registry
General Partnerships Entered in Commercial Register As on 30.06.2009 As in 30.06.2010 As on 30.06.2011 As on 30.06.2012 434 491 737 1 700 Annual report filed 113 129 111 803 Limited Partnerships Entered in Commercial Register 1 538 1 591 1 410 1 749 Annual report filed 416 262 342 294
113. Estonia has reported that there is no legal or practical impediment in obtaining information regarding partnerships as the Estonian Tax and Customs Board can access information directly from the entities.
Trusts (ToR A.1.4)

114. Estonian law does not include the concept of trust, and trusts cannot be set up under Estonian law. Estonia has not signed the Convention on the Law Applicable to Trusts and on their Recognition (1 July 1985, The Hague). There are, nevertheless, no obstacles for foreign trusts to operate in Estonia or for Estonian individuals and legal persons to act as trustees, administrators or protectors for foreign trusts. 115. All taxpayers are required to keep accounts, accounting documents and registers as well as other documents as required by the relevant legal acts and to submit these documents to the tax administration upon request. Estonian resident professional trustees are subject to tax in respect of income arising from their management of the trust but not in respect of the assets of the trust itself. 116. The Estonian authorities have reported that they have not had any practical experience in this matter as no treaty partner has ever requested information related to trusts. However, the identity information shall be covered by the AML law and Estonia confirms that it will be able to obtain and exchange information in relation to trustees, administrators or protectors of foreign trusts.
Tax laws
117. The Estonian authorities have indicated they are not aware of any cases where foreign trusts have been established or administered by Estonian service providers. They have no experience with trustees of foreign trusts, trust assets or income, and they are unsure how this issue would be dealt with for tax purposes. Estonia has advised that domestic tax laws in Estonia do not impose any obligations for taxable persons (i.e. taxpayers and withholding agents, including individuals, companies, partnerships and foundations) to furnish on a regular basis information on the identities of their shareholders and owners to the tax authorities. Nevertheless, the tax authorities have the power, as described in Part B of this report, to retrieve information directly from taxable persons and to request information from third parties, including credit and financial institutions, in order to ascertain facts relevant to tax proceedings (sections 56, 57, 59(2) and 61, Taxation Act). 118. In practice, the Estonian Tax and Customs Board has wide powers of discovery and inspection. They also have access to all relevant taxpayer related information. The information that is held by the tax authorities has been described in discussing the information held in the case of companies, applies here also.
Anti-money laundering laws

119. The MLTFP Act applies to notaries, auditors, accountants, attorneys, bailiffs, and other persons who provide consulting services if they act in the

name and on account of a customer in financial or real property transactions or if they guide planning a transaction or perform an official act, which concerns the management of the customers money, securities or other property, and the foundation, operation or management of trusts, companies or other similar entities, amongst other activities (subsection 3(2)5)). 120. Due diligence obligations apply to such service providers and include the identification of the beneficial owner, including gathering information on the ownership and control structure of a legal person, trust, civil law partnership or other contractual legal arrangement on the basis of information provided in pre-contractual negotiations or obtained from another reliable and independent source (subsection 13(1)3)). Therefore, Estonian individuals or legal persons who act as trustees or administrators of foreign trusts in a professional capacity are required to keep sufficient and updated identity information regarding their clients, including identification of the beneficial owners. 121. The supervision of the AML laws has two limbs in Estonia; supervision by the FIU and the FSA on the one hand and by professionals bodies such as those of notaries, accountants and lawyers on the other. The supervision carried out by service providers has been discussed in an earlier section of this report. 122. The supervisory activities of the FSA cover (1) credit institutions, (2) insurance companies, (3) insurance intermediaries, (4) fund management companies, (5) investment and pension funds, (6) securities market, (7) investment firms, (8) issues of securities, (9) e-money institutions, (10) payment service providers and (11) SMEs considered as qualified investors. The FSA was created in 2003 by merging four different supervisory authorities. The FSA consists of two sub-divisions, Prudential Supervision and Business Conduct Supervision. Both divisions are concerned with AML supervision. The Prudential Supervision division handles matters related to market entry and assessing of documents related to fit and proper internal procedures. The Business Conduct division deals with business processes and compliance with laws etc. The FSA is responsible for the supervision of a number of credit and financial institutions operating in Estonia, as well as of the Estonian securities market. The FSA supervises those entities that it licenses. 123. On-going supervision by the FSA can involve off-site examinations, on-site visits and ad-hoc questionnaires. These are undertaken on the basis of an annual supervision plan. This is based on risk assessment criteria. There are a total of 70 persons working in the FSA, of which 40 are engaged in supervisory work. The ad-hoc questionnaire is the most used supervisory method. On receipt of this questionnaire, the supervised entity has three weeks to reply. Following the reply, the FSA can take follow-up action that includes calling persons for interviews and examination of all relevant
records (including CCTV footage and phone records). This could develop into an on-site visit if the FSA thinks it necessary. 124. An on-site visit allows the FSA to check how internal procedures, including AML rules, operate in practice. They can conduct interviews, check files etc. The on-site visit checks whether the CDD rules are being followed in practice. The CDD covers checking the identity of the customer, details of beneficial ownership, purpose of the business relationship, past records and evidence of business activity. The supervisory activities of the FSA may be for general supervision or specifically for AML procedures. The total number of on-site inspection conducted by the FSA in 2012 was 15 (20 in 2011 and 14 in 2010). The number of different kinds of supervisory methods used in the three year review period, specifically for AML procedures, is tabulated below. Estonia has clarified that a desk audit includes combined actions with general or market conduct supervision. Here the AML component is used in assessing the relevant issues during the market entry process or scrutinizing the origin of the funds of certain transactions and purpose of business relations, etc.). This is not done in an off-site examination.
Examinations by the FSA
On-site examinations 2012 2011 2010 4 3 2 Off-site examinations 5 0 38 Ad-hoc questionnaire 3 4 4 Other type (desk audit) 5 2 8
125. In cases where the supervisory action results in the discovery of a breach of procedure, the FSA issues an administrative precept (instruction) asking the supervised entity to ensure that its procedures are corrected. In the event of a failure to comply with this precept, the FSA has the power to levy a continuing fine on the entity. The upper limit for the fine is, in the case of a natural person, up to EUR 1 200 for the first occasion and altogether up to EUR 4 800. In the case of a legal person, it is up to EUR 3 200 for the first occasion and altogether up to EUR 48 000. The number of precepts and fines that have been levied in the three year review period are tabulated below.
Precepts and fines imposed by the FSA
Number of precepts 2010 2011 2012 2 8 7 Number of fines 1 1 1

126. The other agency involved in AML supervision is the FIU. The FIU was established in 1999. As indicated earlier in this report, the FIU exercises supervision over compliance with the Money Laundering and Terrorist Financing Prevention Act (MLTFP Act) by the obligated persons (including service providers and professionals), as well as by financial institutions which are not subject to supervision by the FSA. 127. The supervisory work of the FIU is comprised of on-site inspections and off-site audits. The selection of cases for these audits is based on risk analysis that is carried out by the FIU based on information that it receives from various sources. Off-site audit consists of sending a tailored questionnaire to the entity being supervised. The replies that are provided in the off-site audit can develop into an on-site inspection. The on-site inspection involves interviews, examining documents. In general, the FIU has wide powers of discovery and inspection. 128. After looking at the practical experience that has been demonstrated by Estonia in the matter of AML supervision, it is clear that Estonia has an effective mechanism in place to monitor its AML obligations. No peer has provided any input that would lead to an adverse conclusion in this regard.
Foundations (ToR A.1.5)

129. A foundation is a legal person in private law which has no members and which is established to administer and use assets to achieve the objectives specified in its articles of association. A foundation cannot be transformed into a different legal person (section 1, Foundations Act). It may be founded by one or several founders for an unspecified term, until stated objectives are achieved, or for a specified term (section 5), or on the basis of a notarised will which must contain a foundation resolution (section 7). The passive legal capacity of a foundation commences as of its entry 130. in the non-profit associations and foundations register, and terminates as of its deletion from the register. The registration departments of the county courts must maintain a register of non-profit associations and foundations located in their jurisdiction (section 75, Non-Profit Association Act and section 591, Code of Civil Procedure). The entries in the non-profit associations and foundations register are public, i.e. everyone has the right to examine and to obtain copies of registry cards and of documents in the public files of nonprofit associations. However, the registry file may only be examined by any person with a legitimate interest (section 77, Non-profit Associations Act). 131. In order to enter a foundation in the register of its location, the management board of the foundation must submit an application (section 11). The foundation resolution and articles of association must be appended to the application, containing: (i) the names and residences or locations and
addresses of the founders and their personal identification codes or registry codes (subsection 6(1)2)); (ii) the sum of money or other assets, and their value, to be transferred to the foundation by the founders (subsection 6(1)3)); and (iii) the set of beneficiaries (subsection 8(1)5)). 132. Estonian foundations can be established for private or public purposes and they can have identifiable persons as beneficiaries. Under section 9 of the Foundations Act, a beneficiary is a person to whom disbursements from the assets of the foundation may be made pursuant to the articles of association of the foundation. This provision also establishes that if a set of beneficiaries is not determined by the articles of association, all persons who are entitled to receive disbursements pursuant to the objectives of the foundation must be deemed to be beneficiaries. 133. It is therefore noted that there may be cases where the articles of association is silent about the set of beneficiaries. The Estonian authorities argued that the management board must keep identity information concerning the beneficiaries in order to organise the accounting of the foundation pursuant to section 33 of the Foundations Act and the Accounting Act. However, it was unclear from the supplementary report, whether the accounting information kept by the management board is sufficient to ascertain the identity of the beneficiaries in all cases. 134. To address this issue amendments of the Accounting Act came into force on 4 June 2012. According to the Accounting Act Annex 3 section (8), notes on accounts which are prepared in accordance with the Accounting Act shall set out at least the following information: other relevant information, including a list of beneficiaries of the foundation accounting entity or reference to source where the corresponding information is available from a public source. 135. Members of the management board, as well as members of the supervisory board, must be natural persons with active legal capacity (subsections 17(2) and 26(1)). The residence of at least half of the members of the management board must be in Estonia or other Member State of the European Economic Area or in Switzerland. There are no such requirement regards members of the supervisory board. Upon a change of the members of the supervisory board, the management board must, within five working days, submit an application to the register and notify of the time of the change of the members and the basis therefore as specified in the articles of association. A complete list of the members of the supervisory board must be appended to the application, including their names, personal identification codes and residences, the dates of commencement of their authority and the consent of new members concerning membership (section 26).

136. Following the amendments that have been made to the Accounting Act all relevant information with regard to the beneficiaries of a foundation is now available. In the three year review period, Estonia has not received any request that sought ownership information of foundations. In any case, foundations, being not-for-profit entities have to register themselves in the commercial register. This ensures that ownership information of the foundation will be available to the commercial register and all public authorities who have access to the commercial register of Estonia.
Other relevant entities and arrangement

137. Under Estonia law, commercial associations are considered legal persons, as companies (subsection 2(1) of the Commercial Code) and are governed by the Commercial Associations Act. 7. A commercial association (tulundushistu) is a company the purpose of which is to support and promote the economic interests of its members through joint economic activity in which the members participate and which is liable for its obligations with all of its assets. The articles of association may prescribe that the members are jointly liable for the obligations of the association with all of their assets (full personal liability) or are liable to the extent determined by the articles of association (additional liability). Unless the articles of association prescribe the personal liability of the members of the association, the share of the association capital shall be at least EUR 2 500. The management board of a commercial association must maintain a 138. list of members of the association which contains in respect of each member: (i) the residence or seat and personal identification code (or alternatively, date of birth) or registry code; (ii) the amount, size and time of payment of contributions; (iii) information on refund of contributions and transfer of membership; and (iv) the date of acceptance into, exit or exclusion from the membership of the association (section 15, Commercial Associations Act). This ownership and identity information about the members of a commercial association must be registered in the list of the members and, if the articles of association prescribe the full personal liability or additional liability of the members of the association, also in the commercial register (subsections 8(7) and 15(5), Commercial Associations Act).
7.
Other types of associations exist in Estonia, i.e. apartment and building associations, but those are not considered relevant entities for the purpose of this review, due to the specificity of their activities.
Enforcement provisions to ensure availability of information (ToR A.1.6)

139. Section 71 of the Commercial Code regulates the liability of an undertaking regarding non-performance of an obligation to provide information to the commercial register. It applies to public and private limited companies, general and limited partnerships, commercial associations, and foundations (in conjunction with section 76 of the Non-profit Associations Act). If a person fails to submit information provided by law or submits incorrect information to the registrar, regardless of whether or not such information is subject to entry in the register, the registrar may impose a fine of not less than EUR 320, without first issuing the ruling of warning specified in the Code of Civil Procedure. 140. Subsection 601(1) of the Code of Civil Procedure provides that if the court has certified information on the entry of incorrect data in the commercial register or non-profit associations and foundations register, or on failure to submit data subject to entry in the register pursuant to law, the court must make a ruling whereby the persons obligated to submit the data are ordered to submit the correct data or file an objection against the ruling, and are cautioned that failure to comply may result in the imposition of a fine. The court may also impose a fine in other cases provided by law. 141. The management board of a private limited company is responsible for keeping a list of shareholders whereas the management board of the public limited company is responsible for ensuring the timely submission of correct information provided by law to the person maintaining the share register. Non-compliance with these obligations may give rise to liability on the members of management board (sections 187 and 315, Commercial Code). Likewise, if the management board of a foundation submits incorrect information to the register, the members of the management board are jointly liable for any damage caused thereby (section 13, Foundations Act). 142. The commercial registry has sufficient powers to levy sanctions in cases where an entity does not submit correct and timely information. The registrar may, pursuant to the procedure provided by the Code of Civil Procedure, impose a fine on an undertaking and any other person required to submit the information to the register that fails to submit information provided by law or submits incorrect information to the registrar. A copy of the ruling whereby a fine is imposed shall be immediately delivered to the undertaking or the person fined. If an obligation is not performed after the imposition of a fine, a new fine may be imposed. If the person on whom the fine is imposed does not pay, the ruling is sent to a bailiff for compulsory execution.

143. The numbers of fines and penalties levied by the registrar during the three year review period are tabulated below.
Fines imposed by the commercial registry during the review period
2010 Warnings of fine Rulings of imposing a fine Warnings of deletion Warnings of compulsory dissolution Rulings of entry of deletion (Commercial Code 60 (3)) Entries of deletion (Commercial Code 60 (3)) 3 942 12 057 7 868 142 1 468 2 237 2011 705 2 674 11 664 164 3 999 1 050 2012 660 791 13 110 68 3 918 4 962
144. As discussed earlier in the report the commercial registry has the power to levy fines upon companies that do not file their annual reports on time. The number of fines levied by the commercial registry on private companies is tabulated below.
Fines imposed by the commercial registry on private limited companies
2010 Number of rulings imposing a fine Number of cautions for eliminating the deficiencies in annual report Number of cautions of deletion Number of entries of deletion 245 5 589 8 072 1 204 2011 3 418 4 219 12 062 3 212 2012 9 4 213 13 033 4 333
145. Pursuant to section 390 of the Commercial Code, a branch must be deleted from the commercial register, amongst other reasons, if: (i) the branch does not have a director and a director is not appointed within three months after a caution by the registrar; or (ii) the director of the branch does not submit the required annual report during the terms specified in section 388 of the Commercial Code and also does not do so during an additional term specified by the registrar. After deletion of a branch from the register, the foreign company may only continue its activities in Estonia as an undertaking if it has a new branch entered in the register. 146. Under section 1348 of the Credit Institutions Act, failure by a credit institution to make public or submit to the FSA a mandatory report, document, explanation or other data in a timely manner, or submission of an inaccurate or misleading information, is punishable by a fine of up to EUR 32 000. In addition, section 57 of the MLTFP Act stipulates that the failure to comply with the identification and verification obligation is punishable
by a fine of up to EUR 1 200. The same act, if committed by a legal person, is punishable by a fine of up to EUR 32 000. The supervisory and enforcement powers of the FSA have been dealt 147. with earlier in this report in dealing with the AML supervision carried out by the FSA. That discussion is relevant here also. It can be seen from that discussion that the FSA has sufficient powers to enforce the obligations of the institutions that it supervises. 148. Pursuant to section 154 of the Taxation Act, failure to submit a tax return, documents, things or other information by the due date, failure to register with a tax authority, submission of false information or knowing submission of incorrect documents to a tax authority, failure to comply with the requirements for the keeping of records, failure to comply with an order of a tax authority or obstruction of the activities of a tax authority in another manner is punishable by a fine of up to EUR 1 200. The same act, if committed by a legal person, is punishable by a fine of up to EUR 3 200. 149. In accordance with sections 3891 and 3892 of the Penal Code, failure to submit information or submission of incorrect information to the tax authority for the purpose of reduction of an obligation to pay a tax or to withhold is punishable by a pecuniary punishment or up to three years imprisonment (increased to up to five years if a tax underpayment exceeds EUR 320 000). Conscious submission of incorrect information to the tax authority is punishable by a pecuniary punishment or up to five years imprisonment (increased to up to seven years if a tax underpayment exceeds EUR 320 000). 150. The review of practical experience has shown that Estonia, through the Tax and Customs Board, has sufficient practical mechanisms to ensure that entities maintain the ownership and identity information that they are obliged to maintain. These mechanisms have been discussed in the section on tax authorities above. The officers of the Tax and Customs Board have wide powers to seek production of any relevant document. The Tax and Customs Board carries out periodic checks in this regard, to check whether the relevant persons are fulfilling their obligations. 151. In the event of a breach being detected, the Tax and Customs Board can levy penalties. A penalty payment to enforce the performance of the relevant obligation shall not exceed EUR 640 the first time and EUR 2 000 the second time. Penalty payments imposed to enforce the performance of the obligation shall not exceed EUR 2 640 in total. A written penalty note is given to the person for not following the order seeking explanations and documents for EOI. The penalty note does not cancel the obligation for giving explanations and submitting documents.

152. In the three year review period, the Estonian Tax and Customs Board has levied 24 142 penalties on 16 071 persons. The total amount of penalty levied is EUR 3 697 207.
Determination and factors underlying recommendations
Determination The element is in place. Phase 2 rating Compliant.
A.2. Accounting records

Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
153. The Terms of Reference set out the standards for the maintenance of reliable accounting records and their necessary retention period. It provides that reliable accounting records should be kept for all relevant entities and arrangements. To be reliable, accounting records should (i) correctly explain all transactions, (ii) enable the financial position of the entity or arrangement to be determined with reasonable accuracy at any time and (iii) allow financial statements to be prepared. Accounting records should further include underlying documentation, such as invoices, contracts, etc. Accounting records must be kept for a minimum of five years.
General requirements (ToR A.2.1) and Underlying documentation (ToR A.2.2)

154. Accounting and record keeping obligations in Estonia are primarily governed by the Accounting Act and the Taxation Act, through which Estonia imposes comprehensive requirements for relevant legal persons in Estonia to maintain reliable and detailed accounting records, in accordance with internationally accepted accounting principles, and to maintain the source documents for these records for at least seven years. These requirements are reinforced by the Taxation Act, which requires all entities that are taxable in Estonia to keep accounts in accordance with the procedure provided for in the Accounting Act. 155. The Accounting Act is applicable to accounting entities, defined under subsection 2(2) as including all legal persons in private or public law, sole proprietors, and branches of foreign companies registered in Estonia. This definition covers all the business entities recognised in Estonia,
including public and private limited companies, limited and general partnerships, commercial and building associations, foundations, and branches of foreign companies. 156. All accounting entities are required by the Accounting Act to organise their accounts in such a way as to ensure the provision of up-to-date, relevant, objective and comparable information concerning the financial position, economic performance and cash flows of the entity. This includes requirements to document all its business transactions, post and record all its business transactions in accounting ledgers and journals, prepare and submit annual reports and other financial statements, and preserve relevant accounting documents (section 4). A business transaction is defined in the Accounting Act as a transac157. tion concluded by an accounting entity, a transaction between third parties, or any other relevant event that changes the assets, liabilities or owners equity of the accounting entity. An accounting entity is required to document and record all its business transactions in journals and ledgers within a reasonable period of time following a business transaction (section 6). All accounting entries must be supported by source documents or by summary documents prepared based on source documents. 158. Chapters 6, 8 and 9 of the Accounting Act prescribe in detail the types of information accounting entities must record in their accounting journals and ledgers to enable proper financial statements to be prepared. An accounting entry must contain, amongst other items: the date of the business transaction; the number of the accounting entry; the accounts debited and credited and the corresponding amounts; a short description of the business transaction; and the name and number of the source (summary) document.
159. Chapter 7 of the Accounting Act defines source documents as documents that certify business transactions and prescribes what these documents must contain. They include, amongst other items: the name and number of the document; the date of preparation of the document; the economic substance of the transaction; the figures relating to the transaction (quantity, price and total amount); and

the names of the parties to the transaction
160. Subsection 57(3) of the Taxation Act reinforces the above requirements for taxable accounting entities and further requires that these accounts organised in a manner which enables an overview to be obtained within a reasonable period of time of the conduct of the transaction and of facts relevant for taxation purposes, including revenue, expenditure, assets and liabilities. 161. Supplementary to the Accounting Act and Taxation Act, the Value Added Tax Act (VAT Act) also imposes obligations for taxable persons to submit VAT returns containing relevant accounting and transaction records. 162. Subsection 36(2) of the Income Tax Act imposes record keeping obligations on natural persons, who are required to maintain accounting records on their income and expenses in a manner which clearly sets out the data necessary for determining the taxable income. A taxpayer is also required to preserve the documents related to income and expenses (i.e. underlying documents). While the Estonian tax laws are silent about trustees of a foreign trust, the record keeping obligations described above are applicable to all Estonian resident taxpayers, whether natural or legal person. 163. In relation to practical experience, it has been discussed in the preceding paragraphs of this report that the Tax and Customs Board has effectively used its powers to enforce all obligations upon taxpayers, including those to maintain accounting records and underlying documentation. Estonia has reported that if the trustee is not the beneficial owner of the trust income, no taxation would occur. The trustee would only be taxable as regards any income he or she receives from the trust or for the services provided. The trustee is bound to maintain accounting records to demonstrate this income. The Accounting Act is enforced by the Registration Department of the Court. The Registrar of the Court may, pursuant to the Code of Civil Procedure, impose a fine on any person required to submit information who fails to submit it. A fine of no less than EUR 200 can be imposed. This penalty can also be levied when a person fails to provide information required in connection with an EOI request. 164. As mentioned earlier, a penalty payment to enforce the performance of the obligations to maintain accounting records and underlying documentation, shall not exceed EUR 640 the first time and EUR 2 000 the second time. Penalty payments imposed to enforce the performance of the obligations shall not exceed EUR 2 640 in total. A written penalty note is given to the person for not following the order seeking explanations and documents for EOI. The penalty note does not cancel the obligation for giving explanations and submitting documents. In the three year review period, the Tax and Customs Board levied 24 142 penalties on 16 071 persons. The total amount
of penalty levied was EUR 3 697 207. This included penalties for not meeting the obligations for maintenance of accounting records. Estonia confirms that no separate statistics on this are available.
Document retention (ToR A.2.3)

165. The Accounting Act requires accounting entities to preserve their source documents for at least seven years as of the end of the financial year during which the source document was recorded in the accounts. Accounting ledgers, journals, contracts, financial statements, reports and other business documents which are necessary for reconstructing business transactions during audits must be preserved by the accounting entity for seven years as of the end of the corresponding financial year (section 12). 166. The Taxation Act reinforces this requirement for taxable accounting entities and requires such entities to preserve documents related to transactions and payments and other documents relevant for taxation purposes for at least seven years as of 1 January of the year following the preparation or receipt of the document, or in the case of files or dossiers, the making of the last entry therein (section 58). 167. There are no specific provisions under the Accounting Act that impose sanctions for breach of the accounting requirements. Under section 3811 of the Penal Code, the following conducts are punishable by a pecuniary punishment or up to one year of imprisonment: (i) knowing violation of the requirements for maintaining accounting; (ii) knowing and unlawful destruction, concealment or damaging of accounting documents; or (iii) failure to submit information or submission of incorrect information in accounting documents if the possibility to obtain an overview of the financial situation of the accounting entity is thereby significantly reduced. The same act, if the court has announced the bankruptcy of the accounting entity or terminated bankruptcy proceedings due to abatement, is punishable by a pecuniary punishment or up to three years of imprisonment. Breach of the record keeping requirements under the Taxation Act carries a fine of up to EUR 1 200 if committed by a natural person, or up to EUR 3 200 if committed by a legal person. 168. The Tax and Customs Board has sufficient powers to ensure that obligated persons meet their obligations to maintain accounting records and underlying documentation. These powers include carrying out on-site inspections or asking the person to provide the relevant documents. In practice, the officers of the Tax and Customs Board carry out periodic checks and any breach is visited with a penalty. Estonia has reported that according to the Taxation Act, if the taxpayer has not preserved its accounting documentation (all documentation or part of it), than he will be penalised. The penalty is

EUR 1 200 if committed by a natural person and EUR 3 200 if committed by a legal person. Estonia has reported that during the review period, in about 6 cases fines were levied on account of deficiencies in maintaining accounting information. 169. In the three year review period, Estonia received about 300 requests dealing with accounting records. Estonia reports that it has been able to provide information in 95% of the cases. The cases where the information could not be provided were cases where the taxpayer was not available within the territory of Estonia. Estonia has reported that since these persons were not available at the given addresses, the information could be provided only from the databases. No other information could be gathered in this small number of cases. It was also not possible to gather information in these cases from a third party.
A.3. Banking information

Banking information should be available for all account-holders.
Record-keeping requirements (ToR A.3.1)

170. Under subsection 91(11) of the Credit Institutions Act, a credit institution is required to prepare accounting reports concerning three, six, nine and 12 months of the current financial year in conformity to the international accounting standards for financial reporting, and to submit such reports to the FSA not later than 2 months after the end of the reporting period. According to subsections 23(2) and 24(3) of the MLTFP Act, a credit 171. or financial institution must register the following personal data concerning each of its clients: the name and residence or seat of the person and, in the case of representation, the name and residence or seat of the representative; the document used for identification, and the number and date and place of issue thereof;
in the case of a natural person, the personal identification code or the date and place of birth of the natural person; in the case of a legal person, the data of the beneficial owners of the legal person, as well as the names of the directors and/or members of the management board or a body replacing it.
172. Section 8 of the MLTFP Act defines a beneficial owner as a natural person who, taking advantage of his or her influence, exercises control over a transaction, act or another person, and in whose interests or favour or on whose account the transaction or act is made. A beneficial owner as a natural person who: permanently owns the shares or voting rights of the company or exercises final control over the management of a company: (i) by owning over 25% of shares or voting rights through direct or indirect shareholding or control, including in the form of bearer shares; or (ii) by otherwise exercising control over the management of a legal person.; or is a beneficiary of or exercises significant control over a legal person or civil law partnership or another contractual legal arrangement, which administers or distributes property: (i) to the extent of no less than 25%; or (ii) in whose interests mainly the legal person, civil law partnership or another contractual legal arrangement is set up or operates.
173. Pursuant to subsection 25(2) of the MLTFP Act, a credit or financial institution must register the following data concerning each transaction to be carried out: upon identification and verification of a client: the date or period of time of the conclusion of the transaction and a description of the content of the transaction; upon the opening of an account: the type of account, account number, currency or securities account; upon the deposit of property: the deposit number, the market price of the property on the day of deposit or, if it is not possible to determine the market price of the specified property, an exact description of the property; upon the renting and use of a safe deposit box: the number of the safe deposit box and other data necessary for identification of the user thereof;

upon the making of a payment relating to shares, debt instruments or other securities: a description of the securities, the monetary value of the transaction, the currency and the account number; upon entry into an insurance contract: the number of the account from which the first premium amount is debited; upon the making of a payment on the basis of an insurance contract: the number of the account to which the payment is credited; upon the transfer of money: data submitted by the person concerning the origin, sender and recipient of the money; and in the case of other transactions: the amount of the transaction, the currency and the account number or account numbers.
174. In accordance with section 26 of the MLTFP Act, credit and financial institutions must preserve this data for at least five years after the end of a contractual relationship with a client. The documents and data specified above must be preserved in a manner which allows for an exhaustive and immediate reply to enquiries from the FIU or other investigative bodies or from a court pursuant to legislation. The internal rules of procedure of a credit or financial institution must set out detailed requirements and procedures for preservation of the documents and data. 175. Banks and financial institutions are supervised by the FSA. As mentioned earlier, the supervisory activities of the FSA cover (1) credit institutions, (2) insurance companies, (3) insurance intermediaries, (4) fund management companies, (5) investment and pension funds, (6) securities market, (7) investment firms, (8) issues of securities, (9) e-money institutions, (10) payment service providers and (11) SMEs considered as qualified investors. 176. The supervisory work of the FSA is based on a risk analysis that is in turn based on statistics received from the Central bank, information collated from its own supervision and market research. The main objective of supervision is to ensure that financial institutions are able to meet their obligations to their customers to pay out deposits, insurance losses, pension contributions, etc. An important task of the Financial Supervision Authority is also to help increase the efficiency of the financial sector, avoid systemic risks, and prevent the abuse of the financial sector for criminal purposes. 177. The supervision carried out by the FSA takes the form of off-site audits and on-site inspections. The off-site audit consists of sending a tailored questionnaire to the institution while the on-site visit involves conducting interviews and checking records at the premises of the institution. When a credit institution is supervised, the on-site inspection covers, (1) corporate governance, (2) business continuity processes, (3) recovery plans, (4) IT
systems, (5) management of credit risk, (6) liquidity management, (7) reporting and (8) internal audit. 178. When an insurance company is being supervised, the ambit of the supervision covers (1) information security processes, (2) presentation of obligatory information to policy holders and (3) loss adjustment and settlement. Similarly, when a fund management company and investment firm is supervised, it covers (1) risk management, (2) safeguarding client assets, (3) prevention of money laundering and terrorist financing, (4) execution of client transaction orders, (5) internal control systems and (5) measures for business continuity. 179. The supervisory activities of the FSA are quite comprehensive and they ensure that the financial entities fulfil all required obligations. The FSA carried out 15 on-site supervisions is 2012 (20 in 2011 and 14 in 2010). The details of fines levied have been provided earlier in this report, when dealing with AML procedures. 180. In the three year review period, Estonia received about 300 requests pertaining to banking information and they have answered about 95% of these. The cases where the information could not be provided were only those where the person did not actually have an account in the bank or the bank account did not belong to the taxpayer concerned. The account did not belong to the taxpayer or any connected person. Estonia reports that even in these cases, it has provided its treaty partner with information that it could find in its database. Estonia has reported that they do not require the requesting jurisdiction to provide the name or any such specific identification. If the name is not available, the account number or any other identifying information will suffice in seeking the information from the bank. Estonia has sufficient practical mechanisms to ensure that banks and 181. financial institutions maintain all information that they are required to. In the peer input received, no adverse comment has been made on Estonias ability to exchange banking information.
COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION 57
B. Access to Information
Overview
182. A variety of information may be needed in a tax enquiry and jurisdictions should have the authority to obtain all such information. This includes information held by banks and other financial institutions as well as information concerning the ownership of companies or the identity of interest holders in other persons or entities, such as partnerships and trusts, as well as accounting information in respect of all such entities. This section of the report examines whether Estonias legal and regulatory framework gives the authorities access powers that cover all relevant persons and information and whether rights and safeguards are compatible with effective exchange of information (EOI). 183. Estonias tax authorities have broad powers to obtain bank, ownership, identity, and accounting information and have measures to compel the production of such information. The ability of Estonias tax authorities to obtain information for EOI purposes is derived from its general access powers under the Taxation Act coupled with the authority provided by the relevant EOI agreements. No domestic interest requirement exists for Estonias competent authority to exercise their information gathering powers. 184. Estonias competent authority, when requested by a foreign counterpart, has broad powers to retrieve information directly from taxpayers and withholding agents (hereinafter, taxable persons). Estonias competent authority has also powers to request information from third parties, including credit and financial institutions, in order to ascertain facts relevant to tax proceedings. 185. In 2012, Estonia has amended the Taxation Act and the Credit Institutions Act to allow the Estonia tax authority to access bank information as long as the client can be identified by any means. This brings the Estonia legal framework fully in line with the standard in terms of the competent authoritys ability to obtain and provide information pursuant to an EOI request.
58 COMPLIANCE WITH THE STANDARDS: ACCESS TO INFORMATION

186. Estonia has made amendments to the Taxation Act which now expressly permits the Estonian tax authority to disclose information subject to tax secrecy to a competent authority of a foreign state, pursuant to the procedure prescribed by a treaty, without the consent or without having informed a taxable person or a third person. 187. The Phase 2 review of Estonia showed that it is able to exchange all kinds of information. The review of the practical application of the legal framework and the peer input received indicated that there are no major impediments in the EOI processes of Estonia that hinder effective EOI. Of the 774 requests received approximately 300 pertained to banking information and Estonia was able to answer all except those where there was a mismatch between the bank account mentioned in the request and the taxpayer under investigation. In these cases Estonia provided all information that was available from its databases.
B.1. Competent Authoritys ability to obtain and provide information

Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information).
Bank, ownership, and identity information (ToR B.1.1) and accounting records (ToR B.1.2)
188. The Tax and Customs Board is a government agency which operates within the area of government of the Ministry of Finance. The Tax and Customs Board acts as the competent authority for the purpose of EOI upon request under Estonias DTCs (subsections 51(1) and 51(2), Taxation Act). The Tax and Customs Board is also empowered to engage in EOI on spontaneous and automatic bases (subsections 51(21) and 51(22), Taxation Act).
Ownership and identity information and accounting records

189. The Tax and Customs Board has broad authority to obtain ownership and identity information, as well as accounting records, from taxable persons, third parties and other regional government agencies for EOI purposes. Subsection 60(1) of the Taxation Act authorises the Tax and Customs Board to obtain any information relating to tax proceedings, in oral or written form, directly from taxpayers or their representatives. The Tax and Customs Board may also compel a taxable person, his representative or third parties to appear at the offices of the Tax and Customs Board to provide information (subsections 60(1) and 61(1)).
190. Under subsection 61(1) of the Taxation Act, the Tax and Customs Board has the right to request information from third parties in order to ascertain facts relevant to tax proceedings, unless they have the right to refuse to disclose evidence or information pursuant to law (see ToR B.1.5 below). In order to request information from such third parties, the Tax and Customs Board has to issue an order which sets out the name of the taxable person in connection with whose tax matter information is being collected and the reason for contacting the third party (subsection 61(3)). 191. However, the Tax and Customs Board may only request information from third parties after attempting to obtain the relevant information directly from the taxable person (subsection 61(2)). This requirement is waived if this would hinder the tax proceedings, if the Tax and Customs Board has no information concerning the residence or seat of the taxable person or if the taxable person cannot be reached at the address known to the Tax and Customs Board. 192. The competent authority is located in the Tax and Customs Board in the Intelligence Department under the Deputy Director General on Support Processes. The Tax and Customs Board is a unified tax administration and there is no separation between a central office and field offices. All officers fall within the centralised control of the Tax and Customs Board. This means that the officers in the Tax and Customs Board can exercise the same powers that are available to any field officer. There are 14 officials within the Intelligence Department who deal with information exchange and most of them are based in the capital, Tallinn. 193. The Intelligence Department does not deal only with information on request but also deals with automatic exchange (including savings information) and spontaneous exchange. The officials of the Intelligence Department also participate in administrative enquiries. The actual manner in which information exchange takes place is described in element C.5. The Intelligence Department has access to all the official databases that are operating in Estonia, including the commercial register, the database of the Central Register of Securities, the Register of Economic Activities all the databases that have been united by X-Road, the Land Register, Commercial Register, Taxpayers Register, Population Register, Road administration database, Traffic Insurance Fund, Police Databases, mobile phone operators, Border Guard Register, and the Register of Small Ships. Estonia has reported that of the information that was requested during the three year review period, 50% was already available with the Tax and Customs Board. This facilitates a quick response and explains why Estonia is able to answer most of its requests within 90 days. The Tax and Customs Board can also seek information from a third party to answer an EOI request.
Bank information
194. One of the requirements under the Terms of Reference B.1.1 is that competent authorities should have the power to obtain and provide foreseeably relevant information held by banks within the jurisdictions territorial jurisdiction. This obligation is articulated in Articles 1 and 5(5) of the 2002 OECD Model Agreement on Exchange of Information on Tax Matters (OECD Model TIEA) and accompanying commentary. 195. Article 5(5)(a) of the OECD Model TIEA prescribes a list of information that a requesting State shall provide to the recipient State to demonstrate the foreseeable relevance of the information to the request, and includes (a) the identity of the person under examination or investigation. The commentary to Article 5(5), notes at paragraph 58 that: While paragraph 5 contains important procedural requirements that are intended to ensure that fishing expeditions do not occur, subparagraphs a) through g) nevertheless need to be interpreted liberally in order not to frustrate effective exchange of information. Paragraph 59 of the Commentary, gives an example of the application of sub-paragraph 5(5)(a), that: Where a Party is asking for account information but the identity of the accountholder(s) is unknown, subparagraph (a) may be satisfied by supplying the account number or similar identifying information. This issue is relevant because, until 2012, access to bank information 196. in Estonia for the purposes of EOI required among other items the provision of the name or business name of the client with regard to whom the inquiry was submitted and the personal identification code or date of birth or registry code of the client. 197. In Estonia, banks are required to maintain general confidentiality of client information under subsection 88(1) of the Credit Institutions Act. The disclosure of such information to tax authorities is governed by subsection 88(5)4), which allow a credit institution to disclose information subject to banking secrecy to a tax administrator pursuant to the provisions of the Taxation Act. In 2012, Estonia amended the Credit Institutions Act to introduce a new section 88(61). This allows banks, pursuant to the provisions of the Taxation Act, to disclose confidential information in response to an inquiry from a tax authority if the inquiry of the tax authority sets out: the name or business name of the client together with the personal identification code, date of birth or registry code; or the account number of the client; or another unique identifier which would enable identification of the client with respect to whom the inquiry has been lodged.
198. The term unique identifier is not defined in the Credit Institutions Act. The Estonian authorities have indicated that they interpret this term consistently with the definition of unique identifier under EU legislation. According to the Payment Services Directive, the term unique identifier means a combination of letters, numbers or symbols specified to the payment service user by the payment service provider and to be provided by the payment service user to identify unambiguously the other payment service user and/or his payment account for a payment transaction (article 4(21), Council Directive 2007/64/EC, of 13 November 2007). This definition has been transposed into Estonian domestic law by section 709(12) of the Law of Obligations Act. 8 The European Commission has issued non-binding guidance 9 concerning the Payment Services Directive, according to which the term unique identifier is broadly interpreted and includes, for example, a IBAN (for bank transfers), a card number (for card payments) or e-mail address (for payments via the internet). 199. Section 61 of the Taxation Act empowers the Tax and Customs Board to obtain information from third parties, including banks. Following the 2012 amendments, the new wording of section 61(3), the tax authority shall issue an order in compliance with the requirements specified in 46 of this Act which also sets out the name or other details enabling identification of the taxable person in connection with whose tax matter information is being collected and the reason for contacting the third party (emphasis added ). 200. Article 5(5)(a) of the OECD Model TIEA prescribes a list of information that a requesting State shall provide to the recipient State to demonstrate the foreseeable relevance of the information to the request, and includes (a) the identity of the person under examination or investigation. The commentary to Article 5(5), notes at paragraph 57 that: While paragraph 5 contains important procedural requirements that are intended to ensure that fishing expeditions do not occur, subparagraphs a) through g) nevertheless need to be interpreted liberally in order not to frustrate effective exchange of information. Paragraph 58 of the Commentary, gives an example of the application of sub-paragraph 5(5)(a), that: Where a Party is asking for account information but the identity of the accountholder(s) is unknown, subparagraph (a) may be satisfied by supplying the account number or similar identifying information. As such, the term unique identifier, as interpreted by Estonia, appears to be consistent with the standard.
8. 9.
http://ec.europa.eu/internal_market/payments/docs/framework/transposition/ estonia_en.pdf. http://ec.europa.eu/internal_market/payments/docs/framework/transposition/ faq_en.pdf.

201. As far as practical experience is concerned, Estonia has not faced any problems in exchanging banking information, whenever sought by treaty partners. Whenever bank information is sought, the competent authority sends a written order to the bank, seeking the information. As per the timelines of the EU Directive 2011/16/EU, Estonia has six months to answer. However, practical experience has shown that the competent authority is able to obtain the information much earlier as most of the information requests in the three year review period have been answered within 90 days. 202. Estonia has reported that they do not require the requesting jurisdiction to provide the name or any such specific identification. If the name is not available, the account number or any other identifying information will suffice in seeking the information from the bank.
Powers to obtain information

203. The Tax and Customs Board has broad powers under the Taxation Act to make inquiries and investigations in order to ascertain facts relevant to tax proceedings (which would include an EOI request). A taxable person has the obligation to cooperate with and not prevent a tax authority from performing procedural acts (section 56). A tax authority can examine any documents relating to the economic or professional activities of a taxable person or to the payment of taxes by a taxable person, and to take inventory or control measurements of goods, materials, other assets, work performed and services provided (subsection 59(2)). 204. Under the Taxation Act, a tax authority is vested with powers (i) to obtain oral and written information from a taxable person or a representative (subsection 60(1)); (ii) to request a taxable person or third party (subject to subsection 61(2)) to present things 10 and bearer securities or submit documents in the possession of this person (subsection 62(1)); and (iii) to make copies and extracts or to remove documents (section 65). 205. In order to conduct inspections, officials of tax authorities have the right to access the premises where the business or professional activities of a taxable person are carried out (subsection 72(1)). However, they do not have the right to conduct searches, open locked spaces or storage rooms or enter a dwelling against the will of the persons residing therein, even if the business or professional activities of a person are carried out in such premises. 206. Furthermore, officials of tax authorities have powers to inspect property owned or possessed by persons not engaged in business or professional activities, provided that the inspection does not involve entry into or
10. The term things is defined under General Part of the Civil Code Act to mean any corporal object.
a search of the dwelling or premises of the person against the persons will (subsection 72(2)). An advance notice of the conduct of an inspection is generally required, except for urgent cases or when the tax authority is unable to ascertain the residence or seat of the owner or possessor of the property (subsection 72(3)). 207. These restrictions are only lifted when a violation of the Taxation Act or Acts concerning taxes have been established in the activities of the taxable person and criminal proceedings have been commenced in connection with such violation. Under such circumstances the tax authority will have the right to conduct an inspection without the above restrictions, on the basis of an order from the Prosecutors Office or a court ruling. 208. It is not clear whether these restrictions have a significant impact on Estonias ability to obtain information for EOI purposes. It should be noted that search and seizure powers are only one of several avenue of obtaining information, and as described in the following paragraphs, Estonia is able to issue administrative acts compelling persons to deliver requested information the tax authority, with penalties for non-compliance. 209. The powers that the Tax and Customs Board has at its disposal have proved to be adequate to collect the required information. Estonia has reported that there has been no case where the taxpayer or the holder of the information has refused to provide information. This is demonstrated by the fact that most of the information requests have been answered within 90 days. 210. When the officials of the Tax and Customs Board visit the business premises of a person, they have the power to take into their possession all relevant documents, computers and electronic media. They can then take copies of these documents for their use. Practical experience has shown that these powers are sufficient.
Use of information gathering measures absent domestic tax interest (ToR B.1.3)
211. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. Estonia has no domestic tax interest with respect to its information gathering powers. That is, information gathering powers provided to the Tax and Customs Board under the Taxation Act, as described above, can be used to provide EOI assistance regardless of whether Estonia needs the information for its own domestic tax purposes.

212. The Estonian authorities make full use of their domestic information gathering powers in response to an EOI request whether they have an interest in the information for their own tax purposes or not.
Compulsory powers (ToR B.1.4)

213. As previously described, the Tax and Customs Board has broad powers to compel the production of information from taxable persons and third parties under sections 59 to 72 of the Taxation Act. The Tax and Customs Board exercises these compulsory powers by issuing an administrative act directed at the taxable person or third parties. When setting a term for the performance of obligations to submit information or documents, a tax authority may issue a warning, stating that a penalty payment may be imposed for failure to perform an obligation within the term (subsection 67(1)). The penalty payment must not exceed EUR 640 the first time, EUR 2 000 the second time, or EUR 2 640) in total (subsection 67(3)). 214. If a person fails to perform an obligation imposed by an administrative act by the due date stated in a warning, the person must pay the penalty payment specified in the warning. The tax authority must, in an order, submit a claim for payment of a penalty payment to an obligated person, set a term for payment and issue a warning stating that, in the event of failure to pay the penalty payment within the specified term, the claim will be subject to compulsory execution (subsection 67(2)). 215. In addition, failure to submit a tax return, documents, things or other information by the due date, failure to register with a tax authority, submission of false information or knowing submission of incorrect documents to a tax authority, failure to comply with the requirements for the keeping of records, failure to comply with an order of a tax authority or obstruction of the activities of a tax authority in another manner is punishable by a fine of up to EUR 1200 (subsection 154(1)). If the same act is committed by a legal person, the fine limit is increased to EUR 3 200 (subsection 154(2)). 216. Statistics have been provided on the number of penalties levied by the Tax and Customs Board. There are no separate statistics on the number of penalties levied where there was an EOI issue involved. However, Estonia has reported that there has never been an occasion where they had any practical difficulty in collecting information for EOI purposes. 217. Although Estonia has experienced no difficulties in obtaining information for EOI purposes, it is the practice of the tax authorities, in all communications with information-holders, to mention the country from which the request is received and the name of the foreign taxpayer. In the event that the requesting jurisdiction asks Estonia to obtain information from an Estonian information-holder without disclosing the name of the requesting
jurisdiction and the foreign taxpayer, Estonia will not approach the Estonian information-holder at all. Instead, it will provide relevant information from its databases only. This could potentially impede effective exchange of information where the requested information may not be obtainable from the databases or other sources. Estonia is recommended to change its practice to ensure that it can also exercise its compulsory powers in such circumstances.
Secrecy provisions (ToR B.1.5) Legal privilege and professional secrecy

218. All of Estonias EOI agreements permit Estonia to decline a request if responding to the request would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy. This follows the standards set forth in Article 26 of the OECD Model Tax Convention and the OECD Model TIEA. 219. These exceptions are reinforced in Estonias domestic laws, which limit the scope of information that the Tax and Customs Board is able to obtain through its information gathering powers. Section 64 of the Taxation Act allows taxable persons or third parties to refuse to provide information or submit evidence that are the subject of legal privilege, professional and business secrets, and state secrets. However, this provision goes beyond the standard to allow taxable persons and third parties to refuse to provide information and submit documents under the following circumstances: persons who assist advocates subject to legal privilege; auditors and accountants in the course of providing auditing or accounting services; spouses, direct blood relatives, sisters and brothers, descendants of sisters or brothers, and direct blood relatives or sisters or brothers of spouses of taxable persons (i.e. relatives), unless they are required to provide information in a given matter or submit documents in connection with their own liability; and persons in respect of questions to which giving an answer would mean that the persons would incriminate themselves or a relative, as defined above.
220. Estonia has advised that these provisions are overridden by disclosure obligations imposed by a DTC containing a provision similar to Article 26(3)(c) of the OECD Model Tax Convention.

221. Practical experience has shown that Estonia has not faced any problem in exchanging information in matters discussed above. No taxpayer has refused to provide information using any of the grounds mentioned in para 215. Estonia has also reported that there have been no cases where a lawyer has invoked this right and refused to provide information. In general there are strong reporting obligations placed upon professionals that have proved adequate to ensure effective EOI.
Bank secrecy
222. Subsection 88(1) of the Credit Institutions Act requires Estonian banks to guarantee the confidentiality of the clients data. All data and assessments which are known to a credit institution concerning the customers of the credit institution are deemed to be information subject to banking secrecy. However, as described above, the banking secrecy obligations are lifted under subsection 88(5)4), which allows Estonian banks to disclose such information to tax authorities under specific circumstances.
B.2. Notification requirements and rights and safeguards

The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.
Not unduly prevent or delay exchange of information (ToR B.2.1)

223. The relevant provisions governing the Estonian tax authoritys legal right to exchange information with its EOI partners can be found in sections 26, 27 and 30 of the Taxation Act. Section 26 of the Taxation Act provides all information obtained by the tax authority in the course of its official duties are information subject to tax secrecy and that such information may only be disclosed with the written permission of the taxable person or in the cases specified in Sections 27-30 of the Act Section 27 defines the scope of information that is considered public information and permits their disclosure to anyone.
224. Following the amendments of 2012, section 30 of the Taxation Act now expressly permits the Estonian tax authority to disclose information subject to tax secrecy to a competent authority of a foreign state. pursuant to the procedure prescribed by a treaty, without the consent or without having informed a taxable person or a third person.
Notification
225. If the Tax and Customs Board needs to obtain information for the purposes of fulfilling the request, the Tax and Customs Board must first attempt to obtain the information directly from the taxpayer or his representative before it can obtain the information from a third party. Nevertheless, the Tax and Customs Board is not required to do so if doing so would hinder the facts relevant for the purposes for tax proceedings from being ascertained , if the Tax and Customs Board has no information concerning the residence or seat of the taxable person or if the taxable person cannot be reached at the address known to the Tax and Customs Board. This procedure is in line with the international standard, which provides that notification requirements and procedures should not prevent or delay the exchange of information, as the practices followed by Estonia would allow it to seek information directly from the bank if requested by the requesting jurisdiction not to approach the taxpayer. 226. Following the legal amendments to the Taxation Act that have been described in the preceding paragraphs, all notification requirements have ceased to exist. Practical experience has shown that nothing in this regard hinders effective EOI.
Appeal procedure
227. Pursuant to the provisions of the Administrative Procedure Act and section 46 of the Taxation Act, the Tax and Customs Board needs to issue an administrative order to compel a taxable person or his representative to appear at the offices of the Tax and Customs Board (subsection 60(2)), or to compel a third party to provide information relevant to a tax proceeding (subsection 61(3)). Such administrative acts which impose obligations on the addressee must set out, among other items, the factual and legal basis for its issue and its terms for compliance (section 46). They must also contain a reference to the opportunities, terms, procedures and place for challenging the administrative act. The Tax and Customs Board typically sets a deadline of two weeks for the recipient of an administrative act to respond. 228. Under sections 137 and 138 of the Taxation Act, a tax person and third party can challenge administrative acts, including those issued for information gathering purposes, if they feel that the administrative act

violates their rights or freedoms. Such challenges must be filed to the Tax and Customs Board within 30 days of the date of notification of or date of delivery of the administrative act. If the challenge is deficient, the Tax and Customs Board may give the taxpayer another 10 days to rectify the challenge. 229. The Tax and Customs Board will assess the challenge and make a decision on whether to accept or deny the challenge, within 40 days after the receipt thereof (subsections 147(3) and 147(4)). As a rule, the filing of a challenge must not prevent the challenged administrative act from being executed, except for the execution of orders issued to a third party pursuant to sections 61 or 62 of the Taxation Act (section 146). 230. If the challenge is unsuccessful, the tax person or third party may file an action with an administrative court pursuant to the provisions of the Code of Administrative Court Procedure (subsection 151(1)). A person may also recourse directly to a court without first filing a challenge with the Tax and Customs Board (subsection 151(2)). In accordance with subsection 13(1) of the Code of Administrative Court Procedure, if no term is provided by law, an administrative court must adjudicate a matter within a reasonable period of time. Under the Taxation Act, there is no specified timeframe for the Administrative Court to render a decision on a challenge by a tax person or third party on an administrative act issued by the Tax and Customs Board. 231. These appeal procedures apply in all cases where the Tax and Customs Board exercises compulsory powers under the Taxation Act. Peer inputs to Estonias Phase 1 review have not indicated that these procedures affect Estonias ability to respond to international requests for information in tax matters within 90 days. Estonia has also advised that the entire process typically takes about 70 days. As far as practical experience is concerned, Estonia has reported that 232. they have not encountered a case where their information gathering process has been challenged. The peer input also indicates that this appeal procedure has not in any way hindered the effective EOI practices of Estonia.
COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION 69
C. Exchanging Information
Overview
233. Jurisdictions generally cannot exchange information for tax purposes unless they have a legal basis or mechanism for doing so. In Estonia, the legal authority to exchange information is derived from double tax conventions (DTCs), as well as from domestic law to a lesser extent. This section of the report examines whether Estonia has a network of information exchange that would allow it to achieve effective exchange of information (EOI) in practice. 234. Estonia has an extensive treaty network that allows for exchange of information for tax purposes with all relevant partners. Estonia has signed 57 DTCs, of which 51 are in force (see Annex 2). 235. In addition to its DTCs, Estonia is also able to exchange information with other EU Member States in accordance with the EU Mutual Assistance Directive, and to automatically exchange of information on interest income earned by EU residents in accordance with the EU Savings Directive. 236. All exchange of information articles in Estonias DTCs contain confidentiality provisions to ensure that the information exchanged will be disclosed only to persons authorised by the DTCs. While each of the articles might vary slightly in wording, these provisions generally contain all of the essential aspects of Article 26(2) of the OECD Model Tax Convention. Although most of the EOI provisions in Estonias DTCs do not include Articles 26(4) and 26(5) of the OECD Model Tax Convention, these DTCs allow Estonia to exchange information according to the international standard. 237. In practice, Estonia follows robust practices that ensure confidentiality throughout the entire EOI process. Information that is received from the requesting jurisdiction and the information that is gathered are both well protected. Estonia follows office practices that are conducive to proper security of the documents and it also has good IT systems. Estonia has, in its practices, been able to ensure that the rights and safeguards available to the
70 COMPLIANCE WITH THE STANDARDS: EXCHANGING INFORMATION

persons in respect of whom information is exchanged, are protected without hindering effective EOI. 238. Estonias DTCs ensure that the contracting parties are not obliged to provide information which would disclose trade, business, industrial, commercial or professional secrets or information which is the subject of attorney-client privilege or to make disclosures which would be contrary to public policy. There are no legal restrictions on the ability of Estonias competent authority to respond to requests within 90 days of receipt by providing the information requested or by providing an update on the status of the request. 239. With regard to information exchange agreements, Estonia has postponed negotiations with at least three jurisdictions who approached it for an agreement. The reason advanced by Estonia was that these jurisdictions did not have significant economic relations with Estonia. Estonia also states that another reason for this postponement is the lack of resources coupled with previous commitments to negotiate treaties with other treaty partners. This approach is not in keeping with the international standard in that jurisdictions should have EOI agreements with all relevant partners, meaning those partners who are interested in entering into an information exchange agreement. Moreover, Estonia, as a matter of practice, has not agreed to negotiate TIEAs. It is recommended that Estonia enter into EOI agreements with all relevant partners and negotiates proposed agreements irrespective of their form. 240. On 29 May 2013, Estonia signed the Multilateral Convention on Mutual Administrative Assistance.
C.1. Exchange of information mechanisms

Exchange of information mechanisms should allow for effective exchange of information.
241. Under subsection 65(5) and section 121 of the Constitution of the Republic of Estonia, the DTCs signed by Estonia are given the force of law once they are ratified by the Riigikogu, which is the Estonian parliament. The competent authority to request and provide information under Estonias DTCs and domestic laws is the Tax and Customs Board, a government agency which operates under the Ministry of Finance 242. The Taxation Act allows Estonia to enter into EOI agreements concerning taxation which override domestic law. Subsection 51(2) of the Taxation Act specifies that in [i]nternational professional assistance shall be sought and granted on the basis of an international agreement, as well as pursuant to the procedure provided for in the legislation of the European Union.
243. Estonia is able to exchange information with other EU Member States 11 under the Council Directive 2011/16/EU on administrative co-operation in the field of taxation. Estonia also provides automatic exchange of information on interest income earned by residents of EU and certain other countries and territories, in accordance with the EU Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments (EU Savings Directive).
Foreseeably relevant standard (ToR C.1.1)

244. The international standard for exchange of information envisages information exchange to the widest possible extent, but does not allow speculative requests for information that have no apparent nexus to an open inquiry or investigation. The balance between these two competing considerations is captured in the standard of foreseeable relevance which is included in paragraph 1 of Article 26 of the OECD Model Tax Convention set out below: The competent authorities of the contracting states shall exchange such information as is forseeably relevant to the carrying out of the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states or their political subdivisions or local authorities in so far as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. 245. Estonias DTCs generally provide for the exchange of information that is necessary for carrying out the provisions of the Convention or of the domestic tax laws of the Contracting States. There are a few exceptions. The DTCs with Canada and the United States use the term relevant. The agreements with Albania, Isle of Man and Macedonia use the term foreseeably relevant. The DTC with Switzerland limits EOI to the purposes of carrying out the provisions of the DTC. 246. The commentary to Article 26(5) of the OECD Model Tax Convention refers to the standard of foreseeable relevance and states that the Contracting States may agree to an alternative formulation of this standard that is consistent with the scope of the Article, for instance by replacing foreseeably relevant with necessary or relevant. In view of
11.
Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

this recognition, all the DTCs concluded by Estonia, with the exception of its DTC with Switzerland, meet the foreseeably relevant standard. 247. As of 30 June 2012, Estonia has also initialed eight other DTCs with Bahrain, Bosnia and Herzegovina, Cyprus, Morocco, Mexico, Oman, Thailand, Uzbekistan and a protocol with China. The protocols amending its DTCs with Singapore and Georgia are now in force. Estonian authorities have indicated that these DTCs and protocols meet the foreseeably relevant standard and will be signed as soon as possible 12. Estonia has signed two new DTCs with India and the UAE, which are 248. now in force. Both these DTCs provide for the exchange of information that is foreseeably relevant to the administration and enforcement of the domestic tax laws of the contracting parties. This scope is set out in Article 26(1) of both DTCs. The DTC with Jersey is in force. 249. No issues have arisen in relation to the foreseeably relevant standard in practice and no requests have been declined on the grounds of foreseeable relevance.
In respect of all persons (ToR C.1.2)

250. For exchange of information to be effective it is necessary that a jurisdictions obligation to provide information is not restricted by the residence or nationality of the person to whom the information relates or by the residence or nationality of the person in possession or control of the information requested. For this reason the international standard for exchange of information envisages that EOI mechanisms will provide for exchange of information in respect of all persons. 251. Article 26(1) of the OECD Model Tax Convention indicates that [t] he exchange of information is not restricted by Article 1, which defines the personal scope of application of the Convention and indicates that it applies to persons who are residents of one or both of the Contracting States. All of Estonias DTCs contain this sentence, except for the DTCs with Germany and Switzerland. 252. However, Article 26(1) of the DTC with Germany applies to carrying out the provisions of the Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. As a result of this language, these DTCs would not be limited to residents because all taxpayers, resident or not, are liable to the domestic taxes listed in Article 2. Exchange
12. Treaties with Bahrain, Cyprus, Mexico, Thailand and Uzbekistan were signed in second half of 2012.
of information in respect of all persons is thus possible under the terms of this DTC. Estonia has reported that it has initialled a new protocol with Switzerland in April 2013 which is in line with the international standard. 253. In contrast, Article 26(1) of the DTC with Switzerland provides for exchange of information only for the purposes of carrying out the provisions of the present Convention in relation of the taxes which are the subject of the Convention.Since this provision only apply to residents of either Switzerland or Estonia, exchange of information in respect of all persons is not possible under the Estonia-Switzerland DTC. 254. The new DTCs with India and UAE provide for EOI in respect of all persons.
Exchange of information held by financial institutions, nominees, agents and ownership and identity information (ToR C.1.3)
255. Jurisdictions cannot engage in effective exchange of information if they cannot exchange information held by financial institutions, nominees or persons acting in an agency or a fiduciary capacity. Both the OECD Model Tax Convention and the Model Agreement on Exchange of Information, which are the authoritative sources of the standards, stipulate that bank secrecy cannot form the basis for declining a request to provide information and that a request for information cannot be declined solely because the information is held by nominees or persons acting in an agency or fiduciary capacity or because the information relates to an ownership interest. 256. The new DTCs with India and UAE contain Article 26(5) of the OECD Model Tax Convention spelling out the obligations of the contracting parties to exchange information held by financial institutions, nominees, agents and ownership and identity information. 257. Article 26(5) of the OECD Model Tax Convention states that a contracting state may not decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person. Except for the DTCs with Albania (Article 26(5)), Bulgaria (Article 25(4)), India (Article 26(5)), Isle of Man (Article 24(5)), Jersey (Article 27(5)), Georgia (Protocol article 7), Singapore (Protocol article 1), Serbia (Article 26(5)), the UAE (Article 27(5)) and the United States (Article 26(3) 13), none of Estonias other 43 DTCs (including the one with
13. Estonias DTC with the United States uses a different text, which also meets the requirements of Article 26(5) of the OECD Model Tax Convention: Notwithstanding paragraph 2, laws or practices of the requested State pertaining to the disclosure of information by financial institutions, nominees or

Russia, which is not in force yet) contain such a provision. Estonia reports that in 2012 it signed treaties with Uzbekistan, Bahrain, Cyprus and Mexico. All these DTCs contain the equivalent provision of Article 26 (5). 258. However, the absence of this paragraph does not automatically create restrictions on exchange of bank information. The commentary to Article 26(5) indicates that while paragraph 5, added to the Model Tax Convention in 2005, represents a change in the structure of the Article, it should not be interpreted as suggesting that the previous version of the Article did not authorise the exchange of such information. 259. It is recommended that Estonia update the DTCs with partners that currently have restrictions under their domestic laws on access to bank information in the absence of a specific DTC provision requiring such access for EOI purposes. Currently, three of Estonias DTCs partners Austria, Luxembourg and Switzerland have restrictions which prevent them from accessing bank information for EOI purposes. It is also noted that some of Estonias other DTC partners 14 may not be able to access bank information or information held by fiduciaries for the purpose of EOI in the absence of a provision similar to Article 26(5) of the OECD Model Tax Convention. Estonia reports that the new treaty with Luxembourg was initialled on 20.09.2012 and the new Protocol amending the treaty with Switzerland was initialled on 25.04.2013. Both treaties will contain EOI article in line with the international standard upon entering into force. 260. Estonia should continue to renegotiate such DTCs to include a provision similar to Article 26(5) of the OECD Model Taxation Convention. This is particularly so in Estonias DTC with Switzerland, Article 26(1) of which states that [n]o information as aforesaid shall be exchanged which would disclose any trade, business, banking, industrial or professional secret or trade process [emphasis added ], effectively prohibiting the exchange of any banking information. Estonia has reported that it has initialled a new protocol with Switzerland in April 2013 which is in line with the international standard.
14.
persons acting in an agency or fiduciary capacity, or respecting ownership of debt instruments or interests in a person shall not affect the authority of the requested State. The competent authorities shall have the authority to obtain and provide information notwithstanding such disclosure laws and practices.. This concern 11 jurisdictions which have not been peer reviewed by the Global Forum or covered by the Tax Co-operation 2010: Towards a Level Playing Field Assessment by the Global Forum on Transparency and Exchange of Information for Tax Purposes, i.e. Armenia, Azerbaijan, Belarus, Croatia, Georgia, Kazakhstan, Latvia, Moldova, Romania, and Ukraine.
261. A new Council Directive 2011/16/EU on administrative co-operation in the field of taxation was adopted by the European Council on 15 February 2011. This Directive allows for exchange of foreseeably relevant information to the standard, providing inter alia for exchange of banking information on request for taxable periods after 31 December 2010 (Article 18). As of 1 January 2013, Estonia is able to exchange bank information upon request with Austria and Luxembourg under the new Directive. 262. During the three year review period, Estonia received approximately 300 requests that dealt with banking information. Estonia has been able to answer 95% of these. The ones that Estonia could not answer were those where the taxpayer named did not have an account in the bank or the account number that was provided did not belong to the taxpayer under investigation or any person connected to the taxpayer. In these cases Estonia provided its treaty partner with all relevant information available from its databases.
Absence of domestic tax interest (ToR C.1.4)

263. The concept of domestic tax interest describes a situation where a contracting party can only provide information to another contracting party if it has an interest in the requested information for its own tax purposes. A refusal to provide information based on a domestic tax interest requirement is not consistent with the international standard. EOI partners must be able to use their information gathering measures even though invoked solely to obtain and provide information to the requesting jurisdiction. 264. The DTCs with India and UAE contain Article 26(4) of the OECD Model Tax Convention, which obliges the Contracting Parties to use their information gathering measures to obtain and provide information to the requesting jurisdiction even in cases where the requested Party does not have a domestic interest in the requested information. 265. There are no domestic tax interest restrictions on Estonias powers to access information in exchange of information cases (see Part B above). Estonia is able to exchange information, including in cases where the information is not publicly available or already in the possession of the governmental authorities. An additional 30 treaty partners of Estonia 15 reported in 2010 that information can be exchanged regardless of the existence of a domestic tax interest. Estonias DTCs with such jurisdictions should be
15. Austria, Belgium, China, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, (Republic of) Korea, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Russia, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

considered as meeting the international standard for EOI, even in the absence of Article 26(4). In addition, Council Directive 2011/16/EU also provides for exchange of information on request regardless of domestic interest (Article 18). This Directive reinforces Estonias ability to exchange foreseeably relevant information to the standard with other EU member states. 266. A domestic tax interest requirement may however exist for some of Estonias other 11 DTCs partners which were not covered in the 2010 assessment report. 16 In such cases, the absence of a specific provision requiring exchange of information unlimited by domestic tax interest will serve as a limitation on the exchange of information which can occur under the relevant DTC. 267. As already explained in the preceding portions of this report, the Tax and Customs Board can use all their powers of discovery and inspection for obtaining information for EOI purposes. It does not make any difference whether the information that needs to be gathered to answer the request is required for domestic tax purposes or not. In practice, the Estonian authorities have indicated and feedback from peers confirms that in all cases Estonia has provided information to its treaty partner regardless of whether or not it has an interest in the requested information for its own tax purposes.
Absence of dual criminality principles (ToR C.1.5)

268. The principle of dual criminality provides that assistance can only be provided if the conduct being investigated (and giving rise to an information request) would constitute a crime under the laws of the requested jurisdiction if it had occurred in the requested jurisdiction. In order to be effective, exchange of information should not be constrained by the application of the dual criminality principle. 269. There are no such limiting dual criminality provisions in any of Estonias DTCs including the new DTCs with India and the UAE. 270. None of the peers made any adverse comment in this regard. The procedure that is followed by the competent authority of Estonia does not require the existence of dual criminality to trigger its EOI mechanism.
16.
Armenia, Azerbaijan, Belarus, Croatia, Georgia, Kazakhstan, Latvia, Lithuania, Moldova, Romania and Ukraine.
Exchange of information in both civil and criminal tax matters (ToR C.1.6)
271. Information exchange may be requested both for tax administration purposes and for tax prosecution purposes. The international standard is not limited to information exchange in criminal tax matters but extends to information requested for tax administration purposes (also referred to as civil tax matters). 272. All Estonias DTCs provides for exchange of information in both civil and criminal tax matters including the new DTCs with India and the UAE. Estonia has received 32 information requests that dealt with criminal 273. tax matters. Information requests that involve criminal tax matters are dealt with by the Investigation Department of the Tax and Customs Board. The exact procedure is discussed under element C.5. However, peer input has indicated that Estonia is able to exchange information in both civil and criminal matters, in line with the standard.
Provide information in specific form requested (ToR C.1.7)

274. There are no restrictions in Estonias DTCs or laws that would prevent it from providing information in a specific form, so long as this is consistent with its own administrative practices. 17 Estonias DTCs with Canada and the United States contain explicit provisions (both under Article 26(3)) that reinforce the need to provide information in the form requested. 275. The Estonian competent authority is prepared to provide information in the specific form requested to the extent permitted under Estonian laws and administrative practices. According to the comments received from treaty partners, there were no instances where Estonia was not in a position to provide the information in the specific form requested or in an acceptable format.
In force (ToR C.1.8)

276. Exchange of information cannot take place unless a jurisdiction has exchange of information arrangements in force. The international standard requires that jurisdictions take all steps necessary to bring information arrangements that have been signed into force expeditiously.
17. In accordance with section 60(1) of the Taxation Act, the Estonian tax authority is entitled to obtain oral and written information from a taxable person or a representative thereof in order to ascertain facts relevant to tax proceedings. In accordance with section 62(1) of the Taxation Act, in order to ascertain facts relevant to tax proceedings, the Estonian tax authority has the right to request that taxable persons and third parties present or submit relevant documents that are in their possession.

277. Estonia has in force DTCs with 51 jurisdictions. The latest of Estonias DTCs that have come into force are those with India, UAE and Turkmenistan. Estonia has advised that its DTC with Russia has been ratified by the Estonian Parliament, but not by Russia. 278. In addition, Estonias DTCs with Bahrain, Bosnia and Herzegovina, Thailand, Cyprus, Uzbekistan, Mexico, Morocco, Oman and its protocol amending its DTC with China, all of which except Thailand meet the international standard, have been initialled but not yet signed. Estonia has indicated that these DTCs and protocol will be signed as soon as possible. 279. Estonia expeditiously takes all the necessary steps to bring into force the agreements that it enters into. After an agreement is signed, the agreement along with an explanatory letter is sent to the Ministry of Foreign Affairs. After the Ministry of Foreign Affairs examines and approves the agreement, it is sent to the Ministry of Justice for approval. As a next step, the Ministry of Finance submits the draft of ratification through the Ministry of Foreign Affairs to the Government, which then sends it to Parliament. The agreement goes through two readings in Parliament. Once it is ratified by Parliament, the President of Estonia signs a notification to this effect. The normal time taken from signature to ratification is four months. There has been no occasion where the Parliament has asked for an amendment to a treaty that is before it for ratification.
Be given effect through domestic law (ToR C.1.9)

280. For information exchange to be effective the parties to an EOI arrangement need to enact any legislation necessary to comply with the terms of the arrangement. Estonias DTCs are given the force of law once they are ratified by the Riigikogu and they override Estonian domestic tax law (subsection 65(5) and section 121, Constitution of the Republic of Estonia and subsection 51(2), Taxation Act). 281. In 2012, Estonia amended the Taxation Act to impose a new limitation on the scope of international cooperation that may be carried out by the competent authority. New section 511(5)4) of the Taxation Act states that the Tax and Customs Board may refuse to provide international professional assistance if the total amount of the claims in the request shall remain below EUR 1 500 (emphasis added ). A plain reading of this provision suggests that it is at the Estonia competent authoritys discretion to engage in EOI if the amount of claims relating to the request is less than EUR 1 500. This would not be compatible with the international standard, which requires the exchange of all foreseeably relevant information without regard to the amount of tax at stake.
282. Estonia has advised that this provision was added to implement Council Directive 2010/24/EU of 16 March 2010 pertaining to assistance in the recovery of taxes (i.e. collection of taxes), 18 and the limitation only applies to cases where assistance is sought in the recovery of taxes. This position is reflected in the explanatory note to the legislation amendment, which specifies that the competent authority may only refuse to provide informational professional assistance where the request for recovery relates to an aggregate amount of less than EUR 1 500. Accordingly, the EUR 1 500 limit does not have any impact on effective EOI. 283. Council Directive 2011/16/EU on administrative co-operation in the field of taxation repeals Council Directive 77/799/EEC of 19 December 1977 with effect from 1 January 2013. Estonia has fully transposed the new EU Directive into its domestic legislation.
Determination The element is in place. Phase 2 rating Compliant
C.2. Exchange of information mechanisms with all relevant partners

The jurisdictions network of information exchange mechanisms should cover all relevant partners.
284. Ultimately, the international standard requires that jurisdictions exchange information with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement. Agreements cannot be concluded only with counterparties without economic significance. If it appears that a jurisdiction is refusing to enter into agreements or negotiations with partners, in particular ones that have a reasonable expectation of requiring information from that jurisdiction in order to properly administer and enforce its tax laws it may indicate a lack of commitment to implement the standards. 285. Estonia has DTCs signed with 57 jurisdictions (51 of which are in force), including:
18. Article 18(3) of Directive 2010/24/EU states that a EU member state is not obliged to grant assistance under the directive if the amount of tax claims is under EUR 1 500.

26 out of 27 EU Member States (i.e. all but Croatia); two EEA countries (i.e. Iceland and Norway, but not Liechtenstein); and 30 OECD/G20 countries 19 (out of which 19 are simultaneously EU Member States and two are EEA countries).
286. Amongst the DTCs mentioned above, Estonia has DTCs with its main trading partners, namely Finland, Germany, and Sweden, as well as other major economies, including China, France, the United States, the United Kingdom, etc. Estonia has advised that its 2002 DTC with Russia has been ratified by the Estonian Parliament, but not yet by Russia. 287. In addition to its DTCs, Estonia is also able to exchange information with other EU Member States in accordance with the EU Mutual Assistance Directive. Estonia is also able to automatically exchange of information with EU Member States on interest income earned by resident individuals of the EU and some other countries in accordance with the EU Savings Directive. 288. Comments were sought from the jurisdictions participating in the Global Forum in the course of the preparation of this report, and no jurisdiction advised the assessment team that Estonia had refused to negotiate or conclude an EOI agreement with it. 289. One peer reported that when they approached Estonia for the purpose of entering into a DTC or a TIEA, it was advised that such negotiations with small jurisdictions or those with whom there are no substantial economic relations have been postponed. Estonia has confirmed that this was their response to the jurisdiction concerned. Estonia has reported that owing to similar considerations, the negotiations with two other jurisdictions have also been postponed. Estonia has also reported that while it does not have a stated policy in 290. the matter, it does not encourage TIEA negotiations. This is borne out by the fact that the treaty network of Estonia consists only of DTCs. Estonia reports that when it is approached by a jurisdiction for a TIEA, it suggests that the jurisdiction enters into a DTC or signs the Multilateral Convention on Mutual Administrative Assistance. The reason Estonia advances for this approach is that it has limited manpower to negotiate international agreements. Estonia also reports that it does not have any experience in negotiating TIEAs.
19. Austria, Belgium, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, India, Ireland, Israel, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Slovenia, South-Korea, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States. The treaty with Russia has not been ratified by Russia yet.
291. It is recognised that the need for bilateral agreements with relevant partners may be progressively diminished by the signing by more countries of the Multilateral Convention. However, some of Estonias partners may prefer not to join the Multilateral Convention which involves obligations wider than the current Global Forum standard. The international standard requires that a jurisdiction exchanges information with all relevant partners, meaning those partners who are interested in entering into an information exchange agreement. Further, while Estonia can honour the terms of a TIEA, its practice is only to enter into DTCs, which may limit its ability to have exchange of information arrangements with all relevant partners. It is recommended that Estonia ensures that it enters into exchange of information agreements, regardless of their form, with all relevant partners.
Determination The element is in place. Factors underlying recommendations Recommendations Estonia should continue to develop its exchange of information network with all relevant partners. Phase 2 rating Largely Compliant Factors underlying recommendation Estonia has been approached by a number of jurisdictions to negotiate a DTC or TIEA and has so far not entered into negotiations with them. Recommendation Estonia should enter into agreements for exchange of information (regardless of their form) with all relevant partners.
C.3. Confidentiality
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
Information received: disclosure, use, and safeguards (ToR C.3.1)

292. Governments would not engage in information exchange without the assurance that the information provided would only be used for the purposes permitted under the exchange mechanism and that its confidentiality would

be preserved. Information exchange instruments must therefore contain confidentiality provisions that spell out specifically to whom the information can be disclosed and the purposes for which the information can be used. In addition to the protections afforded by the confidentiality provisions of information exchange instruments, jurisdictions with tax systems generally impose strict confidentiality requirements on information collected for tax purposes. 293. All of Estonias DTCs have confidentiality provisions to ensure that the information exchanged will be disclosed only to persons authorised by the DTCs. While each of the articles might vary slightly in wording, these provisions generally include both essential aspects of Article 26(2) of the OECD Model Tax Convention, which are that: Any information received under an EOI request must be treated secret in the same manner as information obtained under the domestic laws of the receiving State; and This information may be disclosed only to authorised persons concerned with the administration and enforcement of the receiving States tax laws.
However, Estonia advised during the Phase 1 review that its interpre294. tation of treaty provisions based on Article 26(2) is different from the one laid down in the commentary to the OECD Model Tax Convention. According to Estonias interpretation at that time and also in its practice, information received under an EOI request is first classified into secret and non-secret (also known as public) information in the same manner Estonia classifies information it obtains domestically. Secret information is then subjected to the disclosure restrictions spelled out in the DTCs, while the disclosure of public information is governed by Estonias domestic laws. Section 27 of the Taxation Act defines the scope of information considered public and includes among other items a persons residency status and the amount of his tax arrears. Such information may be disclosed to anyone without the consent of or having informed a taxable person. 295. Estonia stated during the on-site visit that its interpretation had changed. Although section 27 of the Taxation Act defines the scope of information considered public, the information obtained during the EOI with other jurisdictions is kept separately from domestic tax information and disclosed only to authorised persons and authorities and only for the purposes mentioned in Article 26(2). 296. Estonias previous interpretation and practice was not consistent with the confidentiality requirements under the international standard and needed to be amended to conform to the standard. The standard requires both aspects of Article 26(2) to be applied independently, i.e. information received in an
EOI request may only be disclosed to authorised persons under the DTC, regardless of how such secret information is treated under domestic law For information classified as secret, Estonias domestic legislation con297. tains relevant confidentiality provisions under section 26 of the Taxation Act: (1) The tax authorities and officials and other staff thereof are required to maintain the confidentiality of information concerning taxable persons, including all media (decisions, acts, notices and other documents) concerning the taxable persons, information concerning the existence of media, business secrets and information subject to banking secrecy, which is obtained by the authorities, officials or other staff in the course of verifying the correctness of taxes paid, making an assessment of taxes, collecting tax arrears, conducting proceedings concerning violations of tax law or performing of other official duties (hereinafter tax secrecy). The obligation to maintain tax secrecy continues after the termination of a service relationship. (2) Information subject to tax secrecy may only be disclosed with the written permission of the taxable person or in the cases specified in sections 27-30 of this Act. (3) Unless otherwise provided by law, the officials and other public servants employed by the agencies which receive information concerning tax secrecy pursuant to sections 28-30 of this Act or in the performance of their official duties and persons performing public law functions are required to maintain the confidentiality of any information concerning taxable persons which became known to them concerning the taxable person. The obligation to maintain tax secrecy continues after the termination of a service relationship. 298. The same duty to maintain confidentiality also applies to experts who may be involved in the proceedings (subsection 68(4), Taxation Act). The confidentiality duty of tax officials is lifted in a number of situations, as provided under subsection 26(2) above. It is also noted that there are no sanctions for breach of the confiden299. tiality provisions under the Taxation Act. Under the Public Information Act, a holder of information is required to classify as information intended for internal use data collected on a person during the process of taxation, except data concerning tax arrears (subsection 34(1)16)). Disclosure or release of information intended for internal use is punishable by a fine of up to EUR 1 200 (subsection 541(1), Public Information Act).

300. Estonia has further stated that the provisions of the Taxation Act are overridden if there is an international agreement. Section 123 of the Constitution of the Republic of Estonia states that, when laws or other legislation of Estonia are in conflict with an international treaty ratified by the Riigikogu, provisions of the international treaty apply. The same principle can be found also in the Taxation Act (section 1 paragraph 5): If this Act or an Act concerning a tax is contrary to the treaty ratified by the Riigikogu, the provisions of the treaty apply in the event of taxation. According to the amendment of the Taxation Act this paragraph will be restated upon entering into force on 1 July 2013 as follows: If provisions of this Act or an Act concerning a tax differ from the provisions of the [international] treaty, the provisions of the treaty shall apply. 301. In practice, most data and communication in Estonia is held or takes place electronically. Access to all IT systems is only available to authorised users and strictly on a need-to-know basis. The access level/functionality itself is set out in the job description of the employee. All user transactions are logged and traceable. The log trails are stored in the relevant server and is accessible to authorised personnel. The Internal Control Department performs running monitoring. Officials of the tax administration are trained and educated regularly by the Internal Control Department. All newcomers must go through initial training. The main areas covered by the training are data protection and prevention of corruption. Tax officials go through recurrent training in rotation and, as necessary, when new issues arise. Estonian officials take care to follow a clean desk policy. This ensures that important papers are not left unattended where they may fall into the hands of unauthorised persons. All communications carry a confidential stamp or marking. Where physical records are involved, Estonia has secure and exclusive storage areas where these papers are stored. The access to these storage areas is allowed only to authorised persons. 302. In all their communications with treaty partners the Estonian tax authorities state that, The information obtained will only be used for the purpose described in the Mutual Assistance Directive and in the Double Taxation Convention and that This information is furnished under the provisions of the Double Taxation Convention between our countries and the Mutual Assistance Directive. Use and disclosure of this information must be governed accordingly. 303. In all communications with information-holders, the Estonian tax authorities mention the country from which the request is received and the name of the overseas taxpayer. They do not provide the actual request. In the event that the requesting jurisdiction asks Estonia to obtain information from an information-holder without disclosing the name of the requesting jurisdiction and the foreign taxpayer, Estonia will not approach the Estonian information-holder at
all. Estonia states that it has not encountered a situation where a requesting jurisdiction has asked it not to disclose information to a bank or third party. Estonia states that when it seeks information from a bank, it will follow the provisions of the Credit Institutions Act (see sections B.1.1 and B.1.2 of this report). 304. The practice as explained by Estonia could lead to a situation where faced with a request to not let the information-holder know details of the requesting jurisdiction and the foreign taxpayer, Estonia may not be able to provide the information requested. This is because, in this scenario, Estonia will not approach the information-holder and will provide the information from its databases. Estonia has indicated that in respect of 50% of the requests received, the information was in the possession of the competent authority in its databases. That means that in some of the other half of the cases, the Estonia competent authority would not be able to answer the request without approaching the Estonian information-holder. The standard practice of providing the name of the requesting jurisdiction and the foreign taxpayer is a matter of practice in Estonia and does not have any legal basis. 305. As a matter of practicality, it is generally accepted that a requested jurisdiction needs to disclose information contained in an EOI request as necessary for the requested jurisdiction to gather and provide the requested information to the requesting jurisdiction. However, the amount of information that needs to be provided may vary depending on the circumstances of each case, including, for example, the type or form of information requested or from whom the information is sought. For example, it may not be necessary for the person who is served an EOI notice to know the identity of the EOI partners taxpayer in all cases in order to produce the information sought, for instance when accounting records of an entity are requested. The systematic disclosure of such information, which is not otherwise public information, is therefore not in accordance with the principle that the information contained in an EOI request should be kept confidential. It is therefore recommended that Estonia ensure that it can obtain information from an information-holder without providing the name of the requesting jurisdiction and the foreign taxpayer. 306. None of the peers have complained that there is any problem with regard to confidentiality in the practices of Estonia.
All other information exchanged (ToR C.3.2)

307. Confidentiality rules should apply to all types of information exchanged, including information provided in a request, information transmitted in response to a request and any background documents to such requests. Estonias DTCs and domestic law specify that the confidentiality rules spelt out in the DTCs apply to all information received, albeit in accordance with Estonias interpretation, as noted above.

Determination The element is in place. Phase 2 rating Largely Compliant Factors underlying recommendation Estonia cannot approach an information-holder to gather information if it cannot provide him with the name of the requesting jurisdiction and the foreign taxpayer. Recommendation Estonia should ensure that it can obtain information from an information-holder without providing the name of the requesting jurisdiction and the foreign taxpayer.
C.4. Rights and safeguards of taxpayers and third parties

The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
308. The international standard allows requested parties not to supply information in response to a request in certain identified situations where an issue of trade, business or other secret may arise. Among other reasons, an information request can be declined where the requested information would disclose confidential communications protected by the attorney-client privilege. Attorney-client privilege is a feature of the legal systems of many countries. 309. However, communications between a client and an attorney or other admitted legal representative are, generally, only privileged to the extent that, the attorney or other legal representative acts in his or her capacity as an attorney or other legal representative. Where attorney-client privilege is more broadly defined it does not provide valid grounds on which to decline a request for EOI. To the extent, therefore, that an attorney acts as a nominee shareholder, a trustee, a settlor, a company director or under a power of attorney to represent a company in its business affairs, EOI resulting from and relating to any such activity cannot be declined because of the attorneyclient privilege rule.
Exceptions to requirement to provide information (ToR C.4.1)

310. All of Estonias DTCs ensure that the contracting states are not obliged to provide information which would disclose any trade, business, industrial, commercial or professional secret or information the disclosure
of which would be contrary to public policy. Those rights and safeguards are incorporated into Estonias domestic law by virtue of section 64 of the Taxation Act. This section allows taxable persons and third parties to refuse to provide information or submit evidence that are subject to legal privilege, professional and business secrets, or state secrets. 311. No issues in relation to the rights and safeguards of taxpayers and third parties have been encountered in practice, nor have they been raised by any of Estonias exchange of information partners. Whilst, in theory, certain privilege may extend further than that contemplated by the international standard (see para 227), in practice this has not caused any difficulties in accessing information pursuant to an EOI request.
Determination The element is in place. Phase 2 rating Compliant
C.5. Timeliness of responses to requests for information

The jurisdiction should provide information under its network of agreements in a timely manner.
Responses within 90 days (ToR C.5.1)

312. There are no provisions in Estonias laws or DTCs pertaining to the timeliness of responses or the timeframe within which responses should be provided. As such, there appear to be no legal restrictions on the ability of Estonian tax authorities from responding to EOI requests within 90 days of receipt by providing the information requested or providing an update on the status of the request. 313. During the three year review period, Estonia received 774 requests. Most of the requests (714) were answered within 90 days. There were some requests that pertained to accounting information and banking information where the specific information sought by the requesting jurisdictions could not be provided, as the taxpayer was either not in Estonia or the bank account did not match the person being investigated. The account did not belong to the taxpayer or any connected person. Such requests amounted to 5% of the 300 requests for banking information, received during the review period. Here Estonia provided all relevant information it had on its databases. Since

Estonia has provided an answer to this request out of the relevant information on its databases and the peers did not make any adverse comment, these requests are treated as answered. 314. The following table shows the timelines that have been followed by Estonia in answering the requests that have been received in the review period. The most significant partners of Estonia are Finland, Latvia, Lithuania, Norway and Sweden. The table shows that Estonia has answered 92% of the requests received in the review period in less than 90 days. Where Estonia is unable to provide information within 90 days, peers have reported that Estonia provides a status update.
Number of requests received by Estonia during the review period
2009 (from 01/07) Num. Total number of requests received* Full response**: 90days 180days(cumulative) 1year(cumulative) > 1 year Declined for valid reasons Failure to obtain and provide information requested Requests still pending at date of review 86 % 2010 Num. % 2011 num. % 2012 (till 30/06) Total Num. % Average % 258 100% 238 92% 252 98% 258 100% 0% 0% 0% 0%
Num num.
103 100% 192 100% 353 100% 126 100% 774 83% 177 92% 326 99% 336 1% 0% 0% 0% 1 0 0 0 92% 125 99% 714 42 16 2 103 100% 191 0 0 0 0 0% 0% 0% 0% 1 0 0 0 95% 126 100% 0% 0% 0% 0% 0 0 0 0 0% 0% 0% 0%
103 100% 191 100% 352 100% 126 100%
* Estonia counts each written request from an EOI partner as one EOI request even where more than one person is the subject of an inquiry and/or more than one piece of information is requested. ** The time periods in this table are counted from the date of receipt of the request to the date on which the final and complete response was issued.
Organisational process and resources (ToR C.5.2)

315. The functions of the Estonian competent authority (for matters other than criminal tax matters) are carried out by the head of the Intelligence Department and the head of the 1st Intelligence Division under the Intelligence Department. There are 12 experts within the division who deal with EOI matters. Requests are received either electronically or by post. It is the duty of the designated officials of the Intelligence Division to check for incoming requests. All incoming requests are normally received by a designated expert of the International Cooperation Unit under the 1st Intelligence Division. Estonia sends the details of its competent authorities and persons
designated to receive communications to all its EOI partners. All new officials are duly provided training in all the organisational processes connected to EOI. 316. The organisational practices of Estonia are so arranged that as soon as a request is received, the legal basis is checked, the authorisation of the requesting competent authority, whether the request contains all relevant information and adherence to confidentiality. Once this is done, the details of the request are entered into an electronic database. This database also serves as the tracking tool of incoming requests as it contains the registration number, registration date, official in charge, dates of orders, further correspondence etc. Where there are some doubts regarding the request, Estonia seeks clarifications from its treaty partners. But practical experience has shown that the number of such clarifications sought is extremely small and none of the peers has reported a problem related to this issue. 317. Once the request has been registered on the database and assigned to a particular official, the process of gathering the information begins. As mentioned earlier, the Tax and Customs Board is a centralised structure with no separation between central and regional levels. Accordingly the officials of the Intelligence Division have access to all the relevant databases that include the Land Register, Commercial Register, Taxpayers Register, Population Register, Road administration database, Traffic Insurance Fund, Police Databases, mobile phone operators, Border Guard Register, and Register of Small Ships. The official of the Intelligence Division searches these databases for information regarding the taxpayer and if the required information is available, it is sent to the requesting jurisdiction. As mentioned earlier, about 50% of the requests are answered by the competent authority from their own databases. 318. If the information is required to be obtained from a bank or a third party, the designated official in the office of the competent authority contacts the bank or the third party and then sends the information to the requesting jurisdiction. The letter that is sent to the third party or the bank indicates that this information is required for EOI purposes and gives the nature of the information sought, the name of the Estonian taxpayer, the foreign taxpayer and the requesting jurisdiction. In practice the information is usually obtained and the EOI request replied to in less than 90 days. 319. Where the information requested is such that the taxpayer needs to be contacted the designated official in the office of the competent authority checks in the taxpayers register whether there is an on-going audit in the taxpayers case. The sole objective of this enquiry is that in where such an audit is underway, the information requested may already be available with the tax auditor and there may be no need to go to the taxpayer. In cases where

an audit is underway, the competent authority and the tax auditor decide who will approach the taxpayer to avoid duplication of efforts. 320. Once the information is received by the competent authority, the reply (if received in Estonian) is translated into English. Estonia also translates replies into French and Russian where required. The reply is then transmitted to the requesting jurisdiction by electronic or postal mail. The necessary entries are made in their database, closing the case. 321. The procedure with requests that deal with criminal tax matters is slightly different. Here the competent authority is the International Cooperation Division of the Investigation Department within the Tax and Customs Board. There are 127 officials working within the Department. This division is responsible for cooperation with relevant foreign authorities in relation to tax violations and infringements of customs rules as well as prevention, combat and detection of offences associated with drugs and their precursors and responding to the requests for legal assistance from abroad. The division also processes international inquiries and information from foreign investigation and surveillance agencies; administration and developing of international network of contacts; representing the Board to pre-trial investigation and surveillance agencies in abroad, international organisations and international professional ventures pertaining to the Departments profile. It also participates in the law-making process to create a legal basis for international cooperation in criminal matters and functions and liabilities emanating from international conventions. 322. Estonia confirms that the procedure followed here is that when a request pertaining to a criminal tax matter is received under any of the EOI arrangements of Estonia. The Ministry of Justice shall verify whether a request for assistance received from a foreign state is actually a criminal tax matter. A request in compliance with the requirements shall be immediately sent to the Public Prosecutors Office. The Public Prosecutors Office shall verify whether compliance with the request is admissible and possible and forward the request to the competent judicial authority for execution. The Prosecutors office takes seven days for such verification. 323. The Prosecutors Office sets the deadline for rogatory letters depending on the volume of the request, generally accepted principles of international law and established course of dealing/practice in the country. The term for responding to requests for legal assistance is two months in general and response to inquiries is one month. The term may be extended if there is good reason. Estonia reports that the term will not normally exceed six months. As for matters of record maintenance, the procedures followed by the 324. Investigation Department are the same as those followed by the Intelligence
Department. The process of monitoring is also the same. The monitoring here is done by the Prosecutors Office. 325. Besides information on request, Estonia also engages in automatic exchange and spontaneous exchange of information. During the three year review period, Estonia sent information automatically to Armenia, Austria, Belgium, Bulgaria, Czech Republic, Cyprus, Denmark, Finland, France, Georgia, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom, Belarus, Canada, China, Croatia, Iceland, Kazakhstan, Moldova, Norway, Turkey, Ukraine and USA. This list does not include information under the Savings Directive 2003/48/EC. Estonia sends savings information to EU countries and to certain third countries and territories subject to Savings Directive 2003/48/EC. 326. As far as spontaneous information is concerned, in the three year review period, Estonia sent spontaneous information to Finland (11), Sweden (11), Latvia (9), USA (5), United Kingdom (5), Canada (5), Germany (3), Ukraine (3), Luxembourg (2), Lithuania (2), Italy (1), France (1), Denmark (1), Netherlands (1), Belgium (1), Spain (1), Ireland (1), Israel (1) and Switzerland (1). The number in brackets indicates the number of pieces of information sent. 327. Estonia also exchanges information on VAT requests.
Absence of unreasonable, disproportionate or unduly restrictive conditions on exchange of information (ToR C.5.3)
328. Exchange of information assistance should not be subject to unreasonable, disproportionate, or unduly restrictive conditions. As noted in Part B of this Report, there are no aspects of Estonias domestic laws that appear to impose additional restrictive conditions on exchange of information.
Determination This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 rating Compliant
SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS 93
Summary of Determinations and Factors Underlying Recommendations

Factors underlying recommendations
Determination
Recommendations
Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1) The element is in place. Phase 2 rating: Compliant Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2) The element is in place. Phase 2 rating: Compliant Banking information should be available for all account-holders. (ToR A.3) The element is in place. Phase 2 rating: Compliant Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1) The element is in place. Phase 2 rating: Compliant The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2) The element is in place. Phase 2 rating: Compliant
94 SUMMARY OF DETERMINATIONS AND FACTORS UNDERLYING RECOMMENDATIONS

Factors underlying recommendations
Determination
Recommendations
Exchange of information mechanisms should allow for effective exchange of information. (ToR C.1) The element is in place. Phase 2 rating: Compliant The jurisdictions network of information exchange mechanisms should cover all relevant partners. (ToR C.2) The element is in place. Estonia should continue to develop its exchange of information network with all relevant partners. Estonia has been approached by a number of jurisdictions to negotiate a DTC or TIEA and has so far not entered into negotiations with them. Estonia should enter into agreements for exchange of information (regardless of their form) with all relevant partners.
Phase 2 rating: Largely Compliant
The jurisdictions mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3) The element is in place. Phase 2 rating: Largely Compliant Estonia cannot approach an information-holder to gather information if it cannot provide him with the name of the requesting jurisdiction and the foreign taxpayer. Estonia should ensure that it can obtain information from an information-holder without providing the name of the requesting jurisdiction and the foreign taxpayer.
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4) The element is in place. Phase 2 rating: Compliant The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5) This element involves issues of practice that are assessed in the Phase 2 review. Accordingly no Phase 1 determination has been made. Phase 2 rating: Compliant
ANNEXES 95
Annex 1: Jurisdictions Response to the Report 20

Estonia is grateful to the assessment team and representatives of the Global Forum Secretariat for their thorough work on the report. We acknowledge the recommendations of the report. There has been a new development in the EOI network of Estonia since the report was finalized. Namely, DTC with Cyprus entered into force on 08 October 2013.
20.
This Annex presents the jurisdictions response to the review report and shall not be deemed to represent the Global Forums views.
96 ANNEXES
Annex 2: List of All Exchange of Information Mechanisms in Force
Multilateral agreements
Estonia is a party to the: EU Council Directive 2011/16/EU of 15 February 2011 on administrative co-operation in the field of taxation which came into effect on 1 January 2013. The EU member states, covered by this Directive, are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. EU Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments. This Directive aims at ensuring: (i) that savings income in the form of interest payments in favour of individuals or residual entities being resident of an EU Member State are effectively taxed in accordance with the fiscal laws of their state of residence; and (ii) that information is automatically exchanged among EU member states with respect to such payments. Estonia signed the the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) on 29 May 2013.
Bilateral agreements
EOI agreements signed by Estonia (in alphabetical order):
ANNEXES 97
Jurisdiction 1 2 3 4 Albania Argentina Armenia Australia
Type of EoI Arrangement DTC MAC

21
Date signed 5-Apr-2010 Signed Signed 14-Apr-2001 Signed 5-Apr-2001 15-Feb-2011 Signed 30-Oct-2007 Signed 12-Oct-2012 21-Jan-1997 5-Nov-1999 15-Feb-2011 Signed Signed Signed 13-Oct-2008 15-Feb-2011 2-Jun-1995 Signed 12-May-1998 Signed Signed Signed
Date in force 25-Nov-2010 Not in force In force in Argentina 01-Jan-2013 23-Jan-2003 In force in Australia 01-Dec-2012 12-Nov-2002 1-Jan-2013 Not in force 27-Nov-2008 In force in Azerbaijan 01-Oct-2004 Not in force 22-Jul-1998 15-Apr-2003 1-Jan-2013 Not in force Not in force Not in force 30-Dec-2008 1-Jan-2013 28-Dec-1995 Not in force 8-Jan-1999 Not in force Not in force In force in Costa Rica 01-Aug-2013
MAC DTC MAC DTC EU Directive 2011/16/EU MAC DTC
Austria
6 7 8 9 10 11 12 13 14 15 16
Azerbaijan Bahrain Belarus Belgium Belize Brazil Bulgaria
MAC (Original) DTC DTC DTC EU Directive 2011/16/EU MAC MAC MAC DTC EU Directive 2011/16/EU DTC MAC DTC MAC MAC MAC
Canada China Colombia Costa Rica
21. Multilateral Convention on Mutual Administative Assistance in Tax Matters
98 ANNEXES
Jurisdiction 17 Croatia Type of EoI Arrangement DTC EU Directive 2011/16/EU DTC 18 Cyprus EU Directive 2011/16/EU DTC 19 Czech Republic EU Directive 2011/16/EU MAC DTC 20 Denmark EU Directive 2011/16/EU MAC 21 Faroe Islands MAC DTC 22 Finland EU Directive 2011/16/EU MAC Former Yugoslav 23 Republic of Macedonia DTC DTC 24 France EU Directive 2011/16/EU MAC DTC 25 Georgia Protocol MAC Date signed 3-Apr-2002 1-July-2013 15-Oct-2012 15-Feb-2011 24-Oct-1994 15-Feb-2011 Signed 4-May-1993 15-Feb-2011 Signed extended 23-Mar-1993 15-Feb-2011 27-May-2010 20-Nov-2008 28-Oct-1997 15-Feb-2011 Signed 18-Dec-2006 17-Jul-2010 Signed Date in force 12-Jul-2004 1-July-2013 Not in force 1-Jan-2013 26-May-1995 1-Jan-2013 Not in force 30-Dec-1993 1-Jan-2013 In force in Denmark 01-Jun-2011 In force in Faroe Islands 01-Jun-2011 30-Dec-1993 1-Jan-2013 In force in Finland 01-Jun-2011 21-May-2009 1-May-2001 1-Jan-2013 In force in France 01-Apr-2012 27-Dec-2007 11-Mar-2011 In force in Georgia 01-Jun-2011
ANNEXES 99
Jurisdiction
Type of EoI Arrangement DTC EU Directive 2011/16/EU MAC MAC DTC EU Directive 2011/16/EU MAC MAC MAC DTC EU Directive 2011/16/EU DTC MAC DTC
Date signed 29-Nov-1996 15-Feb-2011 Signed Signed 4-Apr-2006 15-Feb-2011 Signed extended Signed 11-Sep-2002 15-Feb-2011 16-Jun-1994 Signed 19-Sep-2011 Signed Signed 16-Dec-1997 15-Feb-2011 Signed 8-May-2009 29-Jun-2009 20-Mar-1997 15-Feb-2011 Signed Signed 21-Dec-2010
Date in force 29-Dec1998 1-Jan-2013 Not in force Not in force 1-Aug-2008 1-Jan-2013 Not in force In force in Greenland 01-Jun-2011 Not in force 5-Jul-2004 1-Jan-2013 10-Nov-1995 In force in Iceland 01-Feb-2012 29-Jul-2012 In force in India 01-Jun-2012 Not in force 23-Dec-1998 1-Jan-2013 Not in force 21-Dec-2009 28-Dec-2009 22-Feb-2000 1-Jan-2013 In force in Italy 01-May-2012 Not in force 30-Dec-2011
26 Germany 27 Ghana 28 Greece
29 Greenland 30 Guatemala 31 Hungary
32 Iceland
33 India 34 Indonesia 35 Ireland 36 Isle of Man 37 Israel
MAC MAC DTC EU Directive 2011/16/EU MAC DTC DTC DTC EU Directive 2011/16/EU MAC
38 Italy
39 Japan 40 Jersey
MAC DTC
100 ANNEXES
Jurisdiction 41 41 Kazakhstan Korea (Republic of) Type of EoI Arrangement DTC DTC MAC DTC 42 Latvia EU Directive 2011/16/EU MAC DTC 43 Lithuania EU Directive 2011/16/EU MAC DTC 45 Luxembourg EU Directive 2011/16/EU MAC DTC 46 Malta EU Directive 2011/16/EU MAC DTC 47 Mexico MAC DTC 48 Moldova 49 Montserrat 50 Morocco MAC MAC MAC DTC Protocol 51 Netherlands EU Directive 2011/16/EU MAC 52 New Zealand MAC MAC 53 Nigeria Date signed 1-Mar-1999 23-Sep-2009 Signed 11-Feb-2002 15-Feb-2011 Signed 21-Oct-2004 15-Feb-2011 Signed 23-May-2006 15-Feb-2011 Signed 3-May-2001 15-Feb-2011 Signed 19-Oct-2012 Signed 23-Feb-1998 Signed extended Signed 14-Mar-1997 26-Jun-2008 15-Feb-2011 Signed Signed Signed Date in force 19-Jul-2000 25-May-2010 In force in Korea 01-Jul-2012 21-Nov-2002 1-Jan-2013 Not in force 8-Mar-2006 1-Jan-2013 Not in force 23-Jan-2007 1-Jan-2013 Not in force 22-Jan-2003 1-Jan-2013 Not in force Not in force In force in Mexico 01-Sep-2012 21-Jul-1998 In force in Moldova 01-Mar-2012 Not in force Not in force 8-Nov-1998 22-May-2009 1-Jan-2013 Not in force Not in force Not in force
ANNEXES 101
Jurisdiction 54 Norway
Type of EoI Arrangement DTC MAC DTC EU Directive 2011/16/EU MAC DTC EU Directive 2011/16/EU MAC DTC
Date signed 14-May-1993 Signed 9-May-1994 15-Feb-2011 Signed 13-May-2003 15-Feb-2011 Signed 23-Oct-2003 15-Feb-2011 Signed 5-Nov-2002 Signed Signed 24-Sep-2009 18-Sep-2006 3-Mar-2011 Signed 21-Oct-2003 Signed 13-Sep-2005 15-Feb-2011 Signed Signed
Date in force 30-Dec-1993 In force in Norway 01-Jun-2011 9-Dec-1994 1-Jan-2013 In force in Poland 01-Oct-2011 23-Jul-2004 1-Jan-2013 Not in force 29-Nov-2005 1-Jan-2013 Not in force Not in force Not in force Not in force 14-Jun-2010 27-Dec-2007 30-Mar-2012 Not in force 29-Mar-2006 Not in force 26-Jun-2006 1-Jan-2013 In force in Slovenia 01-Jun-2011 Not in force
55 Poland
56 Portugal
57 Romania
EU Directive 2011/16/EU MAC DTC MAC MAC DTC DTC DTC Protocol MAC DTC MAC DTC EU Directive 2011/16/EU MAC
58 Russian Federation 59 Saudi Arabia 60 Serbia 61 Singapore
62 Slovak Republic
63 Slovenia
64 South Africa
MAC
102 ANNEXES
Jurisdiction Type of EoI Arrangement DTC 65 Spain EU Directive 2011/16/EU MAC DTC 66 Sweden EU Directive 2011/16/EU MAC 67 Switzerland 68 Thailand 69 Tunisia 70 71 72 73 74 Turkey Turkmenistan Turks and Caicos Islands Ukraine United Arab Emirates DTC DTC MAC DTC MAC DTC MAC DTC MAC DTC DTC 75 United Kingdom EU Directive 2011/16/EU MAC 76 United States DTC MAC DTC Date signed 3-Sep-2003 15-Feb-2011 Signed 5-Apr-1993 15-Feb-2011 Signed 11-Jun-2002 25-Oct-2012 Signed 25-Aug-2003 Signed 28-Dec-2011 extended 10-May-1996 Signed 20-Apr-2011 12-May-1994 15-Feb-2011 Signed 15-Jan-1998 Signed 28-Sept-2012 Date in force 28-Dec-2004 1-Jan-2013 In force in Spain 01-Jan-2013 30-Dec-1993 1-Jan-2013 In force in Sweden 01-Sep-2011 12-Jul-2004 Not in force Not in force 21-Feb-2005 Not in force 15-Mar-2013 Not in force 30-Dec-1996 Not in force 29-Mar-2012 19-Dec-1994 1-Jan-2013 In force in the UK 01-Oct-2011 30-Dec-1999 Not in force Not in force
77 Uzbekistan
ANNEXES 103
Annex 3: List of All Laws, Regulations and Other Material Received

All up-to-date legislation in force is available in Estonian on the website of the Official Gazette at www.riigiteataja.ee. Most of the relevant legislation is also available in English at www.legaltext.ee/en/andmebaas/ava. asp?m=022. The Constitution of the Republic of Estonia, 1992 Taxation Act, 2002 (consolidated text January 2010) Accounting Act, 2002 (consolidated text October 2005) Authorised Public Accountants Act, 1999 (consolidated text March 2003) Commercial Code, 1995 (consolidated text March 2003) Estonian Central Register of Securities Act, 2000 (consolidated text April 2004) General Part of the Civil Code Act, 2002 Code of Civil Procedure, 2005 Administrative Procedure Act, 2001 (consolidated text December 2003) Commercial Associations Act, 2001 (consolidated text March 2004) Building Association Act, 2004 Foundations Act, 1995 (consolidated text December 2004) Non-profit Associations Act, 1996 (consolidated text October 2005) Law of Obligations Act, 2001 (consolidated text May 2009) Credit Institutions Act, 1999 (consolidated text December 2006) Investment Funds Act, 1997 (consolidated text July 2003) Insurance Activities Act, 2000 (consolidated text July 2009)
104 ANNEXES
Money Laundering and Terrorist Financing Prevention Act, 1998 (consolidated text March 2004, without the 2009 amendments which entered into force in 2010) Penal Code, 2001 (consolidated text April 2008) Personal Data Protection Act, 2007 State Secrets and Classified Information of Foreign States Act, 2006 Public Information Act, 2000 (consolidated text July 2009) Estonias double tax conventions
ANNEXES 105
Annex 4: People Interviewed During the On-site Visit

1. Representatives of the Estonian Ministry of Finance and the Estonian Tax and Customs Board. 2. Representatives of the Estonian Ministry of Justice. 3. Representatives of the Estonian Chamber of Notaries, Estonian Chamber of Chartered Accountants and the Bar Association (in connection with AML supervisory functions and other registration duties). 4. Representatives of the Estonian Financial Supervisory Authority (for AML supervision of banks and financial institutions) and the Estonian Financial Intelligence Unit. 5. Representatives of the Estonian Commercial Registry, the Estonian Central Register of Securities and the Estonian Register of Economic Activities (registration authorities for different commercial entities)
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to coordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisations statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members.
OECD PUBLISHING, 2, rue Andr-Pascal, 75775 PARIS CEDEX 16 (23 2013 72 1 P) ISBN 978-92-64-20610-6 No. 60979 2013-01
Global Forum on Transparency and Exchange of Information for Tax Purposes
PEER REVIEWS, PHASE 2: ESTONIA

This report contains a Phase 2: Implementation of the Standard in Practice review, as well as revised version of the Phase 1: Legal and Regulatory Framework review already released for this country. The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work in the area of tax transparency and exchange of information is carried out by 120 jurisdictions, which participate in the Global Forum on an equal footing. The Global Forum is charged with in-depth monitoring and peer review of the implementation of the international standards of transparency and exchange of information for tax purposes. These standards are primarily reected in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004. The standards have also been incorporated into the UN Model Tax Convention. The standards provide for international exchange on request of foreseeably relevant information for the administration or enforcement of the domestic tax laws of a requesting party. Fishing expeditions are not authorised but all foreseeably relevant information must be provided, including bank information and information held by duciaries, regardless of the existence of a domestic tax interest or the application of a dual criminality standard. All members of the Global Forum, as well as jurisdictions identied by the Global Forum as relevant to its work, are being reviewed. This process is undertaken in two phases. Phase 1 reviews assess the quality of a jurisdictions legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework. Some Global Forum members are undergoing combined Phase 1 and Phase 2 reviews. The Global Forum has also put in place a process for supplementary reports to follow-up on recommendations, as well as for the ongoing monitoring of jurisdictions following the conclusion of a review. The ultimate goal is to help jurisdictions to effectively implement the international standards of transparency and exchange of information for tax purposes. All review reports are published once approved by the Global Forum and they thus represent agreed Global Forum reports. For more information on the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes, and for copies of the published review reports, please refer to www.oecd.org/tax/transparency and www.eoi-tax.org.
Consult this publication on line at http://dx.doi.org/10.1787/9789264206113-en This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information.
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GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES

Peer Review Report Phase 2 Implementation of the Standard in Practice

ISBN 978-92-64-20610-6 (print) ISBN 978-92-64-20611-3 (PDF)

Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda.

Summary of Determinations and Factors Underlying Recommendations. . . . 93

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ABOUT THE GLOBAL FORUM 5

About the Global Forum

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Information and methodology used for the peer review of Estonia

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Overview of Estonia Governance and economic context

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General information on the legal system and taxation system

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Overview of the financial sector and relevant professions

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COMPLIANCE WITH THE STANDARDS: AVAILABILITY OF INFORMATION 17

Compliance with the Standards

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A.1. Ownership and identity information

Companies (ToR A.1.1) Types of Companies

Information kept by public authorities

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Private limited company

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General partnerships, limited partnerships

Public limited companies, private limited companies, commercial associations

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Public limited company

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Information kept by companies

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Regulated activities and service providers

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