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An analysis from COBALT, Taxand Estonia
The Estonian Tax and Customs Board has issued another positive advance tax ruling concerning a debt push-down acquisition structure. The ruling provides further guidance on when acquisition debt transferred to a target company, following a post-acquisition merger, may be acceptable for Estonian corporate income tax purposes.
Importantly, the ruling confirms that the tax authority’s debt push-down guidance is not limited to traditional acquisitions involving a special purpose vehicle and may also apply when one operating company acquires another. It also highlights the importance of demonstrating measurable economic benefit to the target company where it assumes responsibility for servicing the acquisition debt. In this case, the authority accepted that the target’s measurable economic benefits exceeded the financing costs and did not consider the arrangement to be aimed at obtaining an unlawful tax advantage or to be artificial.
Tõnu Kolts and Kerstin Tang from our Estonian member firm, COBALT, advised on the ruling and its implementation, providing further clarity on the developing treatment of debt push-down structures in Estonia, which you can read here.
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