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Impact of Protocol to Estonia's Tax Treaty with Switzerland on Other Treaties

As previously covered, Irish Revenue announced on 4 May 2016 that the MFN clause in its tax treaty with Estonia was triggered effective 1 January 2016 by the 2014 protocol to the Estonia-Switzerland tax treaty, resulting in a 0% withholding tax rate for royalties. While similar announcements have not been made by Estonia's other tax treaty partners, for the treaties that have relevant MFN clauses, the 0% royalty rate also applies. In addition to Ireland, the affected treaties and date of effect are as follows:

  • 1999 Belgium treaty, effective from 1 January 2016;
  • 1995 Canada treaty, effective from 1 January 2016;
  • 1996 Denmark treaty, effective from 1 January 2016;
  • 1993 Finland treaty, effective from 1 January 2016;
  • 1997 France treaty, effective from 16 October 2015;
  • 2002 Hungary treaty, effective from 1 January 2016;
  • 1994 Iceland treaty, effective from 1 January 2016;
  • 1997 Italy treaty, effective from 1 January 2016;
  • 1997 Netherlands treaty, effective from 1 January 2016;
  • 1993 Norway treaty, effective from 1 January 2016;
  • 2003 Spain treaty, effective from 1 January 2016;
  • 1993 Sweden treaty, effective from 1 January 2016; and
  • 1994 United Kingdom treaty, effective from 16 October 2015.

In addition to the effect of the Estonia-Switzerland protocol on royalty withholding rates, the protocol also reduced the withholding rate on interest to 0%, which triggers the relevant MFN clauses of Estonia's treaties with France, Spain and the United Kingdom. The effects are as follows:

  • For the treaty with France, the 0% rate applies for interest paid in respect of any kind of loan granted by a bank;
  • For the treaty with Spain, the 0% rate applies for all interest payments; and
  • For the treaty with the United Kingdom, the 0% rate applies for interest paid in respect of a loan made, guaranteed or insured by a financial institution of a public character.

The interest withholding tax changes apply for the respective treaties from the same dates as the 0% rate for royalties listed above.

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