Nordea Bank Finland Plc Estonian branch takes its dispute with the tax authority to court

07.01.2013 Nordea Bank Finland Plc Estonian branch takes its dispute with the tax authority to court

The firm's tax team led by partner Helmut Pikmets advised Nordea Bank Finland Plc Estonian Branch (Nordea) in constitutional review proceedings at the Office of the Chancellor of Justice. The case involves legal issues relating to the taxation of branches of foreign companies who have permanent establishment in Estonia.

The Chancellor of Justice ultimately found that Nordea´s application was justified and the legal norms analyzed did, in fact, breach the fundamental rights of Nordea, and a proposal was made to the Ministry of Finance to consider initiating legislative proceedings in The Parliament of Estonia (Riigikogu) in order to amend the legal act.

The Tax and Customs Board still ordered Nordea to pay additional income tax in the amount of EUR 7.6 million within three years without interest. Nordea challenged the notice of assessment in an administrative court.

Tallinn Administrative Court dismissed the appeal and upheld the notice of assessment on the grounds that the Tax and Customs Board had given a deadline for Nordea to pay the additional income tax without interest. However, the court agreed with Nordea that the amendment to the law had been unexpected and thus in violation of Nordea´s rights.

„Allowing taxpayers to pay tax during several years without interest is a positive precedent in Estonian tax law. However, it is not right to conclude that the tax authority can turn an unconstitutional legal provision adopted by the legislator into a lawful provision through its activities,“ said attorney at law Helmut Pikmets who represented Nordea in court.

Kerstin Pilt, head legal at Nordea emphasized that „Nordea supports the legislator´s right to change the tax environment but the rules should be changed prospectively, not retrospectively. “

Tallinn District Court continues to hear the dispute mainly as far as applying law retrospectively is concerned.

Nordea Bank Estonia is a branch of Nordea Bank Finland and part of the biggest financial group in the Nordic countries, Nordea Bank AB (publ).

On the same topic (in Estonian)

Äripäev: Nordea continues bickering with the Tax and Customs Board
Delfi: Nordea continues bickering with the Tax and Customs Board
E24: Nordea Bank`s court case against the Tax and Customs Board continues
Äripäev: Debate: Income Tax Act unconstitutional
Äripäev: Debate: End of unfair treatment
Äripäev: Minor changes in the law are misleading
Raamatupidaja: Attorney: Income Tax Act unconstitutional
Raamatupidaja: "Ministry: amendment ends unfair treatment


Helmut Pikmets
Sergei Jegorov
Vitali Šipilov