Change of taxation regarding common investment funds in Estonia

Ministry of Finance has sent a new draft of changing the Income Tax Act for approval in other ministries. The purpose of the change is to eliminate the unequal treatment of common investment funds established in Estonia and abroad (non-residents). As of now the common investmend fund established in Estonia is not regarded as a tax payer unlike non-residents in some cases. The draft offers a solution for unifying the tax treatment of income on real estate for investment funds. Currently non-resident is charged of income tax on the moment of gains derived from a transfer of property located in Estonia. Common investment fund established in Estonia executing the same transfer is charged of income tax at a later moment when the shareholder has recieved income. According to the draft the transfer of property located in Estonia shall be charged of income tax at the moment of gain for common investment funds established both in Estonia and abroad. Ministry of Economic Affairs and Communications have approved the draft on July 5th, the remaining ministries have yet not made their decision. The changes are planned to enter into force on January 1st, 2013.