ARCO VARA AS - NASDAQ OMX Baltic

Dividends
No Estonian dividend withholding tax is imposed on dividends paid to Estonian residents (whether
legal persons or individuals) or to non-resident individuals.
However, an Estonian dividend withholding tax of 22 per cent is currently imposed on dividends paid
by the Company to non-resident legal persons. A limited exemption from this dividend withholding
tax applies where the non-resident legal person owns at least 15 per cent of the share capital or votes
of the Company. However, the exemption does not apply where the relevant non-resident legal person
is located in a “low tax rate territory” for the purposes of Estonian taxation laws and regulations.
Estonian taxation laws and regulations provide that the currently applicable rate of dividend
withholding tax of 22 per cent referred to above will be reduced to 21 per cent on 1 January 2008 and
to 20 per cent on 1 January 2009.
Non-resident individual investors whose Shares are held in nominee accounts may be required to
undertake certain action to avoid imposition of the Estonian dividend withholding tax. Non-resident
individual investors are encouraged to contact their custodians or their own professional tax advisors
for any further information on taxation of dividends.
Additional exemptions or more favorable tax rates available to non-resident legal persons may be
enjoyed under international treaties in effect between Estonia and certain other states, including
European Union Member States. For applying the more favorable tax rates under the treaties, the nonresident
legal person subject to Estonian withholding tax has to provide the Company with a document
claiming the benefits of the applicable tax treaty from the non-resident’s competent taxing authority
confirming that the non-resident is a resident of the applicable jurisdiction for treaty purposes. Such
document should correspond to the form provided by the Estonian Ministry of Finance.
For example, Article 10 of the Convention between the Republic of Estonia and the Republic of Latvia
for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on
Income (Double Taxation Treaty between Latvia and Estonia) provides that the withholding tax
imposed in Estonia may not exceed 15 per cent of the gross amount of the dividends (5 per cent if the
beneficial owner of the dividends is a company holding at least 25 per cent of the Company’s share
capital).
Non-resident legal persons who may benefit from lower tax rates under the double taxation treaties
and whose Shares are held in nominee accounts are encouraged to contact their custodians or their
own professional tax advisors for any further information on the application of the relevant double
taxation treaties.
Capital Gains
In general, income tax is not charged on gains realized by non-residents (whether legal persons or
individuals) from the sale or exchange of shares of Estonian companies.
As an exception, Estonian income tax is charged on the capital gain realized from the sale or exchange
of shares of a “real estate company” in case the transferor of the shares is a non-resident who at the
time of transfer of shares has the holding of at least 10 per cent in the real estate company. A “real
estate company” for these purposes is a company, common fund (lepinguline investeerimisfond) or
other pool of assets, of the assets of which, at the time of transfer or at some period during two years
immediately preceding the transfer, immovables or structures as movables located in Estonia
constituted directly or indirectly more than 50 per cent.
As at 31 March 2007, immovables or structures as movables located in Estonia constituted directly or
indirectly more than 50 per cent of the assets of the Company.
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