COBALT achieved a landmark success in Estonian tax practice as the Estonian Tax and Customs Board issued the first positive binding advance tax ruling on a debt push down structure. The ruling confirms that such acquisition structures can be applied, provided that the transaction has sufficient business rationale and economic substance, and that there is a genuine financing need for applying the structure.
COBALT advised a group planning to acquire a leading company in its sector and subsequently merge with it. The transaction structure envisaged that the bank loan taken to finance the acquisition would, following the merger, be pushed down to the target company level, with debt service to be carried out from the company’s operating cash flows.
The Tax and Customs Board agreed with COBALT’s in-depth analysis that the structure does not constitute an artificial arrangement aimed at obtaining a tax advantage, but rather stems from legitimate business and financial needs. The ruling establishes important new practice in Estonian taxation and provides guidance on the use of debt push down structures.
This outcome confirms that internationally recognised financing structures can also be applied in Estonia, provided that they are supported by genuine business purposes, synergies, and a demonstrable financing need. The ruling gives the client legal certainty regarding the tax treatment and underlines COBALT’s position as a leading adviser on complex tax structures.
The project was led by Managing Associate Tõnu Kolts, with the involvement of Partner Peeter Kutman.
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