If the transfer price is not the market value, the basis for determining income tax should be the market value – the difference between the transfer price and the market value is subject of taxation on the basis of ITA §§ 14, 50 or 53, if it is not a fringe benefit (§ 48).

In Estonia, the tax authorities have issued the transfer pricing guidelines which defines a common goal in transactions between associated persons - maximizing profits. To achieve that goal the profits will be moved through various tax jurisdiction or forms of business, which ultimately ensures a lower tax burden. As a rule, profits will be moved through the agreements that are not economically justified, and that non-associated persons would not transact with each other.

Tax liability optimization with transaction between associated persons puts entrepreneurs in an unequal position and fails state tax revenue.