Estonian CIT – Lump-Sum Tax on Company Income

Estonian CIT (lump-sum tax on company income) is a way of taxing a company where it pays tax only when profit is distributed – as long as you reinvest, there is no CIT.

How it works

Instead of paying CIT on an ongoing basis, the company settles it only when it pays profit out to shareholders (a dividend). This improves cash flow and simplifies ongoing accounting.

Who can choose Estonian CIT?

• companies: Sp. z o.o., simple joint-stock, joint-stock, limited partnership, limited joint-stock partnership,
• shareholders are exclusively natural persons,
• the company holds no shares in other entities,
• it employs the required number of people,
• passive revenue does not exceed half of total revenue.

Rates

The tax due on distribution is 10% for small taxpayers and start-ups, and 20% for others. Thanks to a deduction mechanism, the combined effective tax (company + shareholder) is usually lower than in classic CIT + PIT.

Benefits and watch-outs

Benefits: deferred tax, better cash flow and simpler accounting. Watch out for "hidden profits" (certain benefits to shareholders), which are taxed. We'll check whether Estonian CIT pays off for your company.

How Investya helps

We'll assess eligibility, quantify the benefit and implement Estonian CIT as part of accounting for foreigners.