Estonian CIT

Estonian CIT

The name refers to the corporate taxation model in place in Estonia. It is a solution that allows companies to defer CIT payments until profits are distributed to shareholders. Estonian CIT is addressed mainly to growing technology businesses, focusing mainly on creating significant value or scaling through reinvesting of the income rather than sharing the

The deferral of CIT payments is only one of the benefits of Estonian CIT. Other advantages include:

  • a lower effective tax rate on profit distribution to shareholders. Estonian CIT allows for effective rate of 20% (small taxpayers) and 25% (other taxpayers). In the case of standard CIT, the effective rate is 26.29% and 34.39%, respectively.
  • a simplified reporting process. As in companies applying Estonian CIT, all documents are based on accounting principles alone. There is no need to keep separate tax accounts or calculate tax costs or depreciation.
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    Conditions for applying Estonian CIT

    Estonian CIT may be applied only if:

    • only natural persons are shareholders in a company applying Estonian CIT.
    • the company employs at least three people under employment or mandate contracts.
    • less than 50% of the company’s revenues comes from passive revenues, such as receivables, interest, sureties, guarantees or revenues from copyrights.
    • the company cannot hold shares or have other rights in other companies, or be a beneficiary of a foundation or trust.
    How can we help?

    We offer comprehensive services related to the implementation of the Estonian CIT system, including:

    • analysis of whether formal requirements for application of Estonian CIT are fulfilled
    • detailed calculation of the expected effects
    • implementation support, including mitigating and eliminating risks associated with implementing the Estonian CIT system
    • preparation of applications for tax rulings
    • post-implementation support in the event of tax inspections