ZAW-RD notification regarding the Estonian CIT for 2024

Estonian CIT is an alternative form of settlement of income tax with the tax office, which may be used by:

• joint-stock companies,
• limited liability companies,
• limited partnerships,
• limited joint-stock partnerships
• simple joint-stock companies.

To put it simply, it involves deferring the payment of income tax and is intended mainly for companies that invest their profits.

Who can benefit from Estonian CIT?

Entrepreneurs may choose flat-rate taxation on company income if:

• revenues obtained from: receivables, interest, loans, leasing fees, sureties, guarantees, copyrights, industrial property rights, sale of financial instruments and transactions with related entities do not exceed 50% of the company’s total revenues,
• employ at least 3 people on the basis of an employment contract for a period of at least 300 days in a tax year or a contract other than an employment contract, with the expenditure on remuneration being at least 3 times the average monthly salary in the enterprise sector,
• shareholders or partners of these companies are only natural persons,
• they do not hold shares in the capital of another company, participation titles in an investment fund or in a mutual investment institution,
• they do not prepare financial statements in accordance with International Accounting Standards for the period of lump-sum taxation,
• they will submit a notification of their choice of lump-sum taxation to the competent head of the tax office by the end of the first month of the first tax year in which they are to be subject to lump-sum taxation.

All the above conditions must be met cumulatively.

How to switch to Estonian CIT?

The switch to Estonian CIT is voluntary. To do this, you must submit a notification about the choice of this form of taxation to the competent head of the tax office (ZAW-RD).

The notification must be submitted by the end of the first month of the tax year in which Estonian CIT will be applied, which in most cases will be January 31.

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