Estonian CIT – notification only until 31.01.2025.

Reminder: Estonian CIT is an alternative form of income tax settlement with the tax office, which can be applied by:

• Joint-stock companies,
• Limited liability companies,
• Limited partnerships,
• Limited joint-stock partnerships,
• Simple joint-stock companies.

Who can benefit from Estonian CIT?

Entrepreneurs can opt for lump-sum taxation on company income if they meet the following criteria:

1. Revenue Structure:

   • Income from receivables, interest, loans, lease payments, guarantees, warranties, copyrights, industrial property rights, the sale of financial instruments, and transactions with related entities does not exceed 50% of the company’s total revenue.

2. Employment Requirements:

   • The company employs at least three people under an employment contract for at least 300 days per tax year, or under another type of contract, provided that salary expenses amount to at least three times the average monthly salary in the enterprise sector.

3. Shareholding Structure:

   • The company’s shareholders, stockholders, or partners are exclusively natural persons.

4. Investment Restrictions:

   • The company does not hold shares (stocks) in another company’s capital, investment fund participation units, or interests in a collective investment institution.

5. Accounting Standards:

   • During the period of lump-sum taxation, the company does not prepare financial statements in accordance with International Accounting Standards (IAS).

6. Notification Obligation:

   • The company submits a notification of its choice for lump-sum taxation to the relevant head of the tax office by the end of the first month of the first tax year in which it intends to be taxed under this system.

All of the above conditions must be met simultaneously.

For Whom Is Estonian CIT the Optimal Form of Taxation?

Estonian CIT is an ideal solution for companies that invest heavily and regularly. The tax obligation arises only when the profit is distributed to shareholders, providing greater flexibility in financial management.

How to switch to Estonian CIT?

Switching to Estonian CIT is voluntary. To do so, a notification of the choice of this form of taxation (ZAW-RD) must be submitted to the relevant head of the tax office.

When to submit the notification?

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 means January 31, 2025.

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