For business · Law City Katowice
Estonian CIT — implementation and ongoing settlements
A lump-sum tax on corporate income for businesses in Katowice and all of Silesia. On-site or online.
Estonian CIT (a lump-sum tax on corporate income) defers tax until profit is paid out — as long as the money keeps working in the business, there's usually no tax on the profit itself. We check whether your company qualifies and whether it's worth it, then implement it and handle the settlements.
What is Estonian CIT?
Estonian CIT, meaning a lump-sum tax on corporate income, is a form of taxation in which, as a rule, the company pays tax only when it pays out profit to shareholders. As long as the money stays in the business and is reinvested, there's usually no tax on the profit itself — although some other events are also taxable, such as so-called hidden profits. This regime is available to companies that meet the statutory conditions, including those relating to shareholder structure, capital ties and employment.
Who this is for
- Limited liability, joint-stock, limited partnership and limited joint-stock partnership companies that reinvest profits
- Businesses whose shareholders are exclusively natural persons
- Entrepreneurs without holdings in other companies and without an extensive holding structure
- Companies that meet the minimum employment requirements
- Businesses looking for a lower effective tax burden when reinvesting profits
Scope of services
- Checking whether the company meets the statutory conditions for entry and analyzing whether Estonian CIT is worthwhile for it
- Organizing profit payouts and settlements between the company and its shareholders to ensure compliance
- Identifying situations that could count as hidden profits or expenses unrelated to the business, to limit tax risk
- Support in the first year under the lump-sum regime and ongoing advice for later settlements
Benefits and risks
Benefits
- As a rule, tax only arises when profit is paid out — reinvestment with no current CIT
- Lower effective taxation when the company's and the shareholder's tax are considered together
- Simpler settlements — no classic tax-deductible costs or most of the usual book-tax differences
- Better cash flow support for a business that's investing in growth
Things to keep in mind
- So-called hidden profits (for example, loans to a shareholder or private use of company assets) are taxed
- Failing to meet the conditions (shareholder structure, employment) excludes or ends the lump-sum regime
- Expenses unrelated to the business are subject to tax
- Some events (for example, on conversion into another legal form) require a separate settlement
Frequently asked questions
When does a company under Estonian CIT actually pay tax?
As a rule, only when profit is paid out to shareholders, for example as a dividend. As long as the profit stays in the company and is reinvested, there's usually no tax on it. The act does provide for other taxable events, though, including income from hidden profits and from expenses unrelated to the business.
What are hidden profits, and why are they risky?
These are benefits a company provides to shareholders (or parties related to them) outside a formal profit payout — for example, certain loans to a shareholder or private use of company assets. The act treats them as separate income subject to the lump-sum tax, so under Estonian CIT it's worth recognizing such situations as they arise. The classification depends on the specific circumstances.
Can any company use Estonian CIT?
No. This regime is available only to certain types of companies, and only if they meet statutory requirements — including, among others, shareholder structure (as a rule, natural persons), the absence of certain capital ties, and employment levels. We check whether your company qualifies before you choose it.
How and by when do you enter Estonian CIT?
The company files a ZAW-RD notification with the tax office — as a rule by the end of the first month of the year from which it wants to apply the lump-sum regime, or during the year after closing its books. We work out the timing and the entry point individually.
What are the Estonian CIT rates?
The lump-sum regime has two CIT rates depending, among other things, on the size of the taxpayer, and when profit is paid out there's a corresponding settlement on the shareholder's side with a deduction mechanism. The combined effective tax burden tends to be lower than under the classic model — we calculate it using your own figures.
Can I opt out of Estonian CIT?
Yes. A company can opt out of the lump-sum regime once its period of application ends, or lose the right to it by failing to meet the conditions. Exiting comes with specific settlements, which we go over beforehand.