The ‘Estonian’ CIT is, in essence, a solution that provides for the taxation of a capital company at the level of dividend payments. What the company earns and does not pay out to the
shareholder remains in the company without the tax.
This model generally favours capital accumulation, which is beneficial for economies with low capitalisation – like in Poland.
Key benefits:
All settlements and all documentation are based solely on balance sheet law. In the case of the Estonian CIT, there is no separate tax accounting, no separate calculation of tax expenses or
depreciation.
No need to pay the tax monthly, quarterly or annually. This tax is only paid when the dividend is paid out. It is up to the shareholders to decide when and how much profit they will distribute to themselves and, consequently, when and on what amount the tax will be paid. With no other tax payments, your company has better liquidity that can be used for business needs.
It is possible to be taxed with lower taxes when distributing profits through dividends, compared to the traditional rules. With the “Estonian” CIT, you pay significantly less. For a small taxpayer, the sum of CIT and PIT is only 20% instead of 26.29%. By contrast, for larger taxpayers, the sum of CIT and PIT is only 25% instead of 34.39%.
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