Estonian CIT Calculator (Flat-rate Corporate Tax)

The flat-rate corporate income tax, known as Estonian CIT, is a system in which a company does not pay corporate tax on current profit but only when profit is distributed to shareholders. This allows profit to be reinvested freely without immediate tax burdens.

Two rates apply: 10% for small taxpayers (revenue up to EUR 2 million in the previous tax year) and 20% for other companies. These rates are lower than standard CIT, but the tax arises only on the distributed amount.

Limited liability companies (sp. z o.o.), joint-stock companies (S.A.), simple joint-stock companies (P.S.A.), and limited partnerships may use Estonian CIT if they meet conditions regarding shareholder structure (only natural persons), no holdings in other entities, employee headcount and simple ownership structure.

A shareholder receiving a dividend from a company under Estonian CIT may deduct part of the CIT paid by the company from their own 19% dividend tax. A small taxpayer receives a 70% credit (effective dividend rate 5.7%), a large taxpayer receives 51.25% credit (effective rate approximately 9.25%).

The combined effective rate (CIT plus dividend tax after credit) is approximately 15.13% for a small taxpayer at full profit distribution and approximately 27.41% for a large taxpayer.

Retained (undistributed) profit is not taxed. The company pays CIT only on the amount actually distributed to shareholders, so profit can be freely allocated to investment without a tax burden.

Under Estonian CIT the tax base is the distributed income, not income computed under general rules with deductible costs. The company does not apply conventional cost deductions — tax is charged on actual distributions to shareholders.

No — a dividend paid to shareholders of a limited liability company is not subject to ZUS social insurance contributions, regardless of the CIT system applied.

The company must remain in the flat-rate CIT system for at least 4 tax years (the entry year plus 3 further years). Early exit or loss of eligibility triggers a tax settlement under general rules for the entire period.

The calculator uses the basic formula for distributed profit. In practice, distributable income also includes hidden profits, non-business expenditure and changes in asset values. Consult a tax adviser for detailed analysis.