From 2018 Estonia will apply a lower income tax rate
for distributable profit under a certain amount. So far the entrepreneurs had to pay to the state 20% of their income, but next year they will be able to profit much more from their gains. Our law firm in Estonia
can explain you in more detail in what way this measure is going to be implemented in Estonia and how your income tax will be calculated.
Who can profit of the CIT reduction in Estonia?
Both Estonian resident companies and foreign companies
registered in Estonia will profit of the new taxation policy adopted by the Estonian state. Each company will be able to apply the 14% preferential tax rate
for revenues lower than the maximum gain registered in the last three years. Each company will be taxed with a 20% CIT
for those gains which surpass the maximum income of the past three years.
Because of this double rate, accountants will need to perform more operations in order to determine the due amount to pay as CIT
, but the provisions are very clear and allow a quick implementation. One of our attorneys in Estonia
can give you more details on the tax system in this country and on the financial instruments available in Estonia, so that you can profit the most from the income tax reduction
Other aspects related to reduced CIT in Estonia
Since non-distributable profits such as income from trading, dividends, interest or royalties is non-taxable in Estonia, the CIT refers only to the distributed profits. The new legal provisions in Estonia
regarding taxation include as well amendemnts regarding loans and the distribution of profits.If the profit is distributed to shareholders at a rate of 20% no other withholding taxes apply.
This tax reduction
encourages commercial activity in Estonia and it shows that the local government wants to stimulate investment in the Estonian economy. Feel free to contact
one of our Estonian lawyers
in order to find out how you can use the new tax provisions
in this country in order to grow your business.