Estonian CIT in Poland – who can benefit from this taxation?

January 11, 2021

estonian corporate income tax in Poland

Estonian CIT – for who?

Estonian CIT – a tax solution for micro, small and medium-sized enterprises: capital companies (limited liability companies and joint stock companies).

Turnover limit is less than PLN 100 million per year.

Basic condition is to not pay out profits. The exemption from corporate income tax applies to entities that decide to allocate profits to new investments and business development, i.e. they will leave profits in your company.

Purpose of introducing the Estonian CIT

No payment of the corporate income tax will contribute to a significant decrease in revenues to the state budget, which, according to government estimates, will even exceed PLN 4 billion. However, the positive aspect of these tax savings is the creation of 120,000 new jobs.

Term and Additional Terms

The introduction of Estonian CIT is voluntary and its duration is foreseen for a period of four years with the possibility of extension.

The minimum level of employment: 3 people

Partners: only natural persons

Additional conditions: no shares in other companies

Additional benefits: No obligation to keep accounting records regarding corporate income tax. The tax will be determined on the basis of a calculated dividend.

When you have to pay the tax?

The CIT tax will be due when: a company leaves from the Estonian system or there is the – widely understood – profit distribution (or covering losses).

Benefits for your company

The benefits of the Estonian CIT for your company include:

  • greater investment capacity,
  • productivity improvement,
  • innovation improvement,
  • you will save time when it comes to tax settlements.

The idea of ​​an Estonian CIT

This idea was born back in the 1950s and was first implemented in Chile, then in Estonia in 2000 and later by Georgia and Latvia. Similar solutions are also used in Germany, Hungary and Austria, known as the investment reserve.

The basic assumptions, however, are maintained both in Estonia and Latvia, that is:

  • deferment of taxation until the dividends are paid, which means that the profit is not taxed as long as it remains in the company and is subject to investment,
  • simplification of tax settlements – no need to keep records for income tax purposes.

Of course, there are differences between the “original” Estonian CIT and the Polish solution. Assumptions remain the same, but in Poland, some conditions have been introduced that limit the possibility of using it, i.e. turnover limit. The income taxation system in Estonia is universal – it applies to all companies without any turnover restrictions.

Check if you can benefit from the Estonian CIT?

The Ministry of Finance has introduced an online test, on the basis of which you can independently determine whether the company has the option of using this solution: https://www.podatki.gov.pl/estonski-cit/.

Do you have any questions? Would you like to know details of what an Estonian CIT is? Contact us and see if you can be a beneficiary of it: biuro@vgd.eu.

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