Obtaining a support decision excludes from the Estonian CIT regime
April 29, 2025
It should be noted that taxpayers generating income mentioned in Article 17(1)(34) (business activities carried out in a special economic zone) or 34a (the implementation of a new investment specified in a support decision) cannot benefit from the Estonian CIT regime.
Obtaining a support decision and the Estonian CIT
However, the provision specifies that the taxpayer cannot benefit from the Estonian CIT regime only once they have earned such income. The question then arises: what if the taxpayer obtained a support decision but has not yet earned income from the implementation of the new investment, for example, due to incurring expenses on the construction of a hall that will probably not be recognized as a new investment? This was the question raised by a company to the Director of KIS.
Does obtaining a support decision automatically exclude eligibility for the Estonian CIT?
The company argued that obtaining a support decision does not exclude the taxpayer from being taxed under the Estonian CIT regime. The exclusion from the Estonian CIT regime occurs only when the taxpayer earns income from the implementation of a new investment in the area specified in the support decision. Therefore, these are two distinct situations, and tax provisions should be interpreted strictly, not expansively.
Opposing position of the Director of the National Tax Information (KIS)
The Director of KIS disagreed with the company’s position in an interpretation dated January 20, 2025, 0111-KDIB2-1.4010.560.2024.1.AG. The authority based its position on the “Guide to Corporate Income Tax Lump-Sum” from December 23, 2021, which stated that a taxpayer who already holds a permit for activities in a special economic zone or a support decision, but has not yet earned income from this activity, is also excluded from the Estonian CIT regime. This taxpayer falls under Article 17(1)(34) or 34a of the CIT Act. According to the authority, only after the support decision is revoked or expires will the taxpayer meet the conditions to opt for the Estonian CIT.
It is difficult to agree with the authority’s position on this matter. It is worth adding that a similar interpretation was overturned by the Provincial Administrative Court (WSA) in Bydgoszcz in a judgment dated February 6, 2024, case no. I SA/Bd 622/23.
