Estonian CIT – latest practice of authorities and courts

November 5, 2025

In recent tax practice concerning the lump-sum tax on company revenues, two areas of risk have become increasingly prominent: the treatment of transactions with related entities as hidden profits, and the formal correctness of interim financial statements and the procedure for selecting Estonian CIT.

Hidden profits – loans and related benefits

In a ruling dated October 9, 2024 (ref. no.: II FSK 797/24, also discussed in 2025), the Supreme Administrative Court (NSA) held that a loan granted by a company taxed under Estonian CIT to a related entity constitutes hidden profit under Article 28m(3) of the CIT Act, regardless of circumstances (e.g., purpose, market conditions). Additionally, an individual interpretation issued by the Director of the National Tax Information (KIS) on April 22, 2025 (ref. no.: 0111-KDIB1-1.4010.77.2025.4.RH) expanded the view that a shareholder’s remuneration for recurring non-cash services may also be classified as hidden profit. This signals growing caution regarding any capital flows between a company and its shareholder.

Estonian CIT – the approach of the Head of the National Revenue Administration

Unfortunately, the negative trend stemming from court rulings and tax authority interpretations has influenced the approach of the Head of the National Revenue Administration (KAS), who recently amended an interpretation from November 16, 2023. According to the amended interpretation issued on September 30, 2025 (ref. no.: DOP12.8221.13.2025), the remuneration of a company’s proxy who is also a shareholder constitutes hidden profit under Estonian CIT regulations.

Interim financial statements and formalities for selecting lump-sum taxation

In a ruling dated March 5, 2025 (ref. no.: I SA/Sz 614/24), the Provincial Administrative Court (WSA) in Szczecin emphasized that a company transitioning to Estonian CIT mid-year must submit an interim financial statement that complies with the Accounting Act—on time, in electronic format, and signed. Failure to meet these requirements may result in the loss of the right to choose this tax regime. An individual interpretation from May 8, 2025 (ref. no.: 0111-KDIB1-2.4010.152.2025.1) stated that the absence of a signature from the unit’s manager on the statement may render the selection of Estonian CIT ineffective. Furthermore, an interpretation from March 25, 2025 (ref. no.: 0111-KDIB1-2.4010.68.2025.1.MK) indicated that preparing the statement solely in paper form does not meet the requirements for a valid selection of the Estonian regime.

How to effectively choose Estonian CIT?

The Head of KAS has also intervened in this area. On October 1, 2025, he revoked an interpretation from December 5, 2024 (ref. no.: 0111-KDIP2-2.4010.623.2024.1.SJ), which had previously allowed the person responsible for the company’s books to sign the statement in the correct form and on time. The revoking interpretation (ref. no.: DOP12.8221.11.2025) reinforces the fiscally conservative view that the financial statement must be signed by a board member within three months, in accordance with accounting regulations.

What should you keep in mind when it comes to Estonian CIT?

Current rulings and interpretations clearly raise the formal bar and tax risks associated with applying Estonian CIT, especially in intra-group transactions. In practice, it is crucial to:

• examine every transfer to a related entity for potential classification as hidden profit,
• meticulously meet the requirements for interim financial statements and the procedure for selecting the lump-sum tax on company revenues.

Tags Estonian CIT, Estoński CIT, financial statement, hidden profits, sprawozdanie finansowe, ukryte zyski