Estonian CIT in 2026: is it worth switching?
Rules, conditions and risks of the lump-sum corporate tax. Who benefits and who does not.
Estonian CIT, formally the lump-sum tax on corporate income, defers the tax payment until profit is actually distributed. In practice it lets a company reinvest without a current CIT burden. In 2026 it is available to capital companies that meet clear criteria.
Who qualifies
The lump-sum regime is available to limited liability, joint-stock, limited partnerships and limited joint-stock partnerships whose shareholders are exclusively natural persons. The company cannot hold shares in other entities, and its revenue must be predominantly operational — passive income cannot dominate.
- Shareholders are only natural persons.
- No holdings in other companies or foundations.
- At least 3 employees on employment contracts (or cost equivalent).
- Less than 50% passive income (interest, rent, royalties).
- ZAW-RD notification filed by the end of the first month of the tax year.
When it pays off
Estonian CIT is most attractive for companies that reinvest profits — growing, buying equipment, hiring, but not paying regular dividends. The effective rate on distribution is 20% for a small taxpayer and 25% otherwise, but only on actual profit distribution. Until then — 0% income tax.
When to be cautious
Watch out for hidden profits: benefits for a shareholder — loans, rent from a shareholder, company cars used privately — are taxed like dividends. A high share of passive income or a planned sale of shares quickly erodes the benefit. Model the decision on real numbers, ideally together with your accountant.