Corporate Income Tax in Estonia

Corporate income tax in Estonia is calculated based on the company's taxable profit for the financial year.

1. Calculate taxable profit: Start with accounting profit and make adjustments for tax purposes, such as deducting expenses and adding back non-deductible items.
2. Apply tax rate: Once the taxable profit is determined, apply the corporate income tax rate to calculate the tax liability.
3. Submit tax return: Companies are required to file an annual tax return and pay corporate income tax by the deadline.

Estonian companies generally follow International Financial Reporting Standards (IFRS) or local Generally Accepted Accounting Principles (GAAP) for financial reporting, which form the basis for calculating taxable profit.

The corporate income tax rate in Estonia is a flat rate of 20% on distributed profits.

Taxable Income Categories for Corporations:

• Operating income: Revenue from sales of goods or services.
• Investment income: Dividends, interest, rental income, and capital gains.
• Other income: Royalties, licensing fees, and other miscellaneous income.

Treatment for Tax Purposes:

• Deductible expenses: Business expenses incurred for generating income, such as salaries, rent, utilities, and depreciation.
• Non-deductible expenses: Expenses not directly related to business activities or not meeting specific criteria set by tax laws.

Exempt Income Categories for Corporations:

• Retained earnings: Profits reinvested in the company.
• Dividends from subsidiary companies, if certain conditions are met.
• Income from qualifying investments, such as holdings in tax-exempt securities.

These exemptions encourage reinvestment of profits into business expansion, promote investment in qualifying securities, and prevent double taxation on dividends under certain conditions.

Legal Provisions:

• Corporate Income Tax Act (CITA)
• Accounting Act
• Tax Rates: CITA § 47
• Taxable Income: CITA §§ 10-18
• Exemptions: CITA §§ 19-21