Estonian CIT 2026 – who it is for and whether it pays off

Estonian CIT (officially: the lump-sum tax on company income) is an alternative form of corporate income tax (CIT), introduced on 1 January 2021 and modified in 2022. The idea is simple and tempting: the company does not pay tax on retained profit. CIT arises only when a dividend is paid to the partners or shareholders. If you reinvest profit in the business (purchases, growth, hiring), then for tax purposes it looks as if there were no profit.

Legal basis: Chapter 6b of the CIT Act (Articles 28c–28t). In 2026 Estonian CIT remains one of the strongest CIT preferences in Poland. But it is not unconditional – the entry conditions, the specific concept of “hidden profits” and the consequences of exit mean that for some companies it can turn out to be a trap.

Who Estonian CIT is for

The preference is reserved for a narrow group of companies. The requirements of Article 28j of the CIT Act must be met together – five conditions:

1. Legal form

Only the following are eligible:

• Limited companies (sp. z o.o.)
• Joint-stock companies (S.A.)
• Simple joint-stock companies (P.S.A.)
• Limited partnerships
• Partnerships limited by shares

Excluded: sole traders (JDG), civil-law partnerships, general partnerships, professional partnerships, family foundations.

2. Shareholder structure

The partners or shareholders may be only individuals (directly). This applies strictly:

• No legal entities as partners or shareholders
• No investment funds or trusts
• No holding companies (even domestic companies exempt from CIT)

This often blocks entry for capital groups.

3. No shares in other entities

The company may not hold shares or stock in other companies. Exception: shares in related entities of a production and services nature (only in narrow situations).

4. Employment

One of two variants:

• At least 3 people employed full time for at least 300 days a year (employees, contractors under contracts of mandate, B2B), or
• Salary expenses (gross + the employer’s ZUS (Polish social insurance) contributions) equal to at least three times the average monthly salary in the enterprise sector, per month

This condition rules out small one-person companies – even a limited company set up only to use Estonian CIT.

5. Passive income

Income from interest, royalties, dividends, copyrights and guarantees may not exceed 50% of all the company’s income.

Rates

The lump-sum tax on company income is 10% (a small taxpayer and a taxpayer starting a business) or 20% (all others). The partner pays 19% PIT on the dividend, but reduces it by 90% (a small taxpayer) or 70% (all others) of the lump-sum tax attributable to their share of the profit.

For comparison, classic CIT:

| Classic CIT | CIT rate | PIT on the dividend | Total burden | |---------------|------------|--------------------|----------------------| | Small taxpayer | 9% | 19% | 26.3% | | All others | 19% | 19% | 34.4% |

When Estonian CIT pays off

The key question is: what do you plan to do with the profit. The answer determines profitability.

Scenario 1: you reinvest in the company

The company generates PLN 500,000 of profit a year, and you reinvest 100% in equipment, a warehouse and staff.

• Classic CIT (small taxpayer): 9% × PLN 500,000 = PLN 45,000 of CIT payable every year
• Estonian CIT (small taxpayer): PLN 0 of CIT – because you do not pay out the profit

Saving: PLN 45,000 a year, plus positive cash flow (the funds stay in the company).

Scenario 2: you pay out all the profit to the partners

The same profit of PLN 500,000, paid out as a dividend.

• Classic CIT: PLN 45,000 CIT + 19% × PLN 455,000 = PLN 86,450 PIT. Total: PLN 131,450 (26.3%)
• Estonian CIT: you pay the lump-sum tax when the profit is paid out, and the partner’s PIT on the dividend is reduced by part of the lump-sum tax (the rules are in the “Rates” section) – the result depends on your figures, and we will calculate it individually.

Scenario 3: a short life cycle, immediate payout

A micro services company generates PLN 200,000 of profit, and the owner takes it out every month for private needs.

• Classic CIT: 9% × PLN 200,000 + 19% × PLN 182,000 = PLN 18,000 + PLN 34,580 = PLN 52,580

The employment condition also applies: at least 3 people or salary expenses at the level of three times the average monthly salary in the enterprise sector, per month. With such a small profit the company may not meet it, and then Estonian CIT makes no sense.

Conditions of exit – voluntary and automatic

Voluntary

You can return to classic CIT after a full four-year period. Earlier withdrawal means losing the preference retroactively and an adjustment – taxation of the whole undistributed profit at the classic rate.

Automatic (loss of the right)

It happens when the company:

• Brings a legal entity into its shareholders
• Acquires shares in another company
• Falls below the employment requirement
• Exceeds 50% of passive income
• Is in liquidation or bankruptcy

Loss of the right means a final adjustment – full taxation at the classic rates for the whole period of the undistributed profit.

Pay for partners – what to watch

A partner in a company on Estonian CIT can receive pay in three forms:

1. Employment contract – ZUS as standard, PIT 12/32%
2. Management contract – no ZUS for the client, PIT 12/32%
3. Appointment (board resolution) – no ZUS for the president of the board, PIT 12/32% + 9% health insurance contribution

Condition: the pay must be at market level. Anything above the market value = a hidden profit, taxed at the Estonian CIT rate (10% or 20%).

Summary

Estonian CIT is the strongest tool for reducing the CIT burden in Poland – but only for companies that meet all five entry conditions and keep discipline in their payments to partners. The decision to enter requires analysis 3–5 years ahead, because leaving the preference is costly.

Before choosing this form we recommend:

1. A 5-year calculation – the assumption of reinvestment vs dividends
2. An audit of shareholders – whether the structure meets the condition of individuals only
3. An employment plan – whether you will keep 3 people for 300 days
4. Documentation of market prices for partners’ pay

At Profais we keep the books of companies on Estonian CIT – see our full bookkeeping service for companies. We are an accounting firm, not a tax adviser: tax advice and tax opinions going beyond day-to-day settlements are provided by tax advisers (in line with the Tax Advisory Act). We compared the other forms of taxation in the article PIT 2026 for company owners.

Sources: podatki.gov.pl – Estonian CIT, the CIT Act (Articles 28c–28t, Chapter 6b).