”Capital has nationality and it is worth to try to strengthen it. That is why we are introducing a state-of-the-art tax solution – Estonian corporate income tax,” said the head of government.
What is Estonian corporate income tax? In a traditional form of taxation, a company pays tax on income when it is generated (every month, quarter, year). In the Estonian solution, a company pays tax only when it pays out its profits. This mechanism favours investments.
Strengthening the Polish capital
The introduction of Estonian corporate income tax is a response to expectations of companies regarding issues such as income taxation. Such solutions, even more favourable than the current ones, will be effective from 2021.
”We are implementing a state-of-the-art tax solution. It is a solution that benefits both the market and employees. We want to be responsive to the needs of employees and companies,” said the Prime Minister.
Estonian corporate income tax increases available capital, especially for small and medium-sized enterprises that struggle to raise resources for operating activities.
Who can benefit from Estonian corporate income tax? Companies and employees!
Companies seeking resources for new investments and business growth will be the largest beneficiaries of the solution.
Employees will also benefit from the solution. Labour demand will rise, while investments will increase its effectiveness. New jobs will be created, which – thanks to the improved liquidity of companies – will be better protected against the effects of the economic cycle.
Benefits for companies and the economy
Estonian corporate income tax will contribute, among other things, to:
• the increase in companies’ equity,
• the improvement of their liquidity, creditworthiness, and productivity.
As a result, economic growth may accelerate and increase the competitiveness of the entire economy.
This is particularly important for smaller enterprises that struggle to acquire financing for new investments.
Companies that will adopt Estonian corporate income tax will not have to pay tax per month or quarter or provide statements on a yearly basis. No tax means no tax accounting, declarations, or administrative obligations.