Estonian CIT in Poland – stop paying income tax!

Estonian CIT in Poland – stop paying income tax!
Jakub Chajdas

Jakub Chajdas

Partner / Attorney-at-law

Tax optimization thgough company formation in Poland? Yes please. Estonian CIT in Poland is a game changing tax solution for many businesses. In simple words you do not pay any corporate income tax on the company’s profit unless you pay out a dividend. And even if you distribute the profit you get a preferential effective tax rate of 20% (small taxpayers) or 25% (other companies) for corporate and personal income taxes combined. What is not to love about this regulation? Read more to find out how to perform a tax optimization of your business in Poland.

How will you benefit from Estonian CIT?

  • You won’t pay CIT on the company’s profit
  • You won’t pay the solidarity levy
  • You won’t pay the health contribution (at all!)
  • You will pay lower tax when withdrawing your profit

No dividend, no corporate income tax!

Only the funds paid out for profit consumptions are subject to taxation. The funds left in the company as undistributed profit remain untaxed. Yes, you can run your business in Poland without having to pay corporate income tax at all!

Who can use the 0% corporate income tax rate in Poland?

The following entities can use this form of taxation:

  • JOINT-STOCK COMPANY (Polish S.A.)
  • SIMPLE JOINT-STOCK COMPANY (Polish P.S.A.)
  • LIMITED LIABILITY COMPANY (Polish Sp. z o.o.)
  • LIMITED JOINT-STOCK PARTNERSHIP (Polish spółka komandytowo-akcyjna)
  • LIMITED PARTNERSHIP (Polish sp.k.)

You do not meet the requirement concerning the form of your business? This is not a problem! We will help you to transform an existing entity or open a new one, suitable for this solution. Read more about our company transformation service.

When is it worth to benefit from the Estonian CIT?

  • Savings
    If your business generates high income that is not fully consumed by partners and shareholders.
  • Reinvestments
    If your business is expanding and you need a lot of funds for investments in fixed assets, goods, technology and employment.
  • Major transactions (sale of assets)
    If your company is about to make a large transaction from which the income must be used in a way that does not generate tax costs. For example, the sale of valuable property that requires the use of the majority of the sum to repay the loan, in order to free the mortgage.

Is the Estonian CIT really suitable for you?

We know how to implement Estonian CIT in the corporate structure of companies as we run several companies under Estonian CIT ourselves. We can quickly verify whether it would be profitable for you. We will present a calculation of the tax burden and an evaluation of the risks of applying the new tax regime. Remember that as of 2022, Estonian CIT is not that difficult.

How much can you save on Estonian CIT?

Estonian CIT for a small taxpayer (turnover up to 2 000 000 EUR)

Standard CITEstonian CIT
Company’s income1 000 000 PLN1 000 000 PLN
CIT tax rate9%10%
Taxation of dividendPaid out profit – 910 000 PLN

Tax on dividend (19%) – 172 900 PLN
Paid out profit: 1 000 000 PLN

Estonian CIT (10%): 100 000 PLN Tax on dividend including the reduction by 90%: 100 000 PLN
Tax to be paid262.900 PLN  (26.29%)200.000 (20%)
SAVINGS RESULTING FROM ESTONIAN CIT– 62 900,00 PLN

– tax rate reduced by 6.29 percentage points

the tax is reduced by as much as 31,45 %
Estonian CIT calculation for the small taxpayer

Estonian CIT for a taxpayer with a turnover above 2 000 000 EUR.

Standard CITEstonian CIT
Company’s income1 000 000 PLN1 000 000 PLN
CIT tax rate19%20%
Opodatkowanie dywidendyPaid out profit – 810 000 PLN   Tax on dividend  (19%) – 153 900 PLNPaid out profit: 1 000 000 PLN   Estonian CIT (20%): 200 000 PLN


Tax on dividend including the reduction by 70%: 50 000 PLN
Tax to be paid343.900 PLN  (34.39%)250.000 PLN (25%)
SAVINGS RESULTING FROM ESTONIAN CIT– 93 900,00 PLN

– tax rate reduced by 9.39. percentage points

the tax is reduced by as much as 27,3 %
Estonian CIT calculations for the taxpayer with a turnover exceeding 2 000 000 EUR

Under what rules can you use the 0% corporate income tax rate in Poland?

  • OPERATING COMPANY REQUIREMENT
    Your company’s revenue comes mostly from its operations. Furthermore, its passive income accounts for less than 50% of turnover.
  • FULL-TIME EMPLOYMENT OF 3 PEOPLE
    Your company hires at least 3 people for full-time under an employment contract. Alternatively, it incurs employment costs in a form other than an employment contract in the amount of at least 3 times the average monthly remuneration in the enterprise sector, with the simultaneous need to incur costs connected with income tax and ZUS and health contributions. In the first year, for a small taxpayer, it corresponds to 1 full-time job and the equivalent of 1 average salary. For a taxpayer in the first year of starting his business, it amounts respectively to 0, then in the second year – 1, in the third year -2, and so on, until the requirement is fulfilled in the 3rd year of being subject to a lump sum tax.
  • SIMPLE OWNERSHIP STRUCTURE
    Only natural persons are shareholders or partners of your company.
  • EXCLUSION OF COMPANIES BELONGING TO CORPORATE GROUP
    Your company does not hold any shares (stocks) in the capital of another company. It does not have participation titles in an investment fund or collective investment institution. It also does not have rights and obligations in a company that is not a legal person. Moreover, it does not participate in other property rights connected with the right to receive benefits as a founder or beneficiary of a foundation, trust, other entity or legal relationship of a fiduciary nature.
  • EXCLUSION OF IAS
    Your company does not prepare IAS financial statements for the period covered by the lump sum tax.
  • EXCLUSION OF FINANCIAL ENTERPRISES AND LOAN INSTITUTIONS
    Your company does not carry out financial or lending activities as part of its business.
  • EXCLUSION OF SEZ AND POLISH INVESTMENT ZONE
    Your company does not benefit from exemptions resulting from the Special Economic Zone (SEZ) or the Polish Investment Zone
  • NOTIFICATION TO THE TAX OFFICE
    You will submit a notification about the choice of lump sum taxation to the competent head of the tax office, according to the established formula.

Effective taxation under the Estonian CIT (PIT+CIT)

There are two effective tax rates under the Estonian CIT:

  • 20%
    For small taxpayers (turnover up to 2 000 000 EUR)
  • 25%
    For taxpayers with a turnover exceeding 2 000 000 EUR

And a real game changer:

  • 0%
    The funds left in the company as undistributed profit remain untaxed, therefore the effective tax rate may be much lower than those presented above.

No dividend, no corporate income tax!

Only the funds paid out for profit consumptions are subject to taxation. The funds left in the company as undistributed profit remain untaxed, therefore the effective tax rate may be much lower than those presented above.

If you are interested in the above article and would like to know more about the topic, we invite you to cooperate with us. Experts from our law firm in Lodz are at your service, contact us today and let us help you. If you are planning to choose Estonian CIT and looking for accounting services for your company, visit our accounting office in Warsaw.

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Jakub Chajdas

Partner / Attorney-at-law

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