What exactly is the lump sum tax on corporate income?
It is a system that shifts the moment of tax payment to the time of profit distribution (e.g., dividends), allowing the company to reinvest the full amount of earned money.
The traditional CIT model forces you to pay monthly advances regardless of whether you plan investments. In the Estonian model, cash stays in the company. As long as you do not transfer money to a private account, the Tax Office receives nothing in income tax. This is a powerful tool for improving financial liquidity.
Progress Holding support: We analyze your company’s finances and simulate tax benefits. We will check if this model pays off in your specific case.
Who can use Estonian CIT in 2026?
This solution is available to limited liability companies (sp. z o.o.), joint-stock companies, simple joint-stock companies, and limited partnerships whose shareholders are exclusively individuals.
To implement the lump sum tax, your company must meet all the following conditions combined:
- Shareholding structure: Shareholders are only natural persons (no funds or other companies in the structure).
- No shares in other entities: Your company cannot hold shares in other companies.
- Employment: You must employ at least 3 people under an employment contract or specific civil law contracts (with full social security ZUS) for a minimum of 300 days a year.
- Passive income: Less than 50% of revenue comes from receivables, interest, or guarantees.
Detailed regulations can be found in the Corporate Income Tax Act.
How much will you actually save? Tax rates
Effective taxation (combined tax of the company and the shareholder) is 10% for small taxpayers and 20% for other entities.
The traditional model involves classic double taxation. The table below shows the difference in the entrepreneur’s pocket:
| Type of taxpayer | Effective tax (Traditional CIT) | Effective tax (Estonian CIT) |
|---|---|---|
| Small taxpayer (revenue up to 2M EUR) | approx. 26.29% | 10% |
| Large taxpayer | approx. 43% | 20% |
The savings are significant. With a profit of 1 million PLN, a small taxpayer keeps over 160,000 PLN more in their pocket than in the classic model.
How does it look in practice? Progress Holding experience
Based on the analysis of dozens of Estonian CIT implementations conducted at Progress Holding, we identify one critical risk area: hidden profits.
Many entrepreneurs forget that in this model, expenses unrelated to business activity are immediately taxed. The most common mistakes of our clients before coming under our accounting care include:
- Using a company passenger car for mixed purposes (which generates tax on 50% of operating costs).
- Loans granted to shareholders by the company.
- Representation expenses that have no business justification.
At Progress Holding, we manage accounting to monitor these items on an ongoing basis and protect you from additional tax assessments.
How to declare the choice of lump sum taxation?
You must submit the ZAW-RD notification to the relevant head of the tax office by the end of the first month of the tax year in which you want to switch to this system.
The transition process requires closing the accounting books and preparing financial statements for the day preceding the change. This is a moment where no mistakes can be made in asset valuation.
Action: Commission an initial audit from us. Progress Holding will prepare the necessary documentation, submit the ZAW-RD, and handle the closing of the year so that starting the new system is safe.
Frequently asked questions (FAQ)
Can a new company choose Estonian CIT immediately?
Yes, newly registered entities can choose this form of taxation immediately. Moreover, start-ups have facilitations regarding employment limits in the first years of operation.
What happens to unpaid profit from previous years?
Profit generated before entering the Estonian lump sum remains taxed under the old rules upon distribution. It does not merge with the “new” profit under Estonian CIT.
Can I use the R&D relief while on the lump sum tax?
No. Choosing Estonian CIT excludes the use of most tax reliefs, including R&D relief and IP Box. You must calculate what is more profitable – a low lump sum rate or deductions from income.
Estonian CIT in 2026 remains the best tax shield for Polish family businesses and limited liability companies reinvesting profits. However, the key to success is discipline in spending and professional accounting that detects so-called hidden profits.
Do you need professional support with implementation or accounting for Estonian CIT? Contact us at Progress Holding at +48 603 232 418 or via email at office@progressholding.pl.
