The Ministry of Finance has presented draft changes to the personal income tax (PIT) and corporate income tax (CIT). The proposed amendment aims to strengthen the tax system. The pro-fiscal nature of these changes, along with the short vacatio legis period, will present a significant challenge for taxpayers.

The proposed changes to PIT include:

• increasing the flat-rate tax on recorded revenues in the case of providing services to related entities;
• introduction of additional conditions for the tax-free sale of post-leasing cars;
• changes in the rules for taxing income from incentive programs;
• clarification of the regulations regarding the solidarity levy;
• clarification of the rules for determining income from the settlement of a monetary obligation in non-monetary form (datio in solutum);
• limiting the scope of housing relief.

In turn, changes in CIT are to include, among others:

• expanding the catalogue of hidden profits for Estonian CIT purposes, including funds paid for rent, lease, and the provision of intangible services;
• changes to the tax on shifted income.

Moreover, in terms of both PIT and CIT, the Ministry proposes:

• making the possibility of using the IP Box dependent on the taxpayer employing employees;
• excluding the possibility of changing depreciation rates retroactively;
• exclusion of the possibility for real estate companies to depreciate objects classified for accounting purposes as long-term investments;
• clarifying the rules for determining the costs of obtaining income from the redemption of shares or stocks or the reduction of their value;
• taxation of income from property received as a result of the liquidation of a partnership that was established after its transformation from a capital company;
• limiting the costs of obtaining income from the sale of shares in the company, resulting from the transformation to historical costs.

The changes are scheduled to take effect on January 1, 2026. The bill also includes several transitional provisions that, in some cases, may result in a postponement of the application of unfavorable changes to a specific taxpayer. 

We will discuss these and other tax changes during a free training session this Friday, September 26th. 

We invite you to participate!