This caused considerable confusion and no less stress, as in practice the taxpayer would have been obliged to pay the outstanding CIT calculated according to general rules, which had not been calculated due to the specific nature of taxation under the Estonian CIT regime.
The confusion stemmed from an official’s misinterpretation of the provisions of the CIT Act (in the context of the condition for applying the flat-rate scheme by companies whose shareholders are exclusively natural persons, i.e. “natural persons not holding property rights related to the right to receive benefits as founders (settlors) or beneficiaries of a foundation, trust or other entity, or a legal relationship of a fiduciary nature, excluding founders and beneficiaries of a family foundation” – from Article 28j(1)(4) of the CIT Act).
The error of interpretation lay in the official equating the above condition with the shareholders of a company subject to Estonian CIT holding shares in other companies.
This interpretation is contradicted by the tax guidelines of the Ministry of Finance of 23 December 2021 on lump-sum taxation, which state on page 21 that “a partner in such a company (a natural person) may not hold property rights related to the right to receive benefits as a founder or beneficiary of a foundation, trust or other entity, or a legal relationship of a fiduciary nature (Article 28j(1)(4) of the CIT Act). However, there are no obstacles to a partner in such a company holding shares in other capital companies or the entirety of rights and obligations in another company that is not a legal person”
The Ministry of Finance, however, reassures and upholds the interpretation of the provisions presented in the explanatory notes – as evidenced by the response provided to Dziennik Gazeta Prawna (link to the publication below).
Source: Dziennik Gazeta Prawna
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