Income tax incentive of businesses to be abolished
Sides to the new governing coalition have agreed that the special income tax rate of companies will be abolished, with the rate of 22 percent applied universally, which heralds a major tax hike for companies that regularly pay dividends. The change was not included in the initial version of the coalition agreement.
"We will abolish the lower income tax rate for regularly distributed profits," the version of the agreement that was signed by representatives of the Reform Party, Eesti 200 and SDE on Tuesday reads.
For years, Estonia has had two income tax rates, the general 20-percent rate and the 14-percent reduced rate on regular dividends that has been available to companies. Better-known examples include major Swedish banks in Estonia.
Social Democratic Party (SDE) leader Lauri Läänemets told Delfi that a major corporate income tax change is in the pipeline, which was not included in the initial version of the coalition agreement by accident.
The income tax rate will climb from 20 percent to 22 percent also for companies and the reduced rate abolished.
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Editor: Marcus Turovski