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Distributable profits are determined by financial statements drawn up in accordance with Estonian GAAP or IAS/IFRS and there is no adjustment of accounting profits for tax purposes (tax loss carry-forward or carry-back).Distribution of profits will give rise to a tax liability even when the company is in a loss situation.

Example: If a company has a loss of 100 in year 1 and a profit of 150 in year 2, and company distributes 70 in year 2, company is taxed on 70. The tax payable would be 17.50 (20/80 on the 70).