A company sought clarification whether a loan to a related company financed from pre-CIT profits would be taxed as hidden income.
Company’s Loan Plan
The case involved a company planning to grant a loan to a related entity. In its interpretation request, the company emphasized that the funds would come entirely from profits earned before it opted for the flat-rate tax on company income (known as Estonian CIT).
Taxation Argument
The company contended that income taxed under Estonian CIT consists only of profits generated during the period this tax regime was applied. Since the loan would be financed with previously earned money, it should not be treated as hidden profit, the company argued.
