Potential Extension of Estonian Model of Profit Tax to Entrepreneurs Under Consideration

The Ministry of Finance Considers Applying Estonian Model of Profit Tax to Entrepreneurs

The Estonian model of profit tax, which currently exempts companies from profit tax when profits are reinvested, may soon be extended to entrepreneurs as well. The Deputy Minister of Finance, Mamuka Baratashvili, has confirmed that studies are underway to explore the feasibility of implementing this tax framework for entrepreneurs.

"While the final decision has not yet been made, the Ministry of Finance is actively examining the possibility of transitioning entrepreneurs to the Estonian model of profit tax," stated Mamuka Baratashvili. Under this proposed model, entrepreneurs would only be taxed if they utilize funds for personal purposes. The ongoing research will provide insights into the timeline for implementing the Estonian model of profit tax for entrepreneurs.

If this reform is enacted, entrepreneurs stand to benefit significantly, with potential savings estimated to reach up to 100 million GEL.

It is worth noting that Georgia has already implemented the Estonian model of profit tax since 2018, which exempts companies from profit tax if they reinvest their earnings. However, recent government decisions have excluded the banking sector from this taxation regime, instead raising the profit tax rate for banks from 15% to 20%. Additionally, the insurance sector anticipates the adoption of the Estonian model from 2024.