Banks, Estonia, Financial Services, Good for Business

Erki Kilu. Photo: lhv.ee.

Erki Kilu, chairman of the board of the Estonian Banking Association and CEO of LHV Pank, said at the presentation of the association's strategy on Tuesday that the arrangement of the advance income tax for banks whereby banks not paying a dividend must pay income tax is burdensome on small and growing banks, while supporting mature banks.

"The advance income tax for banks undermines banks' competitive situation, undermining in the first place the ability of rapidly developing, local-equity banks to grow and finance the economy," Kilu said.

He said the association has made a proposal to introduce with an amendment to the Income Tax Act an additional deduction in the amount of up to 1.25 mln euros from the quarterly amount that serves as the basis for taxation, in the total amount of up to 5 mln euros per year.  

Under the new income tax regulations valid for banks since 2016, banks must pay an advance income tax starting in 2018 equaling 14 percent of the profit earned by them in the previous quarter.

The Estonian Banking Association is an organization representing 12 banks active in Estonia which is a member of the European Banking Federation.