Profit and dividends
Reinvesting profit vs paying dividends in the Baltics
The best dividend decision is not simply the lowest rate. Founders should compare tax timing, cash needs, investor expectations, retained earnings, and how well the company can evidence business-purpose spending.
| Option | What it improves | What to document |
|---|---|---|
| Retain profit | Working capital, hiring, product development, runway. | Business purpose and clean accounting trail. |
| Pay dividends | Owner liquidity, investor distributions, capital return. | Available profit, withholding questions, recipient tax position. |
| Founder salary | Predictable personal income and social-security coverage. | Market level, payroll registration, employment tax. |
- Do you need personal cash now?
- Will retained profit increase growth or only idle?
- Are shareholder expectations documented?
- Have non-business expenses been separated?
Sources: Estonian distributed-profit tax, Latvian CIT, Lithuanian CIT.