Advantages of Establishing a Company in Estonia

Many entrepreneurs sooner or later have a question – in which country of the European Union to establish a company that would simplify doing business with European and international partners; reduce level of bureaucracy that hinders business development; be able to engage in company activities from anywhere in the world; and reduce taxation legally?

If you have already thought of such questions, the establishment of a company in Estonia would help you solve the above-mentioned issues all at once.

Advantages of establishing a company in Estonia

Тhe main advantages of having a company in Estonia

• 0% company income tax (tax on retained earnings).
• Founders and Board members may be non-residents of Estonia (there is no need to have a local Director).
• There is no mandatory condition to pay a salary to the company’s director and there are no salary requirements.
• There is no need to contribute the authorised capital when establishing a company.
• Possibility of fully remote management of the company if the owner has an e-Resident card.
• In case of doing business in Estonia, a Board member has the right to apply for a residence permit for up to 5 years.
• Possibility to purchase transport and real estate in the ownership of an Estonian company without taxes.
• Estonia has entered into the Convention for the Avoidance of Double Taxation with 59 countries.
• Estonia has a transparent and clear tax system without progressive taxes.

The team of Company in Estonia OÜ will be happy to provide all the necessary information and help with the establishment of a company in Estonia in the shortest possible time.

Issues that non-residents should pay attention to when opening a company in Estonia

• In Estonia, the corporate income tax is 0%. This benefits primarily those business owners who do not pay out profits, but re-invest it in the business.
• Transparency of doing business. Since October 1, 2022, data on owners and board members of all Estonian companies are publicly available.
• Since 1 January 2011, there is no obligation to employ an Estonian resident in the company’s governing body, unlike in other EU countries. The founders and board members of the company in Estonia may be non-residents of Estonia.
• There is no obligation to pay the salary of a member of the company’s board (CEO) and, accordingly, to pay taxes on such salary.
• Moreover, there is no obligation to contribute the share capital (2,500 euros) at the time of incorporation of the company.
• As such, there is no obligation to report to the Estonian Tax Board if not salary is paid and no obligation to apply for VAT number.
• Possibility to acquire a D-visa for a member of the company’s management board
• A company registered in Estonia can take unlimited loans from its shareholder in the course of business activities
• For carrying out actual activities of the company, it is possible to apply for a residence permit for the company’s management board member or the owner.
• The possibility to buy real estate owned by an Estonian company without additional taxes.
• Possibility to acquire a company car with VAT refund
• No transport tax on the company-owned car
• No double taxation with a large number of countries
• Transparent tax system without progressive taxation
• Minimum annual cost of managing the company from 500 euros/year
• Only a few types of business activities require an operating permit, most of the permits are simply of a notification nature.
• Complete absence of bureaucracy compared to other European Union countries
• Possibility of using a virtual office
• Favourable image and reputation of Estonia will benefit you in dealing with business partners and customers
• Possibility of simplified registration of intellectual property (patents and trademarks in the EU).
• Possibility of obtaining a residence permit in Estonia

Benefits of incorporating a company in Estonia

• Savings on taxation. The main advantage of registering a company in Estonia is a zero tax on retained earnings. When distributing profits, the tax will be 20%. At the same time, Estonia is not considered an offshore company, which means that the company’s reputation will not be affected.
• More funds to reinvest in the company. Since there is no need to pay profit tax annually if it is not distributed in the form of dividends, you have more money to reinvest in the business. This gives the Estonian firm an advantage over other jurisdictions.
• Opportunity to work in the European market. Estonia is a member of the EU. Potential clients from Europe are more willing to cooperate with European companies.
• Savings on time. After receiving the electronic resident card, you can manage the company from anywhere in the world. Documents and contracts are digitally signed, and annual reports are submitted electronically. Only large companies are required to undergo an audit.

Estonia’s e-residency is a unique programme of the Estonian government. Entrepreneurs who have received an e-resident card have access to all the country’s electronic services – they can manage the firm completely online, from signing contracts to paying taxes. But an e-resident card is not an analogue of an Estonian passport: it does not give the right to live in Estonia and does not grant tax status.

Who should register a company in Estonia

The company’s registration in Estonia is an ideal solution for start-ups and small businesses that are not tied to a place. This is everyone who works in the digital world and is engaged in software development, IT consulting, online training, design, marketing, etc. Estonia’s advanced tax system, where taxation occurs only when distributing profits, will be your competitive advantage.

In some countries of Europe, startups do not even register as companies at first. Because they are not ready to take on the costs and hassles of running a company as long as they do not have customers and stable income.

In Estonia, all funds that you invest in the firm or spend in the course of its work are not subject to taxes. Renting an office in a co-working space, office equipment, expenses for meals, accommodation, and transportation on business trips are all justified business expenses that do not have to be taxed.

The Estonian tax system is designed to help start-ups. Only after the company becomes bigger, starts hiring employees and receives stable income, it will pay a tax.

Attractive taxation in Estonia can also be used by large businesses. Our experts will tell you whether an Estonian company is right for you.

Types of companies in Estonia

In Estonia, you can register your company as:

Foreign nationals wishing to take full advantage of the Estonian tax system choose to register OÜ (or AS in the case of large businesses).

At OÜ, shareholders are not personally liable for the firm’s obligations. Minimum capital – 2,500 euros. If all the founders are individuals, and the amount of capital does not exceed 25 thousand euros, it is not necessary to make it at registration. The main thing is to pay the capital before the dividend is distributed.

Registration requires at least one shareholder and one director (individual). 100% foreign ownership is allowed. If the majority of the directors do not reside in Estonia, the company must provide the e-Business Register with the contact details of the local representative who will be responsible for further communication with the public authorities.

Annual reporting is submitted online to the e-Business Register. The audit is mandatory only for large firms. The size of the company is determined based on its total assets, income, and number of employees.

How to register a company in Estonia

To open a company in Estonia, you do not need to go anywhere. If you have already become an electronic resident of Estonia, you can register the company online. If not, it is enough to issue a power of attorney, and we will register a company for you remotely. Alternatively, you can come to Estonia in person, and we will accompany you at all stages of the registration process.

First, come up with a unique name for the company. Make at least two choices in case one of the proposed names is already taken. Choose names that are easy to read, remember, and reflect the essence of the company’s activities.

When registering, you need to declare the share capital (at least 2,500 EUR). It can be deposited later, in cash or in kind. At the time of distribution of dividends by the company, the share capital must have already been paid in.

Determine the type of activity that you specify when registering. Keep in mind that the company will be able to work in other areas, you need to specify the main one.

Documents and information required for company registration in Estonia:

After receiving the documents and information, we will register a company for you in Estonia.

Additional services provided by Company in Estonia OÜ:

• Asistance in choosing the right type of company
• Advice on opportunities for work, company structure and its obligations
• Consultation on tax optimization of business
• Assistance in registering the name and articles of association of the company
• Provision of a local representative and legal address on the territory of Estonia
• Receipt of VAT-number and EORI-code (for trading firms)
• Opening a bank account in Estonia, in foreign banks or in the payment system
• Full service to Estonian firms: accounting, auditing, submission of annual reports
• Advice and assistance in obtaining licenses

The main advantages of registering a business in Estonia

• The main advantage of registering a business in Estonia is the absence of a tax on retained earnings. This feature of the legislation makes it possible to increase and reinvest capital, and it opens up new opportunities to optimize the tax burden and develop the business.
• Simple and fast company registration process. On average, the company is registered in less than 3 hours.
• The establishment of a company in Estonia does not imply an obligation to distribute the profits received.
• One of the main advantages of the company in Estonia is income tax. If a company receives income from its economic activities and is registered in Estonia, it is not obliged to pay income tax on its profits if it re-invests profits in its business development.
• Low company registration costs. Minimum share capital is EUR 2,500, but it can be deferred.
• The owner of the company may be a non-resident of the country (natural or legal person).
•  A company in Estonia may be owned and operated by the same person.
• There are no requirements for the amount of wages and terms of employment.
• Simple reporting and clear documentation algorithm.
• The registration of a company in Estonia makes it possible for a non-resident to obtain the status of a taxpayer of the European Union and to issue VAT and EORI numbers.
• The possibility “to become an electronic citizen” – i.e., by registering a company in Estonia and obtaining an e-residence (resident card) one can after registration manage the company remotely, to sign documents with an electronic signature, to have access to all public services and registers in Estonia, while not being a citizen of Estonia.
• Registration of the company in Estonia to non-residents opens new prospects for holders of long-term work D-visa. This is often a suitable way to apply for a residence permit in Estonia in the future.
• Estonia is located in the European Economic Area and is a member of the European Union. In Estonia, all the laws adopted in the EU are applied and this makes it simpler to expand to the EU market.
• Opening a company in Estonia is beneficial to business, for which it is important to quickly and economically register intellectual property, obtain European trademarks and patents.
• The legal and judicial system in Estonia is transparent and understandable, which makes it possible to feel the security of business.