The global Covid-19 pandemic has affected every country’s economy. This article expands the influence the virus is having on the economy by the example of Estonia.
The worldwide pandemic has spread rapidly and seems to affect more or less every individual, inevitably, putting the global economy in a vulnerable situation. Causing economic mess coronavirus has led to a recession, where even the most sustainable orders undergo changes. While looking into pandemic consequences and accessing effect they are having on the economy of Estonia, it is essential to consider the country’s every distinctive economic feature.
The Estonian economy is regarded as open and stable and seeks to maintain the status. Characterised by innovation and adaptability, it can stand up against the virus. Nonetheless, since the pandemic rapid growth during the last spring, local media authorities are transmitting rich diversity of data regarding the Estonian market’s stability. In such a way, there arise questions concerning the subjectivity of an economic forecast. Whether the situation on the market is indeed that disastrous or is it about a certain perspective?
The first wave, or falling numbers
Data gathered for spring 2020 evidently indicate negative implications of the virus, nevertheless, not every business was affected. Statistics show that compared to 2019, the year 2020 first-quarter GDP has dropped by 0,7 per cent and stopped at 6,5 billion euros. For its most part, the virus affected energy, processing and industrial sectors, which could be explained by the decline in trade growth and household consumption. During the spring analysts were not so sure about the power of virus impact, they, however, empathised a decreasing trend in most fields of economic.
By the time of the second wave, the consequences of the first one became clearer. The tertiary sector, in particular, tourism, suffered income loss and approached decline. During the spring-summer of 2020 the decline in the prices was caused by lower demand. A range of leisure limited by the pandemic served as a reason for lowering prices of services, while rising unemployment has worsened the situation. Still, some businesses stayed strong.
News and analytics demonstrate the resilience of large construction companies and exportation. Meanwhile, some experts considered the Estonian market’s dependence on foreign demand, empathising the government’s limited ability to stimulate its own economy.
The second wave, or adaptation
At this stage, the government strived a lesson to be learned and prepared for the second wave. The forecast, however, was disappointing and predicted a stronger impact in the last quarter. GDP has dropped by 1,2 per cent comparing to 2019 and was 7.3 billion euros. The economic decline for its most part resulted from a decline in the first sector. Things were not getting better in hospitality, thereby compromising the market’s stability.
The economy of Estonia, however, has maintained its status and started to stabilise. The decline has decelerated and stopped pretty much in every sector. The processing sector and logistics were the first ones to recover. Despite limited export, the level of trade has increased due to electronics and chemical products.
All in all, for the past year Estonian economy, has fallen by 2,9 per cent. Considering the scale of the pandemic, it may be said that the Estonian government has shown its ability to an efficient adaptation.
Private sector situation
Speaking of attention the Estonian government paid to the private sector, it is essential to note that the first half of the year was a challenge for both small and medium enterprises. Moving towards the end of the year, the government started to financially support such businesses. Having European commission approval, the government aimed to help the socio-cultural sector. Every willing could fill an application online.
Last but not least is the remarkable and independent success of Estonia start-ups worldwide at the height of a pandemic. For instance, Pipedrive, the leading CRM platform, has signed an agreement to receive a majority of investment from Vista Equity Partners, a leading global investment company focused on enterprise software. Similarly, Estonian based Tesla-rival Skeleton Technologies, received more than 40 million euros of investment last year. And also, three Estonian companies, specialised in IT, have joined their forces and signed a contract with the European Space Agency to fight against cyberattacks.
The global success of local companies along with the government’s successful stabilisation of a crisis proves the fact that there are no hopeless situations and highlights the necessity of competent decisions.
There is no wrong time for setting up a business, but you have to be sure you are in the possession of the right information, thereby ready to act. LKS Consult OÜ will sort it out for you. Our professionals are happy to assist you in becoming part of the Estonian business environment and help in setting up the company in Estonia. [/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column][vc_column_text el_class=”padding”]In order to apply for a cryptocurrency license (Virtual Currency Service Provider Activity License) in Estonia in 2021, the following data/documents will be required:
1. General Information
Comment made by the Applicant – a short description of your cryptocurrency project. Main services / services provided
Phone number of the Applicant
Email address of the Applicant
Share capital – the paid-in share capital of a cryptocurrency company must be at least 12,000 EUR.
Credit Institution Certificate – a certificate confirming the contribution of the share capital.
2. Persons Involved
Information about all individuals and legal entities related to the company: identification code, name, surname, role in the company, share in the company, residence address, CV/resume, date of birth, citizenship, phone number, email.
3. Company Account
IBAN – International Bank Account Number.
Name of the financial institution where the account is opened – the applicant company must have an account opened with a payment system registered in Estonia (Payment and e-Money Institutions).
A certificate confirming the existence of an account.
4. Subsidiaries
You must indicate if the license is for the subsidiary.
5. Locations where Services are Provided and the Persons Responsible for Providing Service
It is necessary to provide the exact address of the company office, phone number, email, a brief description of the project, website address. In addition, a signed Commercial Lease Contract must be attached to the application.
Also at this stage it is necessary to add the data of the Person Responsible for Providing Service, that is name, surname, personal code, phone number, email.
6. Contact Person
At this stage, you need to add the Contact Person’s data: name, surname, personal code, phone number, email, place of birth, citizenship, residence address. It will also be necessary to add a CV/resume with previous work experience and, if desired, a diploma from a specialised educational institution.
7. Person Responsible for International Financial Sanction
At this stage, it is necessary to add the data of the Person Responsible for International Financial Sanction: name, surname, personal code, phone number, email, place of birth, citizenship, address of residence.
8. Documents Added to the Application
Rules of procedure and internal audit rules prepared pursuant to § 14 of the Money Laundering and Terrorist Financing Prevention Act
Rules of procedure prepared pursuant to § 23 of the International Sanctions Act and procedure for control of compliance therewith
Certificates certifying the absence of criminal records
Personal data and responsibilities of the member of the management body and the procurator
Copies of identity documents
Handwritten confirmation of absence of penalty
Description of the Service
Additional documents
9. State Fee
After providing all the information, you must pay a state fee of 3,300 EUR to the Ministry of Finance of Estonia.
Recipient: Rahandusministeerium
Bank accounts:
Swedbank a/a EE932200221023778606
SEB Pank a/a EE891010220034796011
Luminor a/a EE701700017001577198
10. Petition
‘Submit’ turns active once all required fields in all stages have been correctly filled out (no red marks). If something is unclear, please call +372 6687080 or write to register@mkm.ee.
The license is issued for a timeless period.
The specialists of LKS Consult OÜ will be happy to assist in obtaining a license in the field of cryptocurrency. Taking into account the needs of customers from all over the world, LKS Consult OÜ has developed an all-in-one offer “Company & Crypto-License in Estonia”, which includes registration of an Estonian company plus all the necessary services for obtaining a single crypto-license. Assistance includes drafting the necessary documents, drafting procedural and KYC rules of the company, translation of documents into Estonian and support throughout the entire process of obtaining a license.
[vc_row][vc_column][vc_column_text]Nothing attracts an entrepreneur more than the speed and cost of launching a cryptocurrency project, and there is no doubt that at the moment on the world stage in Estonia such projects can be implemented faster and cheaper than anywhere else. Only one cryptocurrency license is required to legalise any crypto-activity in Estonia. This strengthens its position among the most preferred jurisdictions to launch a crypto-project.
A Member of the company’s Board can apply for a cryptocurrency license in Estonia. An application for a license can be submitted electronically with an e-resident card, when visiting a notary in Tallinn, or by issuing a power of attorney to a representative of LKS Consult OÜ , so that our lawyer can submit the application for you.
The state fee for an application for a license is 3,300 EUR. The fee must be paid to the Estonian Ministry of Finance (FIU). The issue of a license is decided by the Rahapesu andmebüroo (RAB) within 60 working days after the application is submitted.
Requirements for Companies Applying
for an Estonian Crypto-License in 2021
The minimum share capital of a crypto-company is 12,000 EUR and its deposit before applying for a crypto-license is mandatory. This amount can be further used to finance the commercial activities of the company.
Payment of the share capital is made by means of a cash contribution – by bank transfer from the personal account of the Owner/s of the company in shares of the corresponding to the par value of the share. You can deposit the share capital for a cryptocurrency company only with a cash contribution (not cryptocurrency) from the personal account of the Owner/s to the corporate account. The Members of the Board of Directors pay a contribution equal to the par value of their share (i.e. corresponding to their share in the share capital).
The state fee payable to the Estonian government is 3,300 EUR.
A corporate IBAN account is required before applying. Estonian banks do not accept applications for opening a bank account from crypto+companies, however, it is possible to open an account with one of the European Providers of Cross-Border e-Money Services registered in Estonia.
The Management Board and the place of business must be located in Estonia.
The company applying for the license must have a legal address in Estonia. The physical office can be visited by the Regulator at any time to check the documentation and confirm the firm’s activities. The physical office of a crypto-company must be located in Estonia and correspond to the company’s activities.
The presence of the Director (an Estonian citizen) of the company is mandatory. The Director of the company must be a resident of Estonia and reside in Estonia.
When applying for a single cryptocurrency license, a local KYC/AML Officer is required for an Estonian company. After applying for a crypto-license, the KYC/AML Officer will have to undergo an interview with the RAB to confirm their skills and suitability for the position.
LKS Consult OÜ can help you find and hire an Estonian Director for your company and train them in client identification requirements under the Money Laundering and Terrorist Financing Prevention Act. It should be noted that the chosen Director will only be a member of your company and will represent it in communication with the Regulator.
Required documents for applying for a crypto-license in Estonia:
Taking into account the needs of customers from all over the world, LKS Consult OÜ has developed an all-in-one offer “Company & Crypto-License in Estonia”, which includes registration of an Estonian company plus all the necessary services for obtaining a single crypto-license.
An individual customer approach is vital for us. We take care of your business needs, combining personalised order processing and professional consulting, reasonable rates, and company registration services for clients from all over the world. In addition, LKS Consult OÜ provides continuous support to entrepreneurs in accordance with the latest updates in Estonian legislation.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]The specialists of LKS Consult OÜ will be happy to assist you in obtaining a cryptocurrency license in Estonia as well asprovide accounting services in Estonia.[/vc_column_text][/vc_column][/vc_row]
[vc_row][vc_column][vc_column_text]Estonia is one of the countries with the highest level of e-Government development. Blockchain is considered to be a key technology in the development of the Estonian e-Government because of its undeniable advantages and potential. From a technical point of view, blockchain technology improves the efficiency, security, and transparency of transmitted data.
Data transparency aims at equality of public access to information, while ensuring the clarity, consistency and reliability of the data provided. In the context of democracies, transparency and accountability often take precedence over confidentiality. However, prioritising confidentiality while ensuring transparency requires complex security protocols, which somewhat complicates the process.
In 2001, Estonia developed its own decentralised distributed system – X-Road, and has been using the KSI blockchain platform since 2008 in the registries of codes of healthcare, judicial system, law, security and Commercial Code, among which are e-Police, e-Law, e-Justice, as well as private sector e-services such as digital ID, e-Residency, e-Governance, e-Tax, i-Voting and e-Health.
Why does Estonia use Blockchain technology?
Many believe that Estonia is at the forefront of blockchain and decentralised technology by implementing the projects like KSI and X-Road, starting its digital transformation journey over 20 years ago. Estonia is currently the leading country in the development of e-Government, as it has taken many measures to support the digital society at the beginning of the 21st century. Accordingly, the policy of our country is aimed at increasing the efficiency and transparency of the state apparatus, as well as at developing the economy and improving the general welfare of citizens.
According to the “one-time principle” – the main principle of the Estonian legal framework, all information records are entered in the system once, and any updates must be made in the master record. This is necessary to ensure the integrity of the data and allows you to check the update history of this very data, as well as request records of confidential access.
The transparency and immutability functions of the blockchain (chain of blocks with information) allow detecting all kinds of data manipulation. Information stored in a blockchain-based ledger is nearly impossible to steal, alter or delete, which in turn ensures data integrity at rest. For this reason, it becomes clear why the Estonian government is using the blockchain platform to protect its own servers.
KSI: Keyless Signature Infrastructure
As mentioned earlier, the blockchain platform used in Estonia is called KSI Blockchain (Keyless Signature Infrastructure) provided by Guardtime technology. KSI is designed to protect networks, servers, and databases in Estonia from attacks; detect any deliberate or unintentional data changes; and ensure data integrity at rest.
The KSI uses a “once-only principle” to ensure the integrity of the present digital data. In simple terms, all data entered into the system will be hashed into a string of keys called a hash value. The hash value, access time, and signer are then entered into the KSI blockchain, which creates a “signature” that proves the uniqueness of the document. Thanks to such a data storage system, the source information never leaves the server, allowing the state apparatus to track any changes in the blockchain. It makes it possible to check the “signature” of a document without referring to the original document, hence the literal components of the name of the KSI – keyless signature infrastructure.
X-Road: Data Exchange Layer (DXL)
X-Road is a centrally controlled distributed layer of data exchange between information systems. Simply put, X-Road is a platform that connects different interfaces, servers, and services in Estonia, creating a common level of data exchange between systems. Without exception, all digital systems of state institutions in Estonia are connected to the X-Road platform.
X-Road provides a relatively robust information security platform. However, the platform can only protect data in transmission, but cannot guarantee the safety of data at rest. This is where the features of the KSI blockchain come into play.
Today, blockchain-based systems are practiced in many states as the implementation of digital functions in the government, namely in Estonia, Switzerland, China, Japan, America, Great Britain, and other countries aiming to optimise public administration processes. The use of blockchain technologies still involves some difficulties, but the potential of this technology cannot be ignored. The KSI blockchain in Estonia is a vivid example of the successful use of blockchain for the implementation of e-Government in state processes.
FinTech companies in Estonia using Electronic ID and Blockchain
Over 100 Estonian FinTech companies, ranging from innovative startups like TransferWise to blockchain leader – Guardtime, make Estonia a global center of FinTech excellence.
The following is a list of Estonian FinTech companies that target local or larger markets, but remain in touch with the Estonian back office or management:
Company
Description
Field
AASA GLOBAL
Credit solutions for retail and SME clients, back office in Tallinn.
Lending
ADMIRAL MARKETS
International brokerage firm, back office in Tallinn.
Capital Markets
ADVAPAY
Payment services provider.
Payments
AGRELLO
Smart contracts powered by A.I. with contract versions saved on the blockchain.
Blockchain
ALPHABLUES
Automating customer experience through Chatbots.
AI
ARGELD
Crowdfunding of real estate.
Crowd/P2P
ASKROBIN
Chatbot utilising ML and AI to improve financial inclusion for the underbanked.
AI
BANKISH
Deposit and loan management system provider, spin out from digital lender Finora Capital.
Banking/API
BAROQUE STREET
Japanese-Estonian crypto market data provider.
Crypto
BIGBANK
Online consumer and corporate lender active in 9 European countries from Estonia HQ.
Banking
BIG DATA SCORING
Machine learning analyses of big data to help lenders approve more loans with lower defaults.
Credit Scoring
BIKE ID
Register and insure your bike online in 2mins.
Insurance
BITOFPROPERTY
Crowdfunding of real estate in Estonia and Singapore.
Crowd/P2P
BLACK INSURANCE
Startup seeking to streamline the insurance value chain by removing third parties.
Insurance, Blockchain
BLOCKHIVE
Collaboration platform for blockchain based business and cryptocurrencies.
Blockchain, Crypto
BONDKICK
Crowdfunding of SME’s in UK, Estonian management
Crowdfunding/P2P
BONDORA
Peer-to-Peer lender with 27,000 investors.
Crowdfunding/P2P
BULKESTATE
Real Estate Peer-to-Peer lender, redomiciled from Latvia to Estonia.
Crowdfunding/P2P
CACHET
Flexible insurance for drivers of ride-hailing firms Uber, Bolt and Yandex.
Insurance
CASH ON GO
Digital consumer lender in UK, back office in Estonia.
Lending
CATAPULT
Crowd funding of start-ups in S.E. Asia secured on the blockchain.
Crowdfunding/P2P
CHANGE
Start-up Digital banking based on the Blockchain, active in Singapore, IT in Estonia.
Banking, Blockchain
CINDX
Cryptocurrency asset management, wallet, and technology solutions.
Crypto
CODEBORNE
Software house with financial services references.
Software
COINEX GROUP
Cryptocurrency exchange and hardware.
Crypto
COINMETRO
Cryptocurrency trading platform built on the Blockchain.
Crypto, Blockchain
COINTRAFFIC
Digital agency for Crypto and Blockchain.
Crypto, Blockchain
COST POCKET
Digital expense management and reporting application for corporates.
Software
CREDIT STAR GROUP
Digital consumer lender in 8 countries. Back office in Tallinn.
Lending
CREDITINFO GROUP
Icelandic owned credit data and solution provider with sizeable ops in Estonia.
Credit Scoring
CREDY
Global real-time lead broker for online lending industry.
Lending
CROWDANA
Crowdfunding of start-ups in UK.
Crowdfunding/P2P
CROWD ESTATE
CROWDSURE
Crowd funding of real estate.
Crowd insuring.
Crowdfunding/P2P
Insurance, Crowdfunding/P2P
CYPTERIUM
Crypto wallet, payment and card solutions.
Crypto
CUBER
JV between LHV Bank and ChromaWay offering instant, secure, mobile payments in any currency.
Payments
DATA ME
Credit information processing and analytics.
Credit Scoring
DECRYPTO
ATM provider providing immediate exchange between cash and Bitcoin.
Crypto
DX.EXCHANGE
Start-up offering ownership of NASDAQ listed stocks via their proprietary token.
Crypto, Capital Markets
E-RESIDENCY
Started as a project to provide access to Estonia’s business environment, now a partner to Holvi and UNCTAD.
Identity
EESTY
Digital wallet for storing cryptocurrencies, with ability to link debit card for real economy payments.
Crypto
ERPLY
Point of sale technology, payments, and store credit.
Payments
ESTATE GURU
Crowd funding of real estate.
Crowd/P2P
ESTO
Consumer credit specialist, including POS credit, and leasing.
Lending
ETHLEND
Startup developing borrowing and lending marketplace based on Ethereum Smart Contract.
Lending, Blockchain
EVERYPAY
Payment service provider for e-commerce and phone transactions.
Payments
FAIROWN
Subscription for physical products and related services via financing.
Software
FEELINGSTREAM
AI specialist helping FS firms analyse customer intent to improve cross-sell and retention.
AI
FERRATUM
Finnish owned Bank with consumer credit and back office operations in Estonia.
Lending
FINTECH MARKET
Software solutions for risk, loan, and lead management.
Software
FIIZY
Loan marketplace aggregating credit offers, active in N. America, S. America and Europe from Estonian HQ.
Lending
FITEK
Automation of financial processes such as Purchase-to-Pay and Order-to-Cash.
Payments
FIIZY
Digital marketing company focused on financial services.
Payments
FORTUMO
Payments specialist supporting over 132,000 merchants in 92 countries with direct carrier billing.
Payments
FRIENDLY FINANCE
Digital consumer lender in 6 European countries.
Lending
FUNDERBEAM
Data to assist entrepreneurs and analyse start-ups. Crowd funding of start-ups.
Crowdfunding/P2P, Blockchain
GUARDTIME
Enterprise security and verification of compliance solutions for financial service providers.
Blockchain
HASHCOINS
Produce software and hardware for bitcoin mining. New venture HashFlare provides cloudmining services.
Crypto
HOOANDJA
Crowd funding for creative projects.
Crowdfunding/P2P
ICEFIRE
Software house with various FinTech solutions including core banking, payments, insurance, and wealth.
Banking/API
IGNITE
Software house with various customised cryptocurrency, Blockchain and insurance references.
Crypto, Blockchain
IPF DIGITAL
Digital consumer lender, global IT hub in Tallinn.
Lending
INBANK
Fast growing consumer lender and retail bank.
Banking
INSLY
Software making it easy for Insurance brokers, agents, and end users to understand and transact.
Insurance
INVESTLY
Peer-to-Peer invoice finance for SME’s. Active in Estonia and the UK.
Invoice Finance, P2P
INWISE
Platform for factoring invoices via auction, parent company of Supplier Plus, supply chain financing.
Invoice Finance
INZMO
Insurance application increasing speed of cover and providing overview of assets, cover.
Insurance
IUTECREDIT
Consumer lender in Balkan region, Estonian management team.
Lending
IUVO
Peer-to-Peer investment platform, redomicilied from Bulgaria.
Crowdfunding/P2P
KEY CAPITAL
Advise on the development, commercialisation and implementation of FinTech solutions.
Advisory
LHV BANK
Leading retail bank and FinTech investor.
Banking
LIFEUP
Digital service management for small and medium sized FS clients.
Software
MAKECOMMERCE
Payments solutions for e-commerce.
Payments
MESSENTE COMMUNICATIONS
SMS and PIN solutions for notifications, fraud prevention and 2 factor authentication.
Authentication Software
MINDTITAN
AI solutions for sales, customer service, fraud and risk management.
AI
MOBILAB
Design and build financial services apps and digital wallets.
Banking/API
MONESE
Open a UK back account on your mobile, regardless of your citizenship.
Banking
MONESTRO
Peer-to-peer lender.
Crowdfunding/P2P
MOONCASCADE
Software house with various global FinTech, payment and mobile app references.
Software
MOTHERSHIP
ICO funded platform for trading cryptocurrencies.
Crypto
NASDAQ
Blockchain services developed in Tallinn.
Blockchain, Capital Markets
OMARAHA
Peer-to-Peer lender.
Crowdfunding/P2P
PAXFUL
Peer-to-Peer Bitcoin marketplace registered in Estonia.
Crypto
PLANET 24
Car leasing and insurance provider in South Africa, under Estonian management.
Credit
POCOSYS
White label banking, onboarding, savings and payments solutions.
Payments
POLYBIUS
Aims to create regulated bank for the digital generation, spanning cards, cryptocurrency and lending.
Lending, Cards, Crypto
PROEKSPERT
Software house with various payment and trading platform applications.
Software
PROOF OF YOU
Digital signature and intelligent documentation for P2P economy participants.
Identity
RINGIT
Custom software solutions, clients include Banks in Estonia.
Software
SALV
AML platform start-up founded by ex Transferwise team.
AML
SCOREWISE
Credit scoring systems for consumer credit.
Risk Management
SK IDENTITY SOLUTIONS
e-Identity solutions including cards, mobile and sim-less. Formed by Swedbank, SEB Bank and Telia.
Identity
SORBASE
Cryptocurrency aggregator connected to 25+ of the largest crypto exchanges around the world.
Crypto
TRANSFERFAST
High speed intra-bank payments for corporates.
Payments
TRANSFERFRIEND
Payments and digital wallet provider active in S.E. Asia under Estonian management.
Payments
TRANSFERWISE
Global currency transfers, currently expanding currency pairs and in to corporate segment.
Payments
UNIFOX
Implementing Blockchain technologies to make cryptocurrency accessible to ordinary people.
Blockchain, Crypto
UNION DIGITAL
Client Engagement, Credit Scoring, Digital Core and Crowd/P2P solutions for Nordic-Baltic FI’s.
Banking/API
UNITED FINANCE
Financial institution specialising in service, clients in Estonia and Finland.
Finance
VERIFF
Web and mobile identity verification to reduce fraud and improve KYC.
Identity
WALLESTER
Licensed Payment Service Provider offering Card as a Service (CaaS) solution to Merchants and FIs.
London based InsureTech with Estonian founder and CEO.
Insurance
ZLICK
Start-up focusing on zero click micropayments.
Payments
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”]The specialists of LKS Consult OÜ will be happy to assist you in obtaining a cryptocurrency license in Estonia and offer full support when registering Estonian companies.[/vc_column_text][/vc_column][/vc_row]
Estonia is the most suitable jurisdiction
to launch a crypto-project
Directive No. 2015/849 was enacted on November 27, 2017 by the European Parliament and Council. In the Republic of Estonia, a new Law on the Prevention of Money Laundering and the Financing of Terrorism entered into force on November 27, 2017. The following licenses allow companies to provide the exchange, transfer, and storage of crypto and virtual currencies legally:
Licensed provider of exchange services for virtual currencies and fiat currencies
The license of the company that provides virtual currency wallet services
Virtual currency service providers will, however, be considered “financial institutions” in Estonia starting on March 10, 2020. A virtual currency service provider license was created by merging both licenses. Similarly to other financial institutions in Estonia, crypto-companies must comply with reporting requirements.
With more than 2,000 cryptocurrency licenses issued in fewer than 3 years (400 currently active), Estonia has established itself as a preferred jurisdiction for launching blockchain projects. Known for its 0% income tax rate, Estonia is regarded as one of the world’s best ecosystems for startups. Doing business in Estonia also has a number of favorable characteristics: low administrative costs, minimal bureaucracy, digitisation of doing business, and online registration. You can use an electronic resident card to manage your company completely remotely from anywhere in the world.
FAVORED JURISDICTIONS COMPARISON
A GUIDE TO START A CRYPTOBUSINESS
Cryptocurrency service providers and blockchain businesses have begun to establish themselves in Europe over the past decade as virtual currencies have become more common. The DLT (Distributed Ledger Technology) was adopted by several jurisdictions in 2018.
Although blockchain, cryptocurrency and artificial intelligence (AI) businesses continue to struggle to provide banking services in Malta, Eman Pulis, CEO of the Malta AI & Blockchain Summit, commented that Estonia and Switzerland are continuing to attract companies from these fields.
The comparative table compares the laws of Switzerland, Gibraltar, Malta, as well as the Estonian regulations related to cryptocurrency activities.
Requirements
License VFA Class 4 in Malta
FinTech License in Switzerland
DLT Provider License in Gibraltar
Single Cryptocurrency License in Estonia
Issue time
6 months
6 months
4 months
2 months
Incorporation state fee
375 EUR
600 CHF
200 GBP
190 EUR
Share capital deposit
730,000 EUR
300,000 CHF
28,000 GBP
12,000 EUR
License state fee
24,000 EUR
1,750 CHF
30,000 GBP
3,300 EUR
Income tax
35%
12%
10%
0%
Supervisory annual fee
50,000 EUR
3,500 CHF
30,000 GBP
0 EUR
Total
754,375 EUR
282,425 EUR
81,432 EUR
15,390 EUR
Malta vs Estonia
Malta
There were already crypto-related rules in other jurisdictions prior to Malta, but on July 4, 2018 the Maltese government passed three laws creating the first ever coherent regulatory framework for blockchain.
It is possible to read the official government report here. It consists of three laws – the Malta Digital Innovation Law, the Innovative Technologies and Services Law, and the most famous of all, the Malta Virtual Financial Assets Law, which outlines the regulation for DLT, intermediaries, brokers, custodian services, OTC traders by the MDIA (Malta Digital Invocation Authority).
Provisions for general use
The Malta Financial Services Authority (MFSA) does not issue licenses to banks for opening accounts for cryptocurrency startups. Licenses for crypto-businesses are normally issued within 6 months of application.
Malta is vigilantly protected as an authoritative jurisdiction by the government. The rating of A with a stable outlook was recently confirmed by Fitch. Four licenses (Virtual Financial Assets) are available under Malta’s crypto-regulation, adopted under the 2018 Virtual Financial Assets Act.
VFA licenses come in four types
The first class includes the reception and transmission of services (such as investment consulting and peer-to-peer exchange).
An annual supervisory fee of almost equivalent to 6,000 EUR is required to obtain a Class 1 license. In addition to an initial capital deposit of 50,000 EUR or 25,000 EUR, you will also need professional liability insurance. In relation to virtual financial assets and/or the placement of VFA, an authorised entity may receive and transfer orders.
The second class of services is that provided by VFA (project portfolio management, peer-to-peer CEX).
The registration fee for a Class 2 license is 10,000 EUR, and the annual supervision fee is almost the same. A total of 12,000 euros is required as an initial capital requirement. Virtual financial assets may be provided by the entity, but portfolio management and trading cannot be performed at its expense. In addition, customers’ assets and finances may be owned or controlled by the entity as part of VFA services.
In class 3, funds are held or controlled by the platform (over-the-counter trading).
If you earn less than 250,000 EUR a year, there is a fee of 14,000 EUR for your application and 12,000 EUR for your annual supervision fee. An initial capital contribution of 730,000 EUR is required in such a case. All VFA services can be provided under the license, except for working on crypto-exchanges. While providing VFA services, the entity may also own or control the assets or finances of customers.
VFA services can only be provided under Class 4 (exchange of cryptocurrencies and tokens).
For incomes up to 1 million EUR, the annual fee is 50,000 EUR, which increases on a sliding scale. A Class 4 license costs 24,000 EUR. As of the company’s founding, it has a capital threshold of 730,000 EUR. It is unknown how long it will take for such licenses to be processed, but it is expected to take between three and six months. Those wishing to register with the White Paper must pay an additional 8,000 EUR plus 2,000 EUR in compliance fees.
The Maltese license process is very slow. While other jurisdictions like Estonia and Switzerland already have DLT platforms licensed under the VFA, no DLT platform has yet been licensed by the VFA.
A third party service provider should perform a software system audit if they have been approved by the MDIA as a system auditor. A total of 5,000 EUR is charged for the auditor’s system audit, plus an additional 2,000 EUR for initial processing.
For system auditors, the authorisation process costs 7,500 EUR for the initial processing fee and 15,000 EUR for the registration fee, making the total cost 22,500 EUR.
As of now, results
Despite not being legal tender, cryptocurrencies are acknowledged by the government as “a medium of exchange, account unit or store of value”. Malta does not yet have any banks supporting cryptocurrency businesses. A specific tax law does not exist in Malta for cryptocurrency companies, nor does VAT apply to transactions involving cryptocurrency exchanges.
It is imperative that potential virtual currency service providers are impeccably versed in the innovative aspects of the blockchain sector, and that Maltese authorities do everything in their power to screen them out. For many years, Malta has been trying to avoid attracting fraudsters from shady banks and maintain a reputation as a reputable financial center. There are thus many additional fees involved in acquiring local crypto-licenses. An annual supervisory fee follows each VFA license.
According to the Malta authorities, no licenses have been issued as of April 2020. Despite expanding to Malta in 2018, Binance failed to launch a security token trading platform and open a bank account.
Estonia
General provision
The relatively low licensing fees for Estonian businesses have contributed to the country’s dominance in the European crypto-industry. Estonian government initiatives to incorporate crypto-culture into the country’s economy have resulted in fairly impressive numbers, largely because the country has adopted a technologically neutral and supportive approach to innovation in the cryptoasset industry, as well as creating new business opportunities for both emitters and investors.
As a result of recent anti-money laundering and counter-terrorist financing legislation, Estonia’s cryptoasset industry is heavily dependent on those laws. As of July 1, 2020, new requirements and more stringent regulations will apply as a result of the amendments to the Law that entered into force on March 10, 2020. In Estonia, cryptoassets are allowed for use as payment and exchange methods even though they do not have the same legal status as fiat currency.
It is widely believed that Estonia is a leader in decentralised and blockchain technology due to its implementation of initiatives such as KSI and X-Road. The Estonian government developed its own decentralised distributed system in 2001 called X-Road, and since 2008 it has been using the KSI blockchain platform for health codes, judicial systems, law, security, and commercial codes, including electronic police, electronic law, electronic justice, as well as private sector e-services like digital ID, e-Residency, e-Governance, e-Tax, and e-Voting.
Regulations
Cryptocurrency licenses can be applied for by company Board Members in Estonia. By issuing a power of attorney to a LKS Consult OÜ representative so that we can submit your application on your behalf, you may submit the license application electronically using an e-Resident card, visiting a notary in Tallinn, or submitting the application by visiting a notary in Tallinn.
There is a state fee of 3,300 EUR per cryptocurrency license. FIU (Estonian Ministry of Finance) is responsible for collecting the fee. Licenses are granted within 60 working days of the application being submitted by the Bureau of Data on Money Laundering (RAB). Despite its ease, the regulations are taken seriously regardless of how easy the process seems.
To enhance the integrity of the Estonian crypto-license application process, some recent amendments have been made to the Money Laundering and Terrorist Financing Prevention Act.
For crypto-license applications, a company’s share capital must be at least 12,000 EUR, and it must be paid in full before applying. Besides financing its commercial activities, this amount can also be used for corporate expenses.
Approximately 3,300 euros are due to the Estonian government as a state fee.
Before applying, you must have an IBAN account for your company. Crypto-companies cannot open bank accounts at Estonian banks, but EUMI provides companies with the opportunity to open an account.
An Estonian Management Board is required as well as an Estonian location for the business.
Estonian legal offices are required for companies applying for licenses.
It is mandatory for the Company Director to be an Estonian citizen.
KYC/AML officers must interview with the RAB following their application for a crypto-license to determine their skills and suitability.
Final thoughts
In spite of Malta’s initial dominance in crypto-jurisdictions, those who understand the industry believe it has lost its prominence because cryptocurrency structures are being created from scratch and crypto-activities are being regulated more tightly. As a marketing pioneer, “blockchain island” was more focused on creating an enabling environment than it was on enabling crypto-business. Malta’s minimal share capital requirements, time and bureaucracy costs, running costs incurred by Maltese companies make Estonia a much better alternative and even encourage Maltese entrepreneurs to relocate their businesses to the Baltics.
To legalize any crypto-activity in Estonia, only one cryptocurrency license is needed. Thus, it gains a competitive edge as a jurisdiction to launch blockchain initiatives. There are many reasons why the virtual state has been selected as the most favorable cryptocurrency ecosystem on a global scale. Since 2001, the Estonian government has been developing a profitable infrastructure and introducing not only blockchain technologies, but also an electronic state in all public and private spheres. There is no doubt that Estonia is currently the world’s most convenient business location, and nothing attracts entrepreneurs more than convenience.
In order to obtain a cryptocurrency license, LKS Consult OÜ will be happy to assist. Our all-inclusive offer “Company & Crypto-License in Estonia” is designed to meet the needs of customers worldwide. It includes the registration of an Estonian company as well as all the services necessary for obtaining a crypto-license. Documents are drafted, procedures and KYC rules are drafted, translations are done into Estonian and it is supported throughout the whole application process.
The importance of an individual customer approach to us cannot be overstated. For clients all over the world, our company registration services include both personalised order processing and professional consulting. The company also provides entrepreneurs with continuous support based on the latest changes to Estonian legislation.
Obtaining an Estonian cryptocurrency license can be handled by the specialists at LKS Consult OÜ .[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][us_btn label=”ORDER NOW” link=”url:https%3A%2F%2Fwww.estonia-company.ee%2Fcontacts%2F|||” align=”center” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][/vc_column][/vc_row]
Risks related to the appointment of nominee Board
members and owners for an Estonian company
Nominee director(Board member) is a person who registers a company in one’s own name with the Estonian government authorities, while the company is actually managed by other people. The nominee director is usually not involved in (and often has no idea about) the actual business activity of the company.
Board member of an Estonian company is a person who manages the company and is responsible for all of its activities. The details of the Board member are specified in the Certificate of Incorporation of an Estonian company and are publicly available. The management Board of a company may have one or more board members. It is the Board member who has the authority to sign on behalf of the company and have access to the company’s bank account.
Beneficiary owner of an Estonian company is a person or several persons who directly or indirectly own a legal entity (at least 25% of its equity capital) or significantly impact its decision-making. From September 1, 2018, all legal entities registered in Estonia are obliged to publish data on beneficiary owners in accordance with the fourth anti-money laundering directive (Directive (EU) 2015/849, officially named Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing).
According to the Estonian law, a Board member shall be appointed by the owners of the company’s by drawing up a minutes of the general meeting of owners. If the nominee Board member and the nominee owner are the same person, the actual beneficiary of the company has no right to change the management Board of the company and may have no right to access the company’s accounts without the consent of the nominee director. Company share ownership can only be transferred to a new owner under a notarised company purchase agreement – otherwise it shall not be considered legal.
In view of the above, the fate of an Estonian company registered to a nominee director/owner is completely in one’s hands, and, in case of disagreement with the actual beneficiary, the latter may completely lose control over the company.
When you become a client of LKS Consult OÜ, you can receive all the necessary services in one place: setting up a company, accounting services and advice, assistance in obtaining the necessary licenses and permits, legal support for your Estonian company, advice on opening an account and all amendments to legal and tax regulations of Estonia.
P.S. Bewareof fraudsters offering nominee services and highlighting only the benefits that your company can get without highlighting the high risks and the fact of violation of Estonian law.[/vc_column_text][/vc_column][/vc_row]
Turnover tax does not apply to cryptocurrency transactions. Article 135 (1), par. 2 of the Constitution is enforceable. The European Court held (case C-264/14) that it is enforceable. In accordance with Article 1 of the Directive, Turnover Tax is interpreted to apply to the exchange of a virtual currency for a conventional currency and vice versa, as well as to services related to currency exchanges (fiat currencies).
INCOME TAXATION ON CRYPTOCURRENCIES
The following situations may trigger taxation of virtual currency income:
Purchasing and selling virtual currencies/exchanging virtual currencies can affect the price of the currencies
The mining of virtual currencies
Payment for performed work in virtual currency
In the same way that conventional currency income is taxable, virtual currency income is taxable as well. Taxation will be based on the exchange rate (market price) on the date of the transaction or income receipt when the virtual currency purchase price or income is converted to euros.
Transactions involving cryptocurrencies are taxed
In accordance with Article 15, par. 2, virtual currencies are considered property. The Income Tax Law (ITL) is governed by section 1.
There is an income tax only on income received from alienating virtual currency, including exchanges, according to Article 37 of the ITL; in other words, only profits from the sale or exchange of alienated property items are taxable.
The difference between the purchase price and the sale price of a property is the profit or loss from the sale. A property exchange generates profit or loss based on the difference between the purchase price of the property being exchanged and the market price of the property acquired through the exchange (Art. 37, par. 1).
The following formula shall be used when calculating taxable profit when buying and selling cryptocurrency:
Profit subject to income tax if distributed is the difference between the sale price and the purchase price.
The following formula shall be used when exchanging cryptocurrency to determine taxable profit:
In the case of profit distribution, market price of the asset being exchanged minus purchase price of the asset being exchanged equals profit subject to income tax.
Mining taxation
Taxes are not imposed on mining (activity) as such, and individuals liable for taxes do not need to register. The individual must declare one’s income as a business income and pay taxes based on their tax statement if the individual mines virtual currencies or processes data independently and receives tax-free income.
The person mining virtual currency must be registered as either a limited liability company (OÜ) or as an individual entrepreneur. Registered entrepreneurs or OÜs can deduct expenditures incurred to obtain business income from the business income by claiming such expenses (for example, farm costs, rental costs for mining facilities, electricity costs, etc.).
[vc_row css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D”][vc_column][vc_column_text]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 Estoniawould help you solve the above-mentioned issues all at once.[/vc_column_text][/vc_column][/vc_row][vc_row height=”auto” css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D” bg_type=”bg_color” bg_override=”full”][vc_column][vc_column_text]
Тhe main advantages of having a company in Estonia
The team of LKS Consult 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.[/vc_column_text][/vc_column][/vc_row][vc_row css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D”][vc_column][vc_column_text]
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
[icon name=”coins” style=”solid; color:#45b400; height:1.5em !important;width:auto; margin-right:20px” class=”” unprefixed_class=””]Lowest cost of company registration in the EU
[icon name=”euro-sign” style=”solid; color:#45b400; height:1.5em !important;width:auto; margin-right:20px” class=”” unprefixed_class=””]Low cost of service
[icon name=”piggy-bank” style=”solid;color:#45b400; width:auto;height:1.5em!important; margin-right:20px” class=”” unprefixed_class=””]No need to pay the authorized capital of the company
[icon name=”laptop” style=”solid;color:#45b400; width:auto;height:1.5em!important; margin-right:20px” class=”” unprefixed_class=””]Completely remote opening and management of the company
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.[/vc_column_text][/vc_column][/vc_row][vc_row css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D”][vc_column][vc_column_text]
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:[/vc_column_text][/vc_column][/vc_row][vc_row height=”auto”][vc_column width=”1/2″][vc_column_text]
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]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.[/vc_column_text][/vc_column][/vc_row][vc_row height=”auto” css=”%7B%22default%22%3A%7B%22padding-bottom%22%3A%2240px%22%7D%7D” bg_type=”bg_color” bg_override=”full”][vc_column][vc_column_text]
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:[/vc_column_text][vc_row_inner css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][vc_column_inner width=”1/2″][us_iconbox icon=”fal|passport” title=”Notarised copy of the foreign passport” title_tag=”p” color=”custom” icon_color=”#45b400″ size=”30px” iconpos=”left” alignment=”left” css=”%7B%22default%22%3A%7B%22text-align%22%3A%22left%22%2C%22margin-bottom%22%3A%2215px%22%7D%7D”][/us_iconbox][us_iconbox icon=”fal|file-invoice” title=”Proof of residential address (utility bill)” title_tag=”p” color=”custom” icon_color=”#45b400″ size=”30px” iconpos=”left” alignment=”left” css=”%7B%22default%22%3A%7B%22text-align%22%3A%22left%22%2C%22margin-bottom%22%3A%2215px%22%7D%7D”][/us_iconbox][us_iconbox icon=”fal|file-chart-line” title=”Business plan” title_size=”Business plan” title_tag=”p” color=”custom” icon_color=”#45b400″ size=”30px” iconpos=”left” alignment=”left” css=”%7B%22default%22%3A%7B%22text-align%22%3A%22left%22%2C%22margin-bottom%22%3A%2220px%22%7D%7D”][/us_iconbox][/vc_column_inner][vc_column_inner width=”1/2″][us_iconbox icon=”fal|at” title=”Owner’s email address and public emailaddress of the company” title_tag=”p” color=”custom” icon_color=”#45b400″ size=”30px” iconpos=”left” alignment=”left” css=”%7B%22default%22%3A%7B%22text-align%22%3A%22left%22%2C%22margin-bottom%22%3A%2215px%22%7D%7D”][/us_iconbox][us_iconbox icon=”fal|user-tie” title=”Information about the managing director” title_tag=”p” color=”custom” icon_color=”#45b400″ size=”30px” iconpos=”left” alignment=”left” css=”%7B%22default%22%3A%7B%22text-align%22%3A%22left%22%7D%7D”][/us_iconbox][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row height=”auto” columns_type=”” columns_reverse=”” ignore_columns_stacking=”” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%2C%22padding-bottom%22%3A%2240px%22%7D%7D”][vc_column][vc_column_text]After receiving the documents and information, we will register a company for you in Estonia.
Additional services provided by Service :
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
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.
[/vc_column_text][vc_row_inner][vc_column_inner][us_btn label=”Set up a company” link=”url:https%3A%2F%2Fwww.estonia-company.ee%2Fcompany-formation%2F|||” align=”center” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D” el_class=”white”][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row][vc_column][vc_raw_html]JTNDaDIlMjBjbGFzcyUzRCUyMmRlY29yYXRlZCUyMHVwcGVyY2FzZSUyMiUyMHN0eWxlJTNEJTIydGV4dC1hbGlnbiUzQSUyMGNlbnRlciUzQiUyMiUzRSUzQ3NwYW4lMjBjbGFzcyUzRCUyMnNwJTIyJTNFRlJFUVVFTlRMWSUyMEFTS0VEJTIwUVVFU1RJT05TJTNDJTJGc3BhbiUzRSUzQyUyRmgyJTNF[/vc_raw_html][vc_tta_accordion scrolling=”0″ c_icon=”plus” c_position=”left” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][vc_tta_section title=”How does establishing a company in Estonia benefit you?”][vc_column_text]
Retained earnings are not subject to company income tax.
Board members and founders need not reside in Estonia (there is no need for a local director).
In addition, there is no requirement to pay a salary to the company’s director.
When establishing a company, you do not have to contribute the authorized capital.
With an e-Resident card, it is possible to fully manage the company remotely.
A Board member can apply for a residence permit for up to five years if he or she is doing business in Estonia.
An Estonian company can purchase transport and real estate without paying taxes.
A total of 62 countries have signed the Convention for the Avoidance of Double Taxation with Estonia.
The Estonian tax system is transparent and clear, and there are no progressive taxes.
[/vc_column_text][/vc_tta_section][vc_tta_section title=”As a non-resident, what should I be aware of?”][vc_column_text]Consider these factors:
It is tax-free for corporations in Estonia. Businesses that reinvest profits rather than pay out profits benefit the most from this.
Doing business in a transparent manner. Data on Estonian companies’ owners and directors has been publicly available since October 1, 2022.
In contrast to other EU countries, Estonian residents are not required to serve on the company’s governing body since 1 January 2011. Estonian companies may have non-resident founders and directors.
The CEO of a company does not have to pay his or her salary and, accordingly, does not have to pay taxes.
At the time of incorporation, the share capital (2,500 euros) is not required.
If no salary is paid, no report to the Estonian Tax Board is required, and no VAT number is required.
The possibility of acquiring a D-visa for a member of the company’s management
During the course of business activities, an Estonian company can borrow unlimited amounts from its shareholders
A residence permit can be applied for by a member of the company’s management board or the owner in order to conduct the company’s actual business.
Tax-free purchase of real estate owned by Estonian companies.
Obtaining a company car with a VAT refund is possible
Cars owned by the company do not have to pay transport taxes
Several countries do not impose double taxation
An non progressive tax system that is transparent
Management costs start at 500 euros per year for a small business
[/vc_column_text][/vc_tta_section][vc_tta_section title=”Could you please explain the benefits to me in more detail?”][vc_column_text]
A reduction in taxation. Registration of a company in Estonia has the main advantage of zero taxes on retained earnings. There will be a 20% tax on profits when they are distributed. Moreover, Estonia is not regarded as an offshore company, so its reputation will remain intact.
The company can reinvest more funds. Profits that are not distributed as dividends do not have to be taxed annually, so you can reinvest them in the business. In comparison with other jurisdictions, Estonia has this advantage.
Working on the European market is an opportunity. The European Union includes Estonia. European companies are more likely to cooperate with potential clients from Europe.
Time savings. As soon as you receive the electronic resident card, you will be able to manage the company from anywhere in the world. Electronic signatures and annual reports are used for documents and contracts. Audits are only required for large companies.
[/vc_column_text][/vc_tta_section][vc_tta_section title=”E-residency: what is it?”][vc_column_text]In Estonia, the government offers a unique e-residency program. An e-resident card enables entrepreneurs to access all the country’s electronic services – from signing contracts to paying taxes, they can manage their firms online. E-resident cards are not equivalent to Estonian passports: they do not grant residency rights nor tax privileges.[/vc_column_text][/vc_tta_section][vc_tta_section title=”Who should register an Estonian company?”][vc_column_text]Start-ups and small businesses without a fixed address will find Estonia’s registration to be an ideal solution. Software developers, IT consultants, online training providers, designers, marketers, and anyone involved in the digital world falls into this category. You will have a competitive advantage thanks to Estonia’s advanced tax system, which takes into account only the distribution of profits when taxation is applied.
A startup may not even register as a company in some European countries. As long as they do not have customers or a stable income, they are not ready to handle the costs of running a company.
Investments or expenditures made by the firm are not subject to tax in Estonia. It is not necessary to pay taxes on business expenses such as renting an office, purchasing office equipment, and spending money on meals, accommodations, and transportation.
Start-ups in Estonia benefit from the Estonian tax system. The company will only pay taxes once it has grown, hired employees, and earned a stable income.[/vc_column_text][/vc_tta_section][vc_tta_section title=”What types of companies exist?”][vc_column_text]Your company can be registered as follows in Estonia:
A public limited liability company (AS)
Non-profit association (MTÜ)
A private limited liability company (OÜ)
Self-employed entrepreneur (FIE)
General partnership (TÜ)
To fully benefit from the Estonian tax system, foreign nationals register as OÜs (or ASs for large businesses).
The firm’s obligations are not personal to shareholders at OÜ. The minimum capital requirement is 2,500 euros.Individual founders and capital amounts below 25 thousand euros do not need to register if they are all individuals. Before the dividend is distributed, the capital must be paid.
An individual shareholder and an individual director are required for registration. The ownership of 100% of the company can be foreign. The e-Business Register must receive the contact details of the local representative who will communicate with the public authorities if the majority of directors do not reside in Estonia.[/vc_column_text][/vc_tta_section][vc_tta_section title=”In Estonia, how do you register a company?”][vc_column_text]Estonian companies can be opened without leaving the country. When you become an electronic resident of Estonia, you can register your company online. If not, we can register a company for you remotely if you give us a power of attorney.Our registration team will accompany you at all stages of the registration process if you come to Estonia in person.
You should start by naming the company something unique. In the event that one of the proposed names has already been taken, make at least two choices. Name your company in a way that is easy to read, memorable, and reflects its core purpose.
A minimum of 2,500 euros must be declared when registering a company. In cash or in kind, it can be deposited later. A company must have already paid in its share capital before distributing dividends.
When registering, you need to specify what type of activity you will be performing. You should specify the main area of work for the company, even though they might be able to work in other areas as well.[/vc_column_text][/vc_tta_section][vc_tta_section title=”Is there a list of required documents?”][vc_column_text]
Passport copy notarized
A utility bill showing the address of the residence
Plan of action
Email addresses of the owner and the company’s public email address
The managing director’s information
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In Estonia, there is no tax on retained earnings, which is the main advantage of registering a business. With this feature of the legislation, capital can be increased and reinvested, and the tax burden can be optimized and business opportunities can be expanded.
Fast and simple company registration process. It usually takes less than three hours to register a company.
It is not mandatory to distribute profits received by a company established in Estonia.
Estonian companies have the advantage of low income taxes. A company registered in Estonia that reinvests profits in its business development does not have to pay income tax on its profits if it receives income from its economic activities.
Registration costs for companies are low. It is possible to defer the payment of the minimum share capital, which is EUR 2,500.
Owners of the company may be natural persons or legal entities residing outside the country.
It is possible for the same person to own and operate a company in Estonia.
In terms of wages and employment terms, there are no requirements.
Documentation algorithm that is simple and straightforward.
Estonia allows non-residents to become EU taxpayers and issue VAT and EORI numbers by registering a company.
In order to become an electronic citizen, one needs to register a company in Estonia and get an e-residence (resident card). Once the company is registered, one can manage it remotely, sign documents electronically, and access all public services and registers in Estonia without being a citizen.
For holders of long-term work D-visas, the registration of the company in Estonia opens up new prospects. If you plan to apply for a residence permit in Estonia in the future, this is often the most suitable way to do so.
In addition to being a member of the European Union, Estonia is also part of the European Economic Area. It is easier to expand to the EU market in Estonia since all the laws adopted in the EU are applied.
Businesses have many benefits from opening a company in Estonia, including quick and inexpensive intellectual property registration, trademark registration, and patent registration.
It is possible to feel secure about doing business in Estonia because the legal and judicial system is transparent and understandable.
Taxation of Estonian companies is the most profitable in the European Union. The main advantage is 0% on the company’s retained earnings and the possibility of not having employees who need to be paid a salary every month – a member of the company’s management Board can work for dividends. The absence of a tax on retained earnings is especially beneficial for those entrepreneurs who invest all their profits in the development of an Estonian company. Examples of taxes applicable to individuals and businesses are listed below.
PAYROLL TAXES
Taxes that must be withheld by the employer when paying wages:
Old-age pension saving contributions (only for residents of Estonia) – 2% of gross salary, unemployment tax on employee’s salary (only applicable for residents of Estonia) – from 0.5% to 2.8% of gross salary and income tax 20% of gross salary.
Taxes that must be paid by the employer in connection with the payment of wages to the employee:
Mandatory unemployment insurance contribution (from 0.25% to 1.4% of gross salary) and social tax (33% of gross salary and occurs in the case of payroll and is subject to transfer by the enterprise to the Fund). These taxes are payable by the employer in addition to the payment of wages (i.e. the taxes that the employer withholds from the employee when paying wages are included in the “tax base” from which the social tax and the employer’s mandatory unemployment insurance contribution are paid).
Payroll taxes for non-residents
If a non-resident is a member of the Board of an Estonian company, only 20% of the income tax is paid on one’s salary.
Value added tax in Estonia-VAT
The standard VAT rate in Estonia is 20%, 9% (reduced rate) and 0% (exemption with the possibility of offset).
Income tax business/sales tax (profit tax)
Profit tax or corporate income tax is 0% (there is no concept of profit tax in Estonian legislation, but there is a concept of taxation in the distribution of profits, which applies only in the case of payment of dividends or wages)
Tax on dividends
The tax on dividends or tax on profit distribution is 20/80. The tax rate for paying dividends is 25%. To pay dividends, a member of the company’s management Board will need to make a profit statement for the current period.
Accounting consultation
from 170 EUR
[/vc_column_text][us_btn label=”Order now” link=”url:https%3A%2F%2Fwww.estonia-company.ee%2Fcontacts%2F|title:Contacts||” align=”center” css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”]The specialists of LKS Consult OÜ will be happy to assist you with accounting services for your Estonian company.[/vc_column_text][/vc_column][/vc_row]
The worldwide pandemic has spread rapidly and seems to affect more or less every individual, inevitably, putting the global economy in a vulnerable situation. Causing economic mess coronavirus has led to a recession, where even the most sustainable orders undergo changes. While looking into pandemic consequences and accessing effect they are having on the economy of Estonia, it is essential to consider the country’s every distinctive economic feature.
In order to apply for a cryptocurrency license (Virtual Currency Service Provider Activity License) in Estonia in 2021, the following data/documents will be required:
Nothing attracts an entrepreneur more than the speed and cost of launching a cryptocurrency project, and there is no doubt that at the moment on the world stage in Estonia such projects can be implemented faster and cheaper than anywhere else. Only one cryptocurrency license is required to legalise any crypto-activity in Estonia. This strengthens its position among the most preferred jurisdictions to launch a crypto-project.
Estonia is one of the countries with the highest level of e-Government development. Blockchain is considered to be a key technology in the development of the Estonian e-Government because of its undeniable advantages and potential. From a technical point of view, blockchain technology improves the efficiency, security, and transparency of transmitted data.
Nominee director (Board member) is a person who registers a company in one’s own name with the Estonian government authorities, while the company is actually managed by other people. The nominee director is usually not involved in (and often has no idea about) the actual business activity of the company.
The following situations may trigger taxation of virtual currency income: