LKS Consult

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.

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.

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

Advantages

  • [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

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:

  • A public limited liability company (AS)
  • Non-profit association (MTÜ)
  • A private limited liability company (OÜ)
  • Self-employed entrepreneur (FIE)
  • General partnership (TÜ)

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:

Notarised copy of the foreign passport

Proof of residential address (utility bill)

Business plan

Owner’s email address and public emailaddress of the company

Information about the managing director

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
  • Advice and assistance in obtaining licenses
  • How many executives and shareholders should the Estonian company have?
    At least one shareholder and one executive (can be the same individual). The company can be 100% owned by non-residents.
  • For what purposes are companies registered in Estonia?
    Companies in Estonia are suitable for various purposes: trading on the European market, in the field of export/import or logistics, etc. But mainly they are ideal for online businesses that are not tied to a specific place.
  • Is it possible to open a bank account in Estonia for an Estonian company?
    An account in an Estonian bank can be opened only if the company has a close connection with Estonia: a physical office, local employees, Estonian partners and customers. If there are no such links, an account for the company can be opened with a foreign bank or payment system.

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.
Set up a company

FREQUENTLY ASKED QUESTIONS

  • 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.

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
  • 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.

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.

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.

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.

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.

  • 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
  • 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.