Corruption as low as in the United States

E-Government services as good as in Switzerland

State finances as stable as in Germany

International trade as efficient as in Hongkong

Corporate income tax as low as in Panama

0% corporate income tax on retained and reinvested profits

FAQ

1. COMPANY SETUP

What type of companies do you incorporate?

Usually our clients choose to establish a private limited liability company (in Estonian "osaühing" or "OÜ"). OÜ is the most widely used form - the easiest to set up and the cheapest to maintain. Depending on your business requirements, we can incorporate also other forms of business – including, but not limited to "AS" - a public limited liability company.

What is the minimum share capital of a private limited liability company and should I contribute the share capital during the incorporation?

The minimum share capital of a private limited company is EUR 2,500 and the maximum share Capital is not limited. In case of incorporating the company with share capital up to EUR 25,000 there is no need to contribute the share capital during the incorporation process. Contribution is due, when you, for example, decide to distribute dividends or change the share capital. Thus, until the complete payment of contributions by all the shareholders, the private limited company shall neither increase nor decrease the share capital and shall not make any disbursements to the shareholders.

Until the shareholder has completely paid the contribution, he/she/it shall be liable to the company for the obligations of the company in the amount of the outstanding contribution (i.e. in case of minimum share capital, the amount is EUR 2,500), unless the obligation of the company can be performed on the account of assets of the company.

Can I run my Estonian company without knowing the Estonian language?

The state authorities generally accept documents in Estonian. However, many features of government online systems can be accessed also in English.

Tax returns are available mainly in Estonian, but generally tax authorities accept documents and explanations in English during tax audits. Our customers usually have an Estonian accountant who communicates with authorities in Estonian and is familiar with the local laws and requirements.

Am I required to have Estonian e-residency for incorporating a company?

No, you don't have to be an e-resident. However, kindly note that in case you have Estonian e-residency card, we will be able to establish the company directly on your name (in that case we will assist you in the establishment process via Skype or telephone). Estonian e-residency also provides an opportunity to administer the company from anywhere in the world, digitally sign documents and contracts, declare Estonian taxes online and use online banking. The average processing time for e-residency is one month, but it may vary based on demand and pickup location. Please read about the e-residency under this link.

Can I have more than one member of the baord and shareholder in my private limited company?

Yes, you can.  The private limited company is required to have at least one shareholder and one member of the board.  Kindly note that our standard company structure includes one individual management board member and one individual shareholder. However, we will be pleased to assist you in establishing a company with more complex structure.

Do you accept other (non-resident) companies as shareholders of an Estonian company?

Yes, we do.

Can I be the sole director (board member) of my company?

Yes, you can. If you are not an European Economic Area resident, you should appoint a local contact person for receiving official correspondence from Estonian authorities. We are glad to provide you contact person service. The contact person requirement can be avoided if you take benefit of our nominee services and appoint a local director (see link here).  

Can you provide a local director for arranging communication with local authorities?

Yes, we can. Please have a look at our nominee services under this link.

Do I have to travel to Estonia to incorporate a company?

Incorporation of the company can be done without travelling to Estonia, on the basis of a filled incorporation service form and of a passport copy of the ultimate beneficial owner. Transfer of control over the company to you can be done on the basis of a power of attorney.

However, kindly note that as for now the banks require a face-to-face meeting for opening a bank account.

What documents should I provide for setting up a company?

The list of documents depends on services which will be ordered, the corporate structure of the company and the location of the persons who will be related to the company. As a licensed service provider, we are obliged to perform a client due diligence procedure for each person related to the company (UBOs, shareholders and members of the board).

In general we require the following:

  • Incorporation service form, that gives us a description of your planned business activities, needs and requirements,
  • A copy of the passport of the individuals,
  • A document which proves their residential address (a utility bill, e.g. electricity invoice; please do not send us a mobile phone related invoice),
  • A bank reference letter (in case theindividuals are not residing in the EU),
  • A certified power of attorney which is needed for transferring the control over the company to the client.

You will receive the full list of required documents and detailed instructions related to the above mentioned documents during the incorporation process.

How long does it take to incorporate a company?

Once we have received all the required documents, we can establish a company within one business day. Control over the company can be transferred to you after we have received from you all the required documents.

Do I need a licence for carrying out my business activities?

In Estonia most business activities do not require a licence or a submission of a notice of economic activities. You can see the full list of economic activities that need an operating licence or a notice of economic activity by following the link here.

If your business activity requires a licence, we can assist you in obtaining one.

Should my company have a physical office in Estonia or is it sufficient to have a virtual office only?

All the Estonian companies must have an Estonian address, but there is no requirement to have an actual office in Estonia. Our company provides registered address as well as virtual office services. The latter includes secretarial services, e.g. call handling. In case of a virtual office you will receive an Estonian unique landline number and handling of inbound calls according to your instructions. Mail forwarding electronically is provided to all clients who order registered address service.

Is the information about shareholders and directors of my Estonian company public?

In Estonia the information on the company and persons related to the company (including the names and birthday dates of the shareholders and members of the board) is visible online for everyone on our commercial registry website. In case you do not want third persons to see your names as the shareholders and/or the members of the board of the company, you may use our nominee services.

Liquidation

A company can be liquidated either in voluntary or compulsary way. We may assist you in liquidating your company. The process of liquidation takes generally approx. 6 months, but the lenght may vary depending on the structure of the company, the assets and obligation and whether the liquidation is voluntary or not.

2. BANKING

Do I need a bank account for my company?

We can establish for you a company without a bank account, but you need to open one later for carrying out your economic activities.

Can you assist me in opening a bank account?

Yes, our services include bank account introduction and assistance in setting up basic banking services, like internet banking and debit cards. Our clients generally set up other supplementary banking services (PayPal accounts, VISA and Mastercard integration, etc.) on their own, once they start their regular economic activities.

Can you guarantee that a bank account will be opened?

We always put our best efforts and previous experience in order to achieve our clients’ aims, but the final decision is made by the bank and it is dependent on the circumstances which we cannot influence or foresee. The bank evaluates each account opening application individually. The application might be rejected if it does not meet bank's internal requirements. Applicant’s business must have direct ties with Estonia and the applicant must explain in detail how business activity/owners/management of a company is/are connected to Estonia (e.g. residence permit, employment contract, real estate ownership, an actual office of the company in Estonia and/or employees from Estonia). The bank needs to see a clear reason for the company to operate in Estonia and a reason to have a bank account in Estonia. The bank may also require additional information and documents (e.g. a CV of the director or a business plan). Thus, there is a need to thoroughly consider company's business connections with Estonia before the bank visit.

How long does it take for a company with a non-resident owner to open a bank account?

According to bank's KYC (know your client) procedures, the registration of a non-resident client to the bank database and providing him/her online access to the company’s bank account takes up to 10 working days.

Should I visit the bank for account opening?

Yes, the bank requires at least one face-to-face meeting with the non-resident, who needs online access to the company’s bank account. The second meeting may be done by a representative (our employee) on the basis of a power of attorney.

We arrange a meeting with bank's representatives and our employee will accompany you by this visit, if so requested by you.

Kindly note that in case you want to open a bank account in LHV Pank, it is possible to apply for the bank account opening and get a decision in prior to your visit to Estonia.

Do you assist me with a visa application for the bank visist?

Yes, we do - see link here.

Once the account is opened, can I transfer funds from my bank account without limitations?

During the bank account opening process, the bank generally provides minimum thresholds for money transfers. For example, Swedbank AS accounts have daily threshold of EUR 20,000 and monthly threshold EUR 100,000. In LHV Pank the starting limits are EUR 3,000 daily and EUR 10,000 monthly. If there are regular transfers on everyday-basis, it is possible to apply for an increase of the thresholds. During the increase process, it is advisable to add agreements, invoices and other documents which indicate the actual need for an increase.

In which banks do you open accounts?

We assist in opening bank accounts in Swedbank and in LHV Bank.

Can I open a bank account in Estonia for existing non-resident company or non-resident individual?

Non-resident companies and individuals may have an Estonian bank account. We emphasise that related to the strengthened client acceptance rules, the bank requires that the applicant must have direct ties with Estonia. The bank needs to see a clear reason for the applicant to have a bank account in Estonia. The bank may also require additional information and documents. Thus there is a need to think through the connections with Estonia before the bank visit.

The success of the bank account opening depends on the data and the provided information of the client. We always put our best efforts and previous experience in order to achieve our clients’ aims, but the final decision is made by the bank and it is dependent on the circumstances which we cannot influence or foresee.

Can I open an account for my Estonian company in a foreign bank?

The majority of our clients prefer to open a bank account for their Estonian companies in Estonian banks. In that case we are able to provide our full support during the whole process. In case our clients choose to open the bank account in a foreign country, the whole process is managed by the client himself, but we still provide the required documents and services. We recommend our clients to apply for opening a bank account in an Estonian bank, so that we can proovide our full assistance in that process.

3. ACCOUNTING

Are you providing accouting services or do I have to find an accounting provider by myself?

We provide accouting services and our clients usually set up accouting at the time of incorporation for the following reasons:

  • to validate with the accountant if company's activities are in compliance with Estonian business and tax laws and to check if planned expenses can not be qualified as fringed benefits or any other kind of distributions, thus triggering additional taxation;
  • to submit VAT and/or payroll-related taxes to the Estonian Tax and Customs Board on monthly basis if the company is registered for VAT and / or is going to pay salaries,
  • compiling and filing company's annual report during a period of six months after the end of the financial year,

Our accounting fees depend on company's activities (is the company VAT-registred, how many employees does it have, does it own fixed or financial assets, etc) and on volume of transactions. Under this link you find information on costs of the startup accouting package.

Should my company file monthly tax returns if I have no employees?

If the company is not registered for VAT purposes and does not have any payments which are subject to income or other (e.g. payroll) taxes, there is no need for submission of monthly VAT and income tax (called in Estonian: “TSD”) returns.

What restrictions on balance sheet structure (like thin capitalization rules) should I keep in mind while operating my Estonian company?

There are no thin capitalization rules in Estonia. However, there is a rule that net assets of the company cannot be less than 50% of the share capital of the company.Such situation may occur if, for example, you are financing your company in a start-up phase via shareholder loans and the accrued interest is eating up the equity.

Authorities check whether the filed annual report of the company is in compliance with this rule. The company usually has time until filing of the next annual report to solve this issue. 

Do I have to audit my company?

An audit or a review of annual accounts of a private limited company (OÜ) is compulsory if at least two of the indicators exceed the following conditions:

Conditions

Audit (EUR)

Review (EUR)

Sales revenue or income

4,000,000

1,600,000

Total assets as of the balance sheet date

2,000,000

800,000

Average number of employees

60 people

24 people

An audit or a review is obligatory also if at least one of the following indicators exceeds the following conditions:

Conditions

Audit (EUR)

Review (EUR)

Sales revenue or income

12,000,000

4,800,000

Total assets as of the balance sheet date

 6,000,000

2,400,000

Average number of employees

180 people

72 people


Kindly note that all public limited companies have to audit their annual accounts.

By which date do I have to forward accounting documents to my accountant? Should I do it daily or can I do it once a month?

Accounting documents of the company (incl. incoming and outgoing invoices, agreements, bank statements, information about the salaries, etc.) have to be forwarded to our accountant on a monthly basis (latest by the 5th day of the month) via e-mail. Generally, our clients forward their accounting documents in pdf. Please note that Estonian tax returns are due on a monhtly basis - income tax and payroll return is due generally latest by 10th day of the month which follows to the taxation period and VAT return is due latest by 20th day.

4. TAXES

What is the VAT rate in Estonia?

Regular VAT rate in Estonia is 20%. There are few exemptions (lower VAT rates) from the general rule.

In which case my estonian company should register for VAT?

The general VAT registration threshold is EUR 16,000 per calendar year. However, the company may register itself for VAT purposes on a voluntary basis before the above-mentioned threshold is exceeded.

Is it easy to be registered for VAT in Estonia? What is required for that?

If the company is conduting business activities or has made active steps to start the business activities in Estonia, there are generally no obstacles to have an Estonian VAT number.

To register the company for VAT purposes, an application should be submitted to tax authorities. The latter proceeds the application for 5 working days. The process may take longer if the authorities require additional documents/information during the process. Generally, such requests are related to analysis, whether the company is or is planning to be engaged in actual business activities.

We provide VAT registration services and, if necessary, fully support you during the process.

If I'm already registred for VAT, can the registration be cancelled by tax authorities?

Estonian tax authorities control thoroughly zero-rated VAT returns. In practice, they have often started a tax audit in a situation where the company submits many consecutive zero tax returns. The purpose of these audits is to find out, whether the company is engaged in actual business activities or makes preparations for it. If the Estonian Tax and Customs Board concludes that the company does not conduct business in Estonia, they may cancel the VAT registration.

During the tax audit, the company is generally required to submit a proof that it is engaged in actual business. It is advisable to prepare a short overview of the activities. We will be pleased to assist you in this matter.

When should I add VAT to my invoices?

In general, if the invoice is issued to a company who is registered as a VAT payer in another European Union (EU) member state country (outside of Estonia), to a company from outside the EU or to an individual residing outside the EU, the VAT registered Estonian company states 0% VAT in the invoice.

If the invoice is issued to an EU company who is not registered as a VAT payer or to an individual who is a resident of an EU member state country (outside of Estonia), the VAT registered Estonian company states 20% VAT in the invoice.

Kindly note that the Estonian company sells products or provides services which are not brought to or taken out of Estonia, the products and services are taxed according to the rules of the country where the turnover has arisen.

 

Shall I pay corporate income tax (CIT) from profits earned by my Estonian company?

Estonian corporate income tax (CIT) system differs from the traditional systems. Profits which are earned by the company are not subject to CIT. The same applies if the profits are retained at the accounts of the company or reinvested (used for business purposes). CIT is due when the profits are taken out from the business (e.g. in the form of dividend). Thus, in principle, the shareholder of the company decides when he/she wants to pay CIT.

How the CIT is calculated?

CIT rate is 20% (20/80 is applied on the net amount of the dividend). The following example illustrates calculation of the corporate income tax:

  • If the company earns income at the amount of EUR 150,000, there is no CIT.
  • The above mentioned is applicable also if the company makes EUR 50,000 business related costs.
  • If the shareholder decides to distribute profits (the remaining EUR 100,000) as dividends (e.g. next year), making the payment in February, the CIT has to be declared and paid latest by the 10th March. CIT is EUR 20,000 (100,000 x 20%). Thus, the shareholder receives a net dividend in the amount of EUR 80,000.
  • Estonia does not apply a withholding income tax on dividends. Therefore, the CIT cost is the final Estonian tax cost related to the dividend payment
  • We recommend to contact your tax advisors in your home country, to determine whether receiving dividends from an Estonian company will trigger any tax obligations there.

Are there any withholding taxes that I should pay from dividends received in Estonia?

The CIT cost is the final Estonian tax cost related to dividend payment. The taxation is levied at the level of the dividend paying Estonian company, not at the level of the shareholder. There is no taxation in Estonia at the level of the shareholder even if he/she is a non-resident. As we are concentrated in tax advising from the Estonian point of view, we recommend you to contact tax advisors in your home country, to determine whether receiving dividends from an Estonian company will trigger any tax obligations there.

If my Estonian company has shareholdings in foreign companies, should I pay CIT on received dividends?

Kindly note that determining the obligation to pay CIT in Estonia on the dividends received from a foreign company needs analysing the Double Taxation Relief between Estonia and that specific foreign country, in case there has been signed one. In general, an Estonian resident company does not have to pay income tax on profit distributed as dividends if the resident company paying the dividend has derived the dividend which is the basis for the payment from a foreign company and at least 10 per cent of that foreign company’s shares or votes belonged to the Estonian company at the time of deriving the dividend. Please note that the above does not apply with regard to transactions, the objective of which is obtaining a tax advantage. The company needs to provide the information and records requested by the Estonian Tax and Customs Board in case of a tax audit, to prove that a transaction was made for business reasons, which record the economic substance necessary and appropriate for such business activities. You can find more information about the Estonian holding companies from our webpage.

How can I know exactly which expenses are deductible and will not trigger taxation of fringe benefits?

All profits which are earned by the company are not subject to CIT. The same applies if the profits are retained at the accounts of the company or reinvested (expenses for business purposes). Expenses are related to business if they have been incurred for the purposes of deriving income from taxable business or are necessary or appropriate for maintaining or developing such business and the relationship of the expenses with business is clearly justified. Accommodation (hotel) and transporting (flight tickets, etc.) expenses related to the management board member or the employees of the company can be considered as business-related expenses and require reporting and archiving the relevant invoices and additional documentation. If you order our accounting services, you can always ask instructions from the accountant before you make any transactions or costs. She/he can indicate which costs can be covered by the company without any tax consequences and which not.

Can my foreign company issue invoices to the Estonian company or vice versa?

If you plan to issue invoices from your Estonian company to your foreign company or vice versa, please note that Estonia applies for a transfer pricing taxation. Thus, the pricing between these two companies has to correspond to the market conditions in order to avoid corporate income tax consequences. In addition, the Estonian tax authorities may regard such payments as the remuneration of the member of the management board (salary) if the activities are performed solely by you. 

If I plan to hire employees in Estonia, how much payroll taxes I should pay?

General taxes related to salaries in Estonia are social tax and unemployment insurance covered by the employer and income tax and unemployment insurance covered by the employee. The following example illustrates the above.

Gross salary EUR 1,000
Employer’s costs EUR 1,338
Net salary EUR  821.20
   
Withholding income tax (employee, 20%)   EUR 162.80
Unemployment insurance premium (employee, 1.6%) EUR 16
Social tax (employer, 33%) EUR 330
Unemployment insurance premium (employer, 0.8%)  EUR 8


Kindly note that from 1 January 2017, the minimum salary in Estonia for full-time employment is EUR 470.

Do I have to pay payroll taxes for employees that do not work in Estonia?

Salaries are generally subject to taxation in the country where duties are actually performed. Thus, if your employees are working in another country, the payroll taxes are presumably not due in Estonia. Their payroll taxation should be applied in the country, where they actually work.

How do I distribute profit / receive remuneration from my Estonian company?

If you are an owner and a board member of an Estonian company, you can receive payments from your company in form of salary, board member remuneration, dividends or a combination of these.

Your salary is taxed in the country where you perform your duties and where you are a tax resident. If you do not perform your duties in Estonia, the payroll taxes are presumably not due in Estonia. In such case the Estonian company has to maintain documents that the salary is subject to payroll taxes abroad.

If you receive remuneration as a member of the management board of an Estonian company, the fee will be subject to withholding income tax in Estonia at the rate of 20%. This is applicable also if you are not performing your duties in Estonia. You should consult a tax advisor in your home country if such income is subject to taxation over there.

Paid dividends are subject to corporate income tax (CIT). Please see here the calculation of CIT cost.

The company is not obliged to pay a salary or a board member remuneration to a member of the management board.

Can my Estonian company be considered a tax resident in my home country?

Estonian company is regarded being a tax resident in Estonia by Estonian tax authorities. If activities of the company are performed abroad, foreign tax authorities may regard the company to have a permanent establishment (PE) in another country and consider it being a tax resident over there. The creation of a PE depends on the activities which are carried out abroad. We suggest consulting these matters through with a local tax specialist.

If a parent company gives a loan to its Estonian subsidiary, is the accrued or paid interest taxed in Estonia?

If an Estonian company takes a loan from the parenting company (or non-related company), then the interest paid is not taxed in Estonia.

5. RESIDENCE PERMITS AND VISAS

Can you assist me in applying for a short-stay visa for opening of a bank account?

Yes, we can. We can provide you a visa invitation for a single entry, in order to visit the bank and other authorities if needed in Estonia. Short-stay visa allows to stay in Estonia up to 90 days within six months.

Can I receive a residence permit if I set up a company in Estonia?

It depends. In case of new companies, we have generally applied the following structure:

  1. Starting the business activities,
  2. Submission of a long-stay visa, which provides you an option to stay in Estonia (and Schengen area) for a year,
  3. After the business is already running (in case of management board members at least for 5 months), it is reasonable to submit a residence permit application. The employment agreement can be appended to the application.

Residence permit for employment (hereinafter the "TRPE")

Before submitting the application for Estonian temporary residence permit for employment (TRPE), it must be confirmed whether the employee is subject to the salary criterion. An employer shall pay an alien a salary that is at least equal to the latest annual average wages in Estonia published by Statistics Estonia. Thus the minimum threshold depends on the average rate applicable in the business area of the Estonian company; minimum EUR 1,065 as a gross amount per month threshold is valid until publishing the Estonian average gross salary for the 1st quarter 2017. The employer may be obliged to apply for a permit from the Estonian Unemployment Insurance Fund. This requirement is not applicable to the employees who can be regarded to experts, advisors or consultants who have required professional competence. However, in their case the minimum salary criterion is EUR 1,321 per month as a gross amount).

If a person applies for a TRPE as a member of the management board, the authorities do not require proof whether that person has sufficient qualification and experience for this duty. However, they evaluate very specifically whether the company has been engaged to actual business activities during last 5 months. The previous qualification and experience of an applicant are important in case of advisors, experts and consultants - in such case the authorities wish to receive documents certifying the professional qualification of the applicant.

The success of obtaining Estonian residence permit depends on the data and the provided information of the client. We are able to put our best efforts and previous experience in order to achieve your aims and prove that the vacant position cannot be filled by employing an Estonian citizen and that the individual actually needs to stay in Estonia related to his/her new duties, but the final decision is made by the Estonian Police and Border Guard Board and it is dependent on the circumstances which we cannot influence.

Residence permit for business (hereinafter the "TRPB")

The TRPB can be issued for up to 5 years and it can be extended. TRPB provides you an option to accompany your family members (spouse and children).

An alien (non-EU citizen) may apply for a TRPB if he has a holding in an Estonian company in whose capital he/she has invested at least EUR 65,000 (EUR 16,000 in case of sole proprietor structure). The equity capital of a company, subordinated liability and registered fixed assets value may be considered as investment.

Among other things, a business plan and documents showing that the applicant has a legal income must be enclosed to the application. The Police and Border Guard Board must make a decision on the issue of a TRPB within 2 months.

6. SETUP AND MAINTENANCE COSTS

What are setup costs of an Estonian company?

Setup costs depend on requested services (accounting, bank account opening, nominee services, etc). Our minimum start-up package includes setting up a private limited liability company and address service for one year and costs 550 EUR.

In addition, there are state and notary fees to be paid which depend on many circumstances, e.g. ordered services, corporate structure of the company, number of persons related to the company and the location of the persons who will be related to the company. If there is only 1 person involved, the notary fees are generally approx. EUR 120.

If you are setting up a bank account at the time of incoropration, the fee for our assistance is EUR 160. You also have to take into account travel costs to Estonia for a face-to-face meeting with a bank and our additional fees for accompanying you in the bank visit.

What are annual maintenance costs of an Estonian company.

There are no annual government fees in Estonia.

Annual maintenance costs depend on the scope of requested services (accounting, registered address, nominee services, etc.).

Usually our customers also set up accouting services at the time of incorporation. If you're company does not have employees and material assets and is not VAT-registred, than our start-up accounting package costs 46 EUR / month plus 0.6 EUR per each handled document (invoice, check, etc.)

If I'm a non-resident, do you add VAT to an invoice for incorporating a company in Estonia?

It depends. VAT (20%) is added if it is issued to an individual residing in the EU and to an EU company that is not VAT registered. In other cases we issue an invoice without VAT.

Why do you give me a pro-forma invoice. Although I have not ordered any services?

We send our provisional quotes in a form of a pro-forma invoice just as a reminder. It does not trigger any obligations for you, but provides an option to start the payment and incorporation process.

How should I pay for your services?

Currently the only option to pay is by wire transfer. Alternatively, money transfer to Estonian bank account is possible by Western Union. Several our clients use also www.transferwise.com services. The bank details are written on the invoice. We hope that you will find a suitable way.