When one is determining the foreign jurisdiction where they wish to open their business, a very important question which we often get asked is related to the maintenance costs of an Estonian company.
The importance of knowing the maintenance costs obviously comes from the necessity of doing cost related forecasting and to see how much investments on a regular basis would be needed to have the company working optimally. In turn, these numbers can be compared to investments needed in other jurisdictions to determine the best option.
One of the biggest differentials for Estonian businesses, compared to businesses in some other jurisdictions is that Estonian companies have no tax burdens in Estonia in case they are not VAT registered, do not have employees in Estonia nor distribute dividends.
However, before diving deeper into the overheads which are related to running Estonian businesses, it is important to understand that each business model is different, which also brings different costs along with it.
Therefore, the only logical answer here is that it depends on the specifics of your business. But the positive thing is that there are still some common establishment and maintenance costs that all Estonian companies will have as a minimum.
Incorporate is ready to help you! Please feel free to reach out to us if you would like to get more information about any of our services.
Recurring maintenance costs of an Estonian company
Recurring costs are the direct maintenance costs which you will have from having your Estonian company in operating condition while living abroad.
Most of these costs will stay the same throughout the time which you will have your Estonian company, while others, like accounting, may change depending on how much activities you have.
Legal address and local contact person service
When you live abroad, as in not in Estonia, then it is obligatory for your business to use legal address and local contact person services as described by law. In principle, this is the only maintenance cost of an Estonian company when your company does not have any financial transactions.
This is because an inactive business will obviously not need any monthly accounting due to inactivity and submitting an empty annual report is quite simple – many entrepreneurs even prefer to do it themselves.
Legal address and local contact person service is actually very important as the service provider which offers you these services will act as a contact point for your Estonian company and any local correspondence that your business may receive. This means that all mail that comes on your or on your business’ name will be forwarded to you.
On the other hand, we always wish to make it noticeably clear that when you use these services, no service provider will have the ability to act on the behalf of your business. The only purpose the contact person serves is to act as an intermediary and to forward you any incoming mail. The contact person will not have powers to make any decisions.
Incorporate offers both registered legal address and local contact person service for €300 per year.
Accounting and tax reporting
If your business has a high number of transactions per month, accounting can easily become one of the most expensive recurring maintenance costs for your Estonian company. This is simply because of how accounting must be done.
Each invoice and receipt must be entered into the accounting software correctly and depending on the number of those documents, the time spent on making the entries will consequently increase.
Furthermore, if your business is VAT registered and/or has employees in Estonia, you must make monthly declarations to the Estonian tax authority (EMTA), which will of course increase both local tax burdens as well as accounting expenses related to the declarations and salary calculations for employees.
Finally, every Estonian company, even companies which are inactive, must submit annual reports to the Estonian tax authorities. While filing an empty report due to inactivity is relatively simple, preparing an annual report for a medium sized business can get complicated very quickly.
Our company provides registered address as well as virtual office services. Our virtual office (i.e. call answering service along with the registered address) includes secretarial services, e.g. call handling. In case of a virtual office you will also receive an Estonian unique landline number and handling of inbound calls according to your instructions.
Furthermore, we can assist in mail handling, translation and give you reminders and updates on important deadlines and things that may affect your business.
Incorporate’s traditional virtual office service costs €180 per year while any additional services can always be added if needed.
Establishment costs of an Estonian company
While it is important to understand the recurring maintenance costs of an Estonian company, it is equally important to know what initial investments must be made to establish one.
The following establishment costs related to the set-up of your Estonian business. As a rule of thumb, these are usually only paid once as they are processes which have a beginning and an end, and often no expiry date.
At the end of these processes, you and your company will benefit from having these services performed for years to come unless your business fails to live up to any legal requirements on an ongoing basis.
Establishing an Estonian OÜ company
An OÜ is the Estonian limited liability company and is the most popular legal entity in Estonia which local and global entrepreneurs establish. While there are also other types of businesses in Estonia that one can establish, an OÜ is the one that is of most use.
While we can also help to establish all types of legal entities in Estonia, we will use the OÜ as an example. Many of these following practices can be used to establish other legal entities as well.
Establishing an OÜ using e-residency
Thanks to the Estonian government creating the e-Residency program, you can establish an Estonian OÜ completely online and remotely. However, an important point to remember here is that in order to it online and remotely with co-founders, all co-founders must possess an e-Residency card.
The e-Residency card enables you to authenticate yourself online and make digital signatures. If all of you are not e-Residents, please consider obtaining e-Residency cards for all shareholders or skip to the next point where we describe methods that do not require e-Residency cards to establish a business in Estonia.
Establishing an OÜ with e-Residency can be done on your own as well, however, the tricky part is when you live abroad and are trying to do so. It is so because you will already have to have an agreement with a service provider to use their legal address and contact person service which must be filled in on the application. While it can be tricky, it is not possible.
Now when it comes to the costs, establishing an OÜ can start from €200 and may end with any kind of number that you would like, depending on your desired share capital amount. The cost can be only €200.1 if you establish your OÜ with the minimum share capital of €0.1 (minimum required share capital is €0.1 since February 2023) and wait 5 business days for your business to be registered by the Estonian business registry.
On the other hand, the quick incorporation procedure (1 business day), when establishing your business on your own will cost €265 plus your desired share capital.
Using power of attorney or visiting a local notary
In case you do not have an e-Residency card, your co-founders do not have an e-Residency card, or you wish to establish a business with a more complicated structure, your business must be established at a local notary.
Now there are two ways you can go about this. One method is using Power of Attorney where one of our corporate advisors can represent you and/or other co-founders at a local notary. The other method is that you make a trip to Estonia and visit a local notary in person.
These methods are obviously more time consuming than establishing your business with an e-Residency card, however, they can still prove to be quicker if you are just starting out the process of obtaining your Estonian e-Residency card. You can always obtain and reap the benefits of e-Residency when your business has already been established if you are in a hurry.
Establishing your OÜ with Power of Attorney can set you back upwards of a €1,000 due to Power of Attorney drafting, notary fees, necessary document authentications, translations, and shipping. Also, please note that these fees are without the initial share capital contribution, which you can do later on or per your agreement with our advisors.
Finally, you can visit an Estonian notary by yourself or with our corporate advisor. This is where the price will be dependent on the cost of you making your trip to Estonia, the state fee of €200, plus notary fees and service fees if you would like for us to assist you at the notary.
Reach out to us if you would like our assistance with establishing your business with these methods!
Business license or activity notice
Depending on your desired area of activity, your Estonian business might need a license to operate or give notice of starting activities in a specific field. However, there still are some exceptions where certain business models do not require a license to operate, but this must be carefully studied in order to avoid any legal troubles. In most cases, Estonian businesses do not have any reoccurring taxes or state fees related to their business license.
On the other hand, most businesses that operate in regulated industries must fulfill certain requirements upon submitting their application and keep up to date with any future changes which are made in the legislation to continue operating in the sector. A good example is the financial sector, where specific anti-money laundering rules must be followed and where compliance expertise is very sought after.
In Estonia, each business license has its state fee but the cost of setting up the business correctly ultimately determines the price. Therefore, it is hard to determine the total price without knowing the specifics of your business model, technological solutions, available investment, and the founders themselves.
Bank account opening
The Estonian authorities accept bank accounts established anywhere in the European Economic Area (EEA) which can offer quite a lot of flexibility to many foreign business owners that do not reside in Estonia.
Nowadays, it is unfortunately quite difficult to open a business bank account for Estonian businesses, which have little or no connection to Estonia. However, it is not impossible. On the other hand, this has created a newfound demand for virtual banks and PsP accounts which can be often more innovative than traditional banks.
Many of our newer customers are happy with using Wise, Payoneer and Stripe as their Estonian business’ bank account and have benefited from the ability to open their accounts completely online. While there are other businesses which can prove ties to Estonia and are able to open their account with ease if strong connections are established.
Ultimately, the cost will depend on your needs and data. Opening a bank account can cost you anywhere from €0 to €450. The price is dependent on whether you with to open a bank account at a virtual bank by yourself or want to get our assistance in opening a bank account at a traditional bank in Estonia.
Finally there is value-added tax (VAT) registration. Registering your Estonian company for VAT is one of the biggest benefits when you are planning to work with partners throughout Estonia and the EU. Being VAT registered enables you use certain business-related discounts on products and services.
The legal obligation for registering for VAT comes when your business exceeds a total of €40,000 taxable revenue in a single fiscal year. Or when your business’ annual distance sales across the EU exceeds a threshold of €10,000 under the VAT OSS scheme.
Filing a VAT registration application with our help will set back by €125.
There is a wide variety of businesses that can be established in Estonia.
We hope that this article made the maintenance cost of an Estonian company much clearer – if you have any further questions or doubts regarding any of this information, please do not hesitate to contact us!