Solving nonstandard business issues

Company formation and management in Estonia

Remote business management

Start a location-independent business with minimal cost and red tape

A fully digital end-to-end service

Complex ownership structures with multiple shareholders

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FAQ

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 do have an Estonian e-residency card, we will be able to establish the company directly and remotely on your name.

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.  

We are glad to provide you assistance with the e-residency application. 

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 payments. The taxation is levied at the level of the dividend paying Estonian company, not at the level of the shareholder. 

As of 2019 the dividend payment tax rate is 14% on the average regular dividend payments of the last 3 years if the recipient of the dividends is a legal person.

 If the legal person who received these lower rate dividends is paying out the received payments to its owners who are physical persons in Estonia, there will be an additional 7% income tax withheld. If the legal person who received these lower rate dividends is a non-Estonian company, the income tax rate is 14% and there is no additional tax on forwarding those dividends as this is then outside Estonian jurisdiction.

By which date do I have to forward accounting documents to my accountant?

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 monthly basis: income tax and payroll return is generally due latest by the 10th day of the month which follows to the taxation period and VAT return is due latest by the 20th day. 

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

Yes, you can! Please be kindly informed that companies whose management board is located outside Estonia must designate a contact person to whom the procedural documents of the company and the declarations of intent addressed to the company may be delivered to in Estonia. 

In such a case, only a notary, notary's office, advocate, law office, sworn auditor, audit firm, tax representative of a non-resident for the purposes of the Taxation Act or a licenced trust and company service provider may be designated a contact person. We are glad to provide the contact person service to you.

Can I have more than one member of the board 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 a more complex structure.  

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

Yes!

Non-resident companies and non-resident individuals may apply for an Estonian bank account. We emphasize 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 forth our best effort 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 Commercial Code of Estonia does not require the company to open a payment account in an Estonian bank. 

The new amendment that came into force at beginning of 2018 enables the companies to pay in the share capital to a payment account in a credit institution licensed in the EEA member state, removing mayor hurdle in establishing a fully functional company in Estonia.

We have several partners who are willing to open an account to our clients and we would be glad to offer the service for you.

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 the management board members have been with the company for at least 5 months), it is reasonable to submit a residence permit application.

Residence permit for employment (hereinafter the "TRPE")

Before submitting the application for an 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. 

The employer may be obliged to apply for a permit from the Estonian Unemployment Insurance Fund. This requirement is not applicable to employees who can be regarded as 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 an Estonian residence permit depends on the data and the provided information of the client. 

We are able to put forth our best effort 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 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 a 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 with the application. The Police and Border Guard Board must make a decision on the issue of a TRPB within 2 months. 

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 also be accessed 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.

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

An Estonian company is regarded being a tax resident in Estonia by Estonian tax authorities. If the 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. 

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

Yes, you can, but please note that the pricing between these two companies has to correspond to the market conditions in order to avoid corporate income tax consequences as both companies are related to each other through you and transfer pricing regulations apply. 

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 your non-VAT registered Estonian company buys services from outside Estonia, it must apply for a limited VAT number and pay VAT on the services bought. Therefore, if your Estonian company buys services from your foreign company, it is better to apply for regular VAT and then reverse charge the services, rather than just pay VAT on those services.

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. A short-stay visa allows you to stay in Estonia up to 90 days within a six month period.

Can you assist me in opening a bank account?

Yes, we can!

 We currently cooperate with LHV bank, which is the biggest Estonian based financial group in Estonia. 

Please kindly note that requirements arising from different regulations have made the process of opening an account more complicated and expensive. We are able to put forth our best effort and previous experience in order to achieve your aims, but the final decision is made by the bank and it is dependent on circumstances which we cannot influence. 

We emphasize that due to their strengthened client acceptance rules, the bank would like to verify the background, origin of assets and transactions of non-residential customers. 

As a prerequisite, the applicant’s business must have direct ties with Estonia and the applicant must explain in detail how the business activity/owner/management of a company is connected to Estonia.

Can you guarantee that a bank account will be opened?

We always put forth our best effort 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 Commercial Code of Estonia does not require the company to open a payment account in an Estonian bank. The new amendment that came into force at beginning of 2018 that enables the companies to pay in the share capital to a payment account in a credit institution licensed in the EEA member state, removing a mayor hurdle in establishing a fully functional company in Estonia.

In order to simplify the process of establishing a fully operating company, we are glad to provide our assistance in determining the most suitable solution for you. We will help you gather necessary documents for the corporate account opening process and submit the application to the PsP or bank which suits the best with your company’s business model. 

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:

Condition: Sales revenue or income Audit (EUR): 4,000,000 Review (EUR): 1,600,000 

Condition: Total assets as of the balance sheet date Audit (EUR): 2,000,000 Review (EUR): 800,000

Condition: Average number of employees Audit: 60 people Review: 24 people   

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

Condition: Sales revenue or income Audit (EUR): 12,000,000 Review (EUR): 4,800,000

Condition: Total assets as of the balance sheet date Audit (EUR): 6,000,000 Review (EUR): 2,400,000

Condition: Average number of employees Audit: 180 people Review: 75 people  

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

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

If the Estonian company is paying a salary to its employee for work that is performed outside of Estonia, the payroll taxes (including social tax and unemployment insurance premium) are presumably not due in Estonia. 

If a non-resident performs his/her duties outside Estonia, his/her salary in Estonia is not subject to income tax. We recommend you contact local tax advisors of the relevant country to discuss whether and in what extent the Estonian company shall pay taxes there.

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

The basic setup includes incorporation of an Estonian company using advantages of e-Residency. 

With an e-Residency card we will be able to establish the company remotely and directly on the client’s name. In case the client is not an e-resident of Estonia, there is an alternative solution where we transfer the company to client: 

1) at the time of his/her visit to Estonia 

2) or on the basis of a power of attorney on his/her behalf. 

Do I need a bank account for my company?

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

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. For more detailed information follow the link here. If your business activity does require a licence, we can assist you in obtaining one. 

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

 Yes, we do!

Do you provide accounting services or do I have to find an accounting provider by myself?

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

Our accounting fees depend on the company's activities (e.g is the company VAT-registered, how many employees does it have, does it own fixed or financial assets, etc.) and on the volume of transactions. 

In addition, we provide a full set of accounting services for crypto-companies. Please contact us in order to get a taylor-made solution for accounting services.

Do you provide assistance with the visa application for the bank visit?

Yes, we do - see the link here.

How can I know 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 the business if they have been incurred for the purposes of deriving income from a taxable business or are necessary or appropriate for maintaining or developing such a business and the relationship of the expenses with the 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 can not.

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 a 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.  

As of 2019 the dividend payment tax rate is 14% on the average regular dividend payments of the last 3 years if the recipient of the dividends is a legal person. 

If the legal person who received these lower rate dividends is paying out the received payments to its owners who are physical persons in Estonia, there will be an additional 7% income tax withheld. If the legal person who received these lower rate dividends is a non-Estonian company, the income tax rate is 14% and there is no additional tax on forwarding those dividends as this is then outside Estonian jurisdiction.

How is the CIT calculated?

 The 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:  

 

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 30 working days. 

How long does it take to incorporate a company?

The basic setup includes incorporation of an Estonian company using the advantages of an Estonian e-residency card. The company can be incorporated remotely and directly on your name in 1 business day.  

In case you are not an Estonian e-resident, as an alternative solution we can transfer the company to you:  

1) At the time when the shareholders/board members visit Estonia - upon the transfer at the notary, it takes up to 5 days for all information to be changed and reflected online  

2) On the basis of a Power of Attorney on the shareholders/board members behalf – up to 2-4 weeks

How should I pay for your services?

Currently the only option to pay is by wire transfer. Alternatively, money transfer to an 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.

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

The 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: apprx. EUR 821.20 (depends on the persons pension funds and tax free amounts) 

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 2019, the minimum salary in Estonia for full-time employment is EUR 540 gross.

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

It depends. Please note the following: VAT (20%) will be added to an invoice if it is issued to an individual residing in the EU and to an EU company that is not VAT registered. 

An invoice without VAT will be issued to: 

(1) an individual residing outside the EU; 

(2) a company domiciled outside the EU; or 

(3) EU domiciled VAT registered company

If I'm already registered 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.

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

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

If an Estonian company gives a loan to its parent company, are there any tax consequences?

Yes, a given loan to a parent or sister company can be considered a hidden profit distribution. It has to be declared to the tax department and it may be subject to income tax until the loan has been returned.

If my Estonian company has shareholdings in foreign companies, do 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 requires 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 profits 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 records the economic substance neccessary and appropriate for such business activities.

In which banks do you open accounts?

In Estonia we mainly assist in opening a bank account in LHV. Internationally, we are working with various payment service providers. Please ask for additional information.

In which case my Estonian company should register for VAT?

The general VAT registration threshold is EUR 40,000 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 conducting 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 the tax authorities. The latter proceeds the application for 5 working days. Please note that it is mandatory to have a bank account opened before the VAT application can be submitted. 

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.

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 to everyone on our commercial registry website. Some information is behind a paywall.

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.

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. If there are regular transfers on an 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.

Should I visit the bank if I wish to open an account?

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 the bank's representatives and our employee will accompany you to the visit, if 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.

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.

Should my company have a physical office in Estonia or is it enough 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 a 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 unique Estonian landline number and handling of inbound calls is done according to your instructions. Mail forwarding electronically is provided to all clients who order the registered address service.

What are the 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, etc.).

What are the setup costs of an Estonian company?

Setup costs depend on requested services (accounting, bank account opening, etc). Our minimum start-up package includes setting up a private limited liability company using advantages of an e-residency card. This includes the state fee, both the contact person and registered address service for one year with a total cost of 590 EUR.  

In addition, there are 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.

What documents should I provide for setting up a company?

The list of documents depends on the services ordered, the corporate structure of the company and the location of the individuals 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: 

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

What is the VAT rate in Estonia?

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

What is the minimum share capital of a private limited liability company?

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 a company with a 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.

What restrictions on the balance sheet structure should I know 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 a 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 the filing of the next annual report to solve this issue.

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.

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 if 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.

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.

Will 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.