Company registration in Estonia Company registration in Estonia

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Main characteristics for registration in Estonia

Corporate tax
0%
Best choice for:
ICO
Time to complete the registration
3 days

Company Registration in Estonia

Estonia is a small country located in Baltic Sea Region. With its favourable economic environment, stable government, liberal economic rules and ease of company formation, it already attracted numerous international companies. The Estonian Government highly welcomes foreign capital and especially businesses in high-technology and innovative sectors.

Estonia is the first country that offers e-Residency, which is a government-issued digital ID available to anyone in the world.

This article gives you an overview on how to set up a company in Estonia and key points on how your business can benefit from it.

Tips: You should definitely consider an opportunity for your business to be operated in one of the free trade zones in Estonia: at the ports of Muuga; Paldiski and Sillamäe in the northern coast of Estonia as well as in Valga in the south-east Estonia. Please contact us to get more details.

What types of legal entities is it possible to incorporate in Estonia?

Foreign companies and citizens may register the company in Estonia in the following types:

  1. Private Liability Company (OÜ): has a share capital divided into private limited company shares and shareholders are not personally liable for company obligations. The minimum share capital is EUR 2,500. This type of legal entity also allows expedited procedure for formation of the company. In particular, the applicant must present all necessary documents to the Commercial Register electronically and authenticate the documents with digital signature.
  2. Public Liability Company (AS): along with OÜ this is the most commonly used type of legal entity in Estonia. Such companies are liable for its obligations by their assets. The minimum share capital is EUR 25,000.
  3. Partnerships: there are two types of partnerships: general partnership (TÜ) and limited partnership (UÜ). General partnership consists of two or more partners who are solely liable for obligations of the legal entity with all their assets. On the contrary, in the limited partnership only one partner has full liability (general partner) and at least one of the persons (limited partner) is liable for the obligations of the limited partnership to the extent of the limited partner’s contribution.
  4. Commercial Association: this is the legal entity formed by its members through joint economic activity.
  5. Sole proprietorship
  6. Branch: a subsidiary of foreign company with no requirement as to the authorized capital. The branch may have one or more directors, provided that at least one director is the resident of EU member state or Switzerland.

Company registration documents to be submitted depend on the type of legal entity you choose from.

How long does it take to register a company in Estonia?

The procedure for registering a company in Cyprus is rather quick and it may take from a few days up to a couple of weeks.

Tips: as it was earlier mentioned, Estonia is the first country to offer e-Residence. The e-Residency allows to start a company online from anywhere in the worlds. The e-Resident may access business banking and online payment service providers. It also allows to easily declare taxes online. The
E-Resident does not need to go to Estonia to manage the business, as it is permitted to operate the company online from anywhere in the world. Please contact us to learn more details and potential opportunities.

What documents is it necessary to submit for incorporation in Estonia?

Identification document

  • Certified copy of International Passport
    Or
  • Certified copy of EU issued ID card

Address Proof

  • Utility bill no older than 3 months
    Or
  • Copy of official ID document showing address
    Or
  • Bank account statement or bank reference letter showing address of UBO

Agreement

Signed Nominee (Trust) agreement

Personal meeting/Call

Meeting or call is held with UBO -> completed UBO identification form

Forms

  • Form completed by EST office

Other documents

  • Consent signed by UBO
  • Certified POA signed by UBO

Certification

If UBO from country with agreement with EST: certification by public notary

If UBO from other country: certification by public notary + apostille

What are the requirements for company names in Estonia?

Estonian legislation does not provide any obligation to get any prior approval for the company name. The company name must be indicated in the Articles of Association or other document to be submitted to the Commercial Register. The name must be in Estonian and can have an English equivalent. The company name cannot be misleading to the scope of company activity, legal form or be unethical.

Is there a residence requirement for directors and shareholders in Estonian companies?

Estonian legislation does not set any limits on the residence of shareholders and directors (except for residency requirement in branch).

Is it required to have a company secretary in Estonia?

No company secretary is required in an Estonian company.

What are the accounting requirements for an Estonian company?

Estonian companies are required to prepare a financial statement on an annual basis according to the standards of IFRS as adopted by the European Union. Annual reports are submitted in an electronic form through Commercial Register online portal.

Company director(s) are responsible for maintaining of accurate books and records. All transactions shall be documented and documents thereof preserved for seven years as of the end of the financial year during which the source document was recorded.

Tips: the content and volume of the annual report depends on the size of the company. As an instance, small-sized entity submits long or abridged balance sheet, and income statement; specified information in limited amount of notes and management report. Medium-sized entity prepares full financial statements in accordance with Estonian GAAP or IFRS as endorsed by the EU and management report.

When is it obligatory to audit an Estonian company?

Public limited companies are subject to audit. In addition, audit or review is mandatory if an entity exceeds certain quantitative thresholds (consolidating entities apply the thresholds to the consolidated numbers).

What is the cost of company formation in Estonia?

The cost of company incorporation in Estonia is Euro.

Taxes in Estonia

Estonia is considered to have one of the simplest tax regimes in the world. In Estonia taxes are imposed on a state and local levels. State taxes include income tax, social tax, land tax, gambling tax, value-added tax, customs duty, excise duties and heavy goods vehicle tax. On the state level taxes are collected by the Tax and Customs Board.

What companies are qualified as tax residents in Estonia?

A legal entity is a tax resident in Estonia, if it is incorporated in Estonia. However, it is necessary to take into account whether a legal entity is also a tax resident of another country. In this case, the tax residency is defined based on a relevant tax treaty.

What is a taxable period in Estonia?

Period of taxation for legal entities and non-residents with permanent establishments in Estonia is one calendar month.

What is corporation tax rate in Estonia?

Corporate income tax rate in Estonia is 20% of the gross amount. The income tax shall be returned and paid on a monthly basis. Tax returns in Estonia can be submitted electronically.

How are dividends taxed in Estonia?

Corporate income tax in Estonia is levied on a company’s distributed dividends at the rate of 20%. The profit is not subject to corporate income tax until profit distributions are made. For example, distribution of dividends and profit distribution via reduction of share capital are taxable with corporate income tax.

Withholding tax in Estonia on interest does not apply to non-residents. Royalties (including payments for the use of industrial, commercial, or scientific equipment) paid to non-residents are generally subject to 10% withholding tax under Estonia law, but reduced rates or exemptions may apply under double tax treaties.

What is interest tax rate in Estonia?

As a general rule, interest paid to non-residents is not subject to withholding tax in Estonia. An exception applies to the portion of interest that significantly exceeds the market interest rate. In this case, 20% rate is paid to the amount exceeding fair market interest.

What is royalties tax rate in Estonia?

Royalty paid to non-residents is subject to 10% tax at source. No tax in Estonia applies if royalty is paid to a related party in another EU member state or Switzerland.

What is capital gains tax rate in Estonia?

Capital gains paid upon distribution is at the rate of 20%.

What is VAT rate in Estonia?

The main indirect tax in Estonia is a value-added tax (VAT) set at a standard rate of 20%. Reduced rates of 0% and 9% apply to some goods and services, including a 0% rate on exported goods and a specific list of exported services.

Company Liquidation

As in other jurisdictions, a liquidation of a company in Estonia can be done voluntary or involuntary.

What are the grounds for involuntary liquidation in Estonia?

A company in Estonia can be terminated by the court decision in case a company fails to comply with legal requirements.

What is the procedure of involuntary liquidation in Estonia?

A court appoints a liquidator responsible for all formal actions. A notification of company’s liquidation is published in the Official Gazette. Along with it, the liquidator prepares balance sheet and distributes remaining assets within 6 months after the notification in the Gazette. Once all debts are settled, the company is formally liquidated.

What are the grounds for voluntary liquidation in Estonia?

In most cases, a company in Estonia is liquidated on a voluntary basis by the decision of shareholders.

What is the procedure of voluntary liquidation in Estonia?

Following the decision, the management board submits a request to the Commercial Register which can be done online through company registration profile. The shareholder’s resolution shall contain provisions on appointment of liquidators and entry their names into the Commercial Register. A final balance sheet and asset distribution plan is also submitted to the Commercial Register. Once all the debts have been paid to creditors and all the tax liability has been satisfied, the company is dissolved and cancelled in the Register of Companies.

Note: it should be noted that at least on liquidator of an Estonian company must be a resident of Estonia.

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