Opening and running a business in Estonia

Opening and running a business in Estonia

Estonia has been part of the European Union’s single market for over 10 years and is entering the Schengen area. Estonia is an attractive country for opening its business – it has a developed economy, a simplified tax system, and entrepreneurs support from the state. National legislation allows citizens of other countries to conduct private business in Estonia. In addition, foreigners who have opened their businesses in Estonia have the same rights to receive subsidies, benefits, loans from the state as local entrepreneurs. If you decide to start a business in Estonia as a resident of this country, you will notice that the company is mainly managed by means of an e-citizenship card. With this card you become an “e-citizen” and you can sign all the necessary documents and pay taxes online, you have access to all portals of public services.

The advantages of opening a business in Estonia

– It is not necessary to employ a local resident in the company’s management body, as is the case, for example, in Lithuania and other European countries. As a result, non-residents of Estonia and the EU may be founders and members of the board.

– There is no mandatory remuneration requirement for a member of the management board (director), and therefore there is no minimum size requirement

– There is no need to actually introduce the share capital during the registration of the company, it is enough to declare it

– Relatively low tax burden

– Developed infrastructure

– A simple accounting system

– Opportunity to buy real estate for the company without any taxes

– Possibility to purchase a vehicle for a company without paying (or refunding) 10-20% VAT

– A highly developed information system. Availability of the electronic commercial register. Thanks to it, entrepreneurs have the opportunity not only to open and register a company in Estonia, but also to make changes to documents, submit declarations and carry out many other online activities.

What is needed to open a company in Estonia

There are two options for registering a company in the country: via the Internet and at a notary.

Required documents from natural persons:

– international passport

– document confirming the status of director or member of the board

– electronic signature – e-residence

Required documents from legal persons:

– document confirming the status of a board member

– excerpt from the register of the country in which the company is registered

– company statute

To open and register a company in Estonia, it is necessary to choose the form of ownership or organizational and legal form of the future enterprise. Estonian legislation provides for several different types of corporate structure, here are the most important ones:

1. A limited liability company is a type of corporate structure used by people working alone or in small groups. The founder’s liability is limited by the size of the share capital.

2. A joint-stock company – it is created to run a large company in which the target capital can not be lower than PLN 25,000. Euro. The executive body is the management board. The condition is that at least half the members of the board of directors live in other EU countries.

3. A private company is an option to start a small business. There are no minimum capital requirements. Accounting is carried out as part of a simplified system. The entrepreneur is responsible for the obligations with his property.

Registration

Company registration in Estonia requires a specific set of documents:

– Memorandum and Statute

– statement

– bank certificate of depositing the minimum share capital

– receipt of payment of the state tax for registration

Based on the above documents, a notary registers your company. Registration will take two or three days. In addition, it will be necessary to provide other documents – identity document, signatures and additional information, in particular the legal address of the company. This may also be at home in some cases.

In the case of one owner, you can register via a notary public or electronically if you have a digital ID card, ID card (as mentioned above).

The cost of registering a company varies from 800 euros, registration by proxy and from 700 euros, with a personal presence up to 2000 euros, depending on the package of services.

Taxes in Estonia

1. VAT – the standard rate is 20%, for some types of goods the reduced rate is used – 9%. The 0% VAT tax applies to goods exported from EU countries.

2. Income tax on profits (dividends) for legal entities – 20%, corporate income tax – 20%

3. Personal income tax – 20%

4. Social tax – the employer pays a tax on the employee’s remuneration in the amount of 33%

5. Retirement pension contribution – an employee pays 2% of remuneration.

Attention! The main tax supplementary to the Estonian budget is VAT, which companies pay only when their annual turnover exceeds EUR 40,000. From 1 January 2018, the government of the country decided to increase the threshold subject to taxation from 16 thousand. EUR to 40 thousand Euro in support of small and medium enterprises.