Company Formation in Estonia
Updated on Thursday 08th August 2019
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BridgeWest is specialized in providing offshore company formation services to investors across the world. Our team of specialists is prepared to provide advice on the taxation system applicable in a given offshore jurisdiction, on the tax benefits investors can obtain, but they can also offer step-to-step assistance on the registration of an offshore company. When opening a company in Estonia, BridgeWest will provide you with the following services:
- drawing up the articles of association that can be signed through power of attorney (Estonian laws require powers of attorney for any public notary proceedings);
- drawing up documents for company incorporation in Estonia, such as specimen signatures, passport copies, application forms required for company registration;
- arranging public notary proceedings (all procedures for company incorporation are done in front of an Estonian public notary);
- providing a registered office in Estonia on demand;
- the registered office serves as headquarters for the company in Estonia and it will be made public;
- setting up a bank account for the company in Estonia - BridgeWest will help in setting up the share capital bank account, as well as a current bank account once the company is incorporated;
- recommending an Estonian accountant, as accounting services are needed for new businesses in Estonia.
Osaühing (OÜ - private limited company in Estonia)
The Estonian private limited company can be owned by one or more shareholders and it is required to have a director. The minimum share capital required to open a private limited company is of EUR 2,550; the nominal value of a share has to be of EUR 1. The private limited company represents one of the most common ways to start a business in Estonia.
The Estonian private limited company must have a management board formed by Estonian residents, although the management board members do not need to be shareholders and it is also required to have a registered office. Our team of specialists can offer more information on the characteristics of this business structure.
The Estonian private limited company must have a management board formed by Estonian residents, although the management board members do not need to be shareholders and it is also required to have a registered office. Our team of specialists can offer more information on the characteristics of this business structure.
Aktsiaselts (AS - public limited company in Estonia)
The public limited company in Estonia can be registered by a single founder, who can be a natural person or a legal entity. It needs a public share capital of EUR 25,500 with a minimum nominal share value of EUR 1. It is also required to have a management and supervisory board and a registered office. The public company’s shares must be registered in the Estonian Central Register of Securities.
The Estonian branch, subsidiary and representative office
Foreign companies are allowed to set up separate enterprises from the parent company, where the foreign company will be a shareholder in an Estonian company. Foreign companies can also open extensions of the parent company in Estonia. The main documents required for company incorporation in Estonia are the followng:
- the memorandum and articles of association (the statutory documents of an Estonian business);
- the corporate name that the investors want to use for the local company;
- the business activity that will be developed through the Estonian company;
- • in the case the shareholder is a legal entity, a certificate of good standing from the Trade Register in the country of origin of the shareholder is required;
- a certificate from the bank as a proof that the minimum share capital has been deposited.
What should investors prepare when starting a business?
The basic requirements that have to be met when opening a company in a given jurisdiction differ and the differences are given by each country’s laws. When starting a business in a given jurisdiction or when starting the offshore company setup, investors should decide on a set of common aspects.
For example, the company’s representatives should establish a corporate name for the company, the company’s directors (depending on the country, the company’s director can be the company’s shareholder as well), and the company’s business activities. They should also verify the tax requirements applicable to a business, but it is necessary to know that in the case of offshore company formation, investors can have a set of advantages, as offshore jurisdictions are known for offering numerous tax exemptions.
Why invest in Estonia?
Regardless of the company type selected for incorporation in Estonia, foreign businessmen can benefit from a set of advantages when starting a company in this country. Although it is a small country, Estonia is an attractive business destination for startup companies and numerous investment projects are set up in this sector. Businessmen may also consider the below mentioned aspects:
- the data of the Organization for Economic Cooperation and Development (OECD) showed that the top foreign direct investments in Estonia are concluded in the financial and insurance sector (28.6%);
- other important recipients of foreign direct investments are the real estate sector (17.7%) and the manufacturing industry (13.1%);
- the country’s top investors are Sweden (27.7%) and Finland (22.3%);
- the number of greenfield investments in Estonia increased at 25 in 2018;
- in 2016, the country had only 18 greenfield investments.
Investors must also consider the fact that the country benefits from attractive conditions on the protection of investors. With this being said, it is important to know that Estonia has an index of transaction transparency of 8.0 (much higher compared to other similar regions). For example, in Eastern Europe this index stands at 7.0, while in Germany, one of the leading economies in Europe, it stands at only 5.0.
Estonia also ranks very well when referring to the index of the shareholders’ power. In Estonia, this stands at 9.0, having better conditions than Germany, where the same index is of 8.0. The country ranks similar with other jurisdictions on the index of investor protection. This stands at 6.0. Businessmen who want to open a company in Estonia should also know that this country has one of the most liberal economies at a global level, with stable authorities.
Taxation in Estonia
The corporate tax in Estonia is set at 20%. In Estonia, the standard VAT rate is 20%, but a reduced rate of 9% and a zero percent rate apply for some good and services. Undistributed profits are not taxed in Estonia, but a 21% rate applies to gross dividends. Businessmen who want to open a company in Estonia must also know that the following are available:
- the tax on distributed dividends in Estonia ranges between 14% to 20%;
- in Estonia, the local companies and local citizens prefer to declare their taxes online (95% of all entities);
- the personal tax declaration in Estonia can be completed in only 3 minutes;
- taxes related to the employment in Estonia are imposed at a rate of 33%;
- the social security tax stands at 20%, while the health insurance tax is of 13%;
- the unemployment insurance tax in Estonia is of 0.8%.
With regards to the registration for value added tax purposes, it is necessary to know that the registration is not obligatory in the case of businesses that have a turnover below EUR 40,000. Our team of consultants in opening companies in Estonia can offer more information on this subject.
BridgeWest is also able to offer ready-made Estonian companies and VAT registration. Please contact us for more information and prices for opening a company in Estonia. Besides this, BridgeWest is ready to offer offshore incorporation services; our specialists also have the necessary expertise in assisting investors in opening an offshore bank account.