Company registration in Estonia
Under the laws of the Republic of Estonia, entrepreneurial activities can be carried out only by persons registered as undertakings. Consequently, in order for a person to run a business, he or she should have a certain status, i.e. should register either a sole proprietorship or a business association pursuant to the procedure laid down by law. Both variants are quite common but the majority of small and medium-sized businesses function as business associations.
The latter, in their turn, fall into two categories: for-profit and non-profit entities which differ not only in terms of their purposes and objectives but also in respect of their legal form, organisational structure and operation procedure.
Business can only be run through a for-profit association. Non-profit entities cannot pursue profit-making and cannot be used for carrying out entrepreneurial activities. There are several legal forms of business associations, but the most common one for small and medium-sized businesses is a private limited company (osaühing – OÜ).
A private limited company (OÜ) is a legal structure that is most suited to small and medium-sized businesses with up to 10 shareholders. The minimum share capital for private limited companies in Estonia is 2 500 EUR.
No director is required under the Estonian legislation because the members of the management board bear all the responsibility for activities and bookkeeping of the company.
• The founder of the company can have any citizenship and reside in any country of the world.
• From 1 December 2014 all foreigners can apply for a digital identity card (E-residency). A digital ID card (for e-residents) enables foreigners to put a digital signature on documents without having to leave their computer. Shareholders staying abroad can take part in all important voting sessions using their computers without having to come to Estonia. This significantly simplifies the handling of affairs between foreign and Estonian companies.
REQUIREMENTS FOR ESTONIAN PRIVATE LIMITED COMPANIES (OÜ)
• Obligatory registration in the Estonian Commercial Register
• At least one shareholder
• At least one member of the management board. One and the same person can be both a member of the management board and a shareholder.
• Legal address in Estonia
• Duty to keep accounts
RETURNS submitted to the Estonian Tax and Customs Board by Estonian private limited companies
If a private limited company has a corresponding individual VAT number or has employees working under employment contracts, the following returns should be submitted on a monthly basis:
a) income and social tax return by the 10th day of each month
b) value added tax return by the 20th day of each month
If the private limited company has a turnover in the EU, then the following reports should also be submitted:
c) intra-community goods turnover report by the 20th day of each month
REPORTS submitted by Estonian private limited companies to the Commercial Register
d) annual report in the prescribed form for the previous financial year (01.01.-31.12) by the 30th June of each year.
REPORTS submitted by Estonian private limited companies to the Estonian Statistical Office
e) Only those companies are obliged to submit quarterly / every month reports to the Estonian Statistical Office which have been selected by this institution based on its own criteria.
REPORTS submitted by Estonian private limited companies to the Estonian Central Bank
f) Only those companies are obliged to submit quarterly reports to the Estonian Central Bank which have been selected by this institution based on its own criteria and which are engaged in foreign trade.
TAXATION
Basic tax rates in Estonia:
– corporate income tax 0%
– social tax 33%
– value added tax (VAT) 22%
– income tax paid by natural persons 20%
– since 2019, 7% is withheld from dividend payment made to natural person, both resident and non-resident, if the payer applied reduced corporate income tax rate of 20/80 to the dividend payment.
– unemployment insurance premium: 1,6% for employees and 0,8% for employers.
Other taxes and duties: land tax, gambling tax, customs duty, excise duty, heavy goods vehicles tax.
BASIC EXEMPTION:
Beginning from 1 January 2023 the overall tax-free amount (basic exemption) of up to 7848 euros per year or up to 654 euros per month will be applied on all types of income. More information you can get from Tax and Customs Board website: https://www.emta.ee/en/private-client/taxes-and-payment/tax-incentives/calculation-basic-exemption
WAGES:
– minimum wage: 820 EUR per month
– hourly rate: 4,86 EUR per hour
• One of the benefits of the taxation system in Estonia is that no tax is paid on retained earnings. The company’s profits are taxed at a rate of 20/80 (25%) until 31.12.2018 only upon payment of dividends.
• It is not necessary to pay a salary (to members of the management board).
• A bank account is opened at an Estonian bank in accordance with the bank’s pricelist. You can manage the company’s bank account from anywhere where there is Internet.
Necessary documents and information to register a new company in Estonia
• Contact details of all the founders (telephone numbers, emails, residence addresses)
• If there are several founders, the price of the shares should be specified indicating who will own them and in what amount (EUR) and proportion (%).
• The company’s email address that will be in the public domain
• It is also necessary to specify whether the share capital in the amount of 2 500 EUR will be contributed or not at the time of registration of the company (the latter option is allowed according to the new legislation).
• The name of the new company. The company’s name should be chosen as carefully as possible because nomen est omen.
• The legal address that you plan to use for business activities of your new company. If you do not have a legal address, our law office will be happy to offer you our legal address for an indefinite period of time provided that your company will be using our accounting and legal services.
• If you are not a resident of the Estonia, you will have to provide us with the details, address and email of your contact person who who can act as contact person according to law. If that is not possible, our law office will be happy to offer you a contact person for an indefinite period of time provided that your company will be using our accounting and legal services.
• You should specify what exactly the company will be doing (area of business)
• All the founders of the new company should be present at the making of the notarised transaction when the company is registered.
• If you represent somebody under a power of attorney, you should provide us with the power of attorney in Estonian well in advance of the transaction. If your power of attorney needs to be translated, our law office is ready to assist you with its translation and notarisation in accordance with the pricelist.
• Please specify the exact time and date for the appointment with the notary.
We can also offer you the following:
• Preparation of all the documents needed for a notarised transaction in Estonian (if necessary, they will be cleared with the client). All the necessary consultations.
• Appointments at a convenient date and time to sign the documents at the notary’s office.
• Accompanying the client to the notary’s office or the bank, all the relevant advice about forming a new company, paying taxes and opening a corporate and, if necessary, a personal bank account. Payment of the share capital. Submission of documents to the Commercial Register. If necessary, submission of an application to the Estonian Tax and Customs Board to obtain a VAT identification number.
• If necessary, we will provide you with the complete range of services to obtain a licence (for trading, cargo transportation, etc.) or an operation permit.
• If necessary, we will assist you with your bookkeeping and submitting returns to the Estonian Tax and Customs Board, the Estonian Statistics Office and the Estonian Enterprises Register.
• If necessary, we will provide you VIP legal support throughout your company’s operation.
• If necessary, we will provide you with professional translation of texts of any level of difficulty in all subject areas (any language combinations, notarisation, Apostille, legalisation).
• Submission of an application to the Estonian Tax and Customs Board to get an EORI code.
• Knowledgeable information and organisation support in all your matters in accordance with the pricelist or the contract.
**** The company registration service will be provided after the required amount has been paid at the till or to our bank account. You can pay in cash at our law office or make a bank transfer to our account.
Our law office will make sure that the services you need will be provided to a high standard and on time. We sincerely hope that we will become your trusted partner in resolving your problems in Estonia!