Why does the international business community express so much interest in Estonia, a rather small Baltic country? The central reason for that is the effort the local Government spends on creating a favorable business environment in the country. A non-resident of Estonia and the EU does not have to overcome too many bureaucratic obstacles to open a company in the country. All you have to do is follow some simple and transparent rules.
Besides, Estonia offers a significant fiscal advantage. In accordance with the country’s legislation, undistributed profits are not taxed in Estonia. That is, if you reinvest the profits into your company, you do not have to pay any profit tax at all. This makes growing your business in Estonia very easy.
Steps in the process of registering a company in Estonia
First, you have to choose a name for your prospective company and determine the spheres of its business activities.
Next, you have to take a one-day trip to Tallinn to register the company by yourself. If you apply for some professional assistance, however, you can register a company in Estonia by proxy. You will have to pay for this service but it is probably going to cost you less than a trip to Estonia, depending on how far away you live.
Finally, you have to wait a bit until your company data are entered into the Commercial Register. When they are, you can enjoy the ‘most-favored-company’ treatment on the part of the local authorities. The last step in the company formation process is opening a corporate bank account. This task does require professional support. You can find a more detailed guide on registering a company in Estonia if you follow the link.
Timeframes of registering a company in Estonia
The company registration procedure can be completed within 1 day in Estonia. This holds both for opening a company in person and for opening a company by proxy. The company data will be registered with the Commercial Register within 1 to 5 days. If you choose to buy an existing company instead of starting a new one, the timeframes will remain the same.
A company in Estonia: numerous advantages
- The company registration process is fast and simple in Estonia. You can register a company in the country within 3 hours only. This is not a myth: this is real.
- You do not have to distribute the profits that an Estonian-based company makes.
- One of the main advantages that Estonia offers is its income tax regulations. If an Estonian company earns an income from its economic activities, it does not have to pay any taxes on it on the condition that the income is reinvested into the company. If you extract a portion of the income from the company and use it to cover your personal costs (not related to business operations), then you have to pay an income tax, of course.
- The costs of establishing a company in Estonia are low. The company can have a charter capital of 0 euros. The standard charter capital is 2,500 euros in the country. However, you can postpone depositing it. Start business operations, earn some money, and deposit the charter capital later.
- A non-resident of Estonia is eligible to register a company in the country. The non-resident can be a natural person or a corporate entity.
- The same person can own and manage a company registered in Estonia.
- There are no regulations on the amounts of salaries to be paid and neither are there any specific employment conditions in Estonia.
- Maintaining a company registered in Estonia costs very little.
- The reporting requirements are transparent and the reporting algorithm is quite simple.
- A foreign national registering a company in Estonia is able to save on taxes if he/ she writes real estate or a car in the name of the company rather than in his/ her personal name.
- Opening a company in Estonia lets you acquire the status of an EU taxpayer and thus obtain the VAT and EORI numbers.
- If you become an ‘electronic resident’ of Estonia and obtain an e-residence card, you can manage your company remotely, use your electronic signature to sign various documents, gain remote access to all state services in Estonia as well as access to various registers. A lot of opportunities for a foreign citizen!
- A non-resident Estonian company owner is entitled to open accounts with Estonian and other EU banks and payment systems. All major financial institutions in Estonia provide Internet banking opportunities.
- State agencies function ideally well in Estonia. It is comfortable to interact with the local bureaucratic machine and English is widely spoken in the country.
- When registering a company in Estonia, a non-resident of the country gains easier access to a long-term (D-type) visa. This is a work visa and it can be a starting point in the process of obtaining a legal residence permit in Estonia.
- Estonia has signed agreements on double taxation avoidance with almost all countries of the world.
- Estonia is within the European Economic Area and it is an EU member state. This fact gives easy access to European markets to all companies located in Estonia.
- If you would like to register intellectual property, a trademark, or obtain a European patent, registering a company for this purpose in Estonia would be highly economical.
- Estonia is located in the center of Europe: it has (land and maritime) borders with Russia, Latvia, Finland, and Sweden.
- If you borrow money from a foreign creditor and use your Estonian company profits to pay the interest on the loan, no taxes are payable in Estonia. Your creditor will have to pay the taxes in the country of his/ her fiscal residence.
- You don’t have to involve an Estonian citizen into forming a company in the country. All company owners and directors can be foreign nationals or foreign legal entities.
We would also like to provide a few seldom mentioned but important arguments in favor of opening a company in Estonia:
- Estonia enjoys a wonderful reputation in the European business world. For instance, its taxation system was recognized as the best taxation system in Europe in 2019. In 2017, Estonia ranked first for entrepreneurial activities.
- You can easily find skilled personnel in Estonia. According to the statistics, 86% of Estonian adults speak a foreign language or two. Estonians are able and willing to work for international companies because many of them are fluent in foreign languages.
- The legal and judicial systems in Estonia are transparent and easy to understand. At the same time, the local Government is rather innovative. Laws frequently change in Estonia because the legislators are eager to adapt them to the changing environment.
A company in Estonia: a disadvantage
We would like to point out one disadvantage of registering a company in Estonia. Even though it’s the only disadvantage that we can think of, it is rather significant.
It has become difficult to open a corporate bank account for an Estonian company in the country. Today, you have to clearly explain to the bank officer why exactly you have launched a company in Estonia. You have to show that you have counteragents in the country, agreements with Estonian partners, manufacturing facilities in Estonia, real property there, and so on.
There are two basic ways of overcoming this problem. First, you can seek professional assistance in opening a corporate bank account in Estonia, as this would improve your chances greatly. Second, you can consider banking outside Estonia. Having an Estonian company with a bank account in another country is perfectly legal.
