Estonia

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Estonia

General information about the jurisdiction

Estonia, officially the Republic of Estonia, is state in Northern Europe with access to the Baltic Sea. Almost a third of the population lives in the capital – Tallinn, there are only 47 cities in the country.

Russian is the mother tongue for 30% of people, which may be useful for Russian-speaking businessmen.

There is a common electronic document system in Estonia (the government has used this system from 2000) as well as countless items of free Internet.    

Tax benefits, prestige and absence in "black lists" have made Estonia a popular jurisdiction among businessmen from all over the world.

Advantages:

• there is no income tax

• there is the opportunity to obtain long-term visas for director and shareholder of the company, as well as getting a permit and permanent residence

• There are no requirements for payment of the share capital

1. Legislation

Company activity in Estonia is regulated by Commercial Code 1995.

2. Company formation

2.1 Types of companies

A company in Estonia may be registered in form of joint stock company (AS), general and limited partnership, private entrepreneur. The most useful corporate form for small and medium business is Limited Liability Company (OÜ), and for big companies - joint stock company (AS).

2.2. Private Limited Liability Company (OÜ):

  • The minimum authorized capital – €2500, Payment by the moment of incorporation is not required but desirable. 
  • The authorized capital is divided into shares, the value of each must be multiple of €10.
  • The company is managed by the Board of members, who may appoint a director – at least 1 individual, no residency required. If the authorized capital is more than €25000 and the Board includes more than 3 members, it should be a Board of Directors (at least half of directors must be Estonian residents).
  • Members – at least 1, individual or legal person, no residency required. 
  • Secretary – one residential secretary is required.
  • Confidential information: information about members in case of nominee service. 
  • Company is obliged to keep and submit an annual financial report. An audit is required for companies with authorized capital exceeds €25000, annual turnover – more than €625000, balance - more than €312500 and there are more than 10 employees a year.
  • Registered office in Estonia is required. 

3. Taxes

Income tax - 0%, but only on retained profit.

If the company pay dividends to its shareholders, the tax rate will be (approximately 26,6%).

If the founder of the Estonian company is an offshore company or the company registered in low tax jurisdiction, it is charged to corporation tax at a rate of 21% (the list of offshore and low tax jurisdiction is established by the government).

VAT - 20% (for some goods – 0% and 5%)

Social tax - 33%

Income tax from individuals - 21%.

Tax on dividends - 28% (dividends, paid by a company that owns at least 15% of the authorized capital, do not include in the taxable amount).

Tax on interests and royalties - 30%.

There is no sale tax, tax on rent estate abroad.

4. Currency control

None

5. Agreements on avoidance of double taxation

Estonia concluded more than 40 agreements on avoidance of double taxation, including Ukraine.