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Companies registration in Estonia

Estonia provides an opportunity to acquire e-residency for everybody who wants to get a full access to transparent Estonian business environmental. E-residents can start a business in Estonia from anywhere in the world and run it totally remotely. E-resident card enables its holder to access different state portals, it makes possible to sign, authenticate, encrypt and send documents digitally and declare all taxes online.

Moreover any person can personally benefit from the establishing a company within Estonian jurisdiction since the participation in a company is a reason for applying for the issue of a temporary residence permit. The requirement is to have a holding in a company and invest in business activity in Estonia at least 65,000 euros of capital (in the case of a self-employed person, 16,000 euros).

The advantages of companies in Estonia:
  • a relatively low share capital requirement (2500 euros);
  • voluntary VAT payer registration upon annual turnover succeed 40.000 EUR;
  • no income tax if dividends are not distributed;
  • no demand on the regular payment of wages;
  • banking system is well developed in Estonia and almost all banking services can be provided without necessity to visit a bank office;
Requirements for the companies:
  • usiness name of a company should be different from already registered business names;
  • f the management board of a company is located in a foreign state, the company must designate a resident of Estonia to be a contact person;
  • minimum one founder requirement, minimum one shareholder;
  • initial capital contribution could be paid in monetary or non-monetary form;
  • at least one director has to be appointed, no requirements for director’s residency, director may be legal entities;
  • a company needs to have an Estonian address;
  • earer shares are not permitted;
  • company shall keep proper records of account and maintain taxation and audit records;
  • the requirement to submit annual report within 6 months after the end of financial year.
Taxation
Income tax (or corporate income tax) - 0%, applicable to the benefits derived, but not distributed. This is a significant difference from the standard calculation of the tax system in most countries, which charge a certain percentage of the difference between revenues and expenditures of the company. Individuals and legal entities are not taxed on dividends. The company may refinance the profit, invest it in deposits, securities, equipment and real estate). The tax would have to be paid only at the time of profit distribution with tax rate of 20% (20/80), however, the lower tax rate of 14% (14/86) is applied in some cases.

The value added tax (VAT) rate in Estonia is 20% Goods and services purchased in the EU are not taxed. It is stated (or affirmed) in the declaration of tax from turnover. The same applies to the goods purchased outside the EU unless they are imported into the territory of Estonia. The 0% rate of VAT does not apply to services purchased outside the EU in the territories of certain offshore jurisdictions.  VAT reports are filled to the tax authorities on a monthly basis. However, Estonian company is not required to be registered as a VAT payer, unless the amount subject to VAT exceeds 40.000 EUR.
  • The audit obligation applies to an accounting entity in whose annual financial statements at least two of the indicators listed on the right exceed the following values:
    • required sales revenue or income 4 000 000 euros;
    • total assets as at the balance sheet date 2 000 000 euros;
    • average number of employees 60.
 
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