DOING BUSINESS IN ESTONIA IN 2023
Since 2003, Healy Consultants Group PLC has assisted our Clients with starting their business in Estonia. Our services include i) Estonia business registration, ii) regulated industries licensing, iii) Estonian corporate bank account opening, iv) employee recruitment strategies and v) office rental solutions.
|Compare different Estonia entities||LLC||Fast business setup solution||Free zone LLC||Public limited company||LLP||Representative office||Branch office|
|Also known as||Osaühing||Osaühing||Vabatsooni firma||Aktsiaselts||Piiratud vastutusega ühing||Filiaal||Esindaja|
|Best use of company?||All products and services||Close a customer deal now||Manufacturing and export trading||To secure public funding||Professional services||Marketing & research||Specific projects|
|How soon can you invoice Clients/sign sales contracts?||1 month||2 weeks||2 months||2 months||2 months||2 months||2 months|
|How soon can you hire staff?||2 months||5 weeks||2 months||2 months||2 months||2 months||2 months|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank account numbers?||1 month||2 weeks||1 month||1 month||1 month||1 month||1 month|
|How long to supply company registration/tax numbers?||1 month||2 weeks||2 months||2 months||2 months||2 months||2 months|
|Corporate tax rate on annual distributed business profits?||20%||20%||up to 0%||20%||0%||0%||20%|
|Limited liability entity?||Yes||Yes||Yes||Yes||Yes||No||No|
|Government grants available?||Yes||Yes||Yes||Yes||Yes||No||Yes|
|Resident director/partner/manager/legal representative required?||No||No||Yes||No||No||Yes||Yes|
|Minimum paid up share capital? (EUR)||2,500||2,500||2,500||25,000||None||None||None|
|Corporate bank account location?||BigBank||LHV Pank||SEB bank||BigBank||SEB bank||Tallinna Äripank||Swedbank|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes||No||Yes|
|VAT payable on sales to local customers?||20%||20%||20%||20%||20%||No sales allowed||20%|
|Average total business set up engagement costs? (EUR)||10,400||Inquire proposal||14,000||10,500||9,350||10,500||10,500|
|Average total engagement period?||2 months||2 months||3 months||3 months||3 months||3 months||3 months|
|Accounting and tax considerations||LLC||Fast business setup solution||Free zone LLC||Public limited company||LLP||Representative office||Branch office|
|Corporate tax rate on annual distributed profits on business?||20%||20%||up to 0%||20%||0%||0%||20%|
|Legally tax exempt if properly structured?||Yes||Yes||Yes||Yes||Yes||No||No|
|Group HQ tax incentives?||Yes||Yes||Yes||Yes||Yes||No||Yes|
|Must file an annual tax return?||Yes||Yes||Yes||Yes||No||Yes||Yes|
|Must file annual financial statements?||Yes||Yes||Yes||Yes||No||Yes||Yes|
|Must appoint an auditor?||No||No||No||Yes||No||No||No|
|Access to double taxation treaties?||Yes||Yes||Yes||Yes||Yes||Yes||No|
|Withholding tax on payments to foreign shareholders?||No||No||No||No||No||No||No|
|Company Registration||LLC||Fast business setup solution||Free zone LLC||Public limited company||LLP||Representative office||Branch office|
|Resident director/partner/manager/legal representative required?||No||No||Yes||No||No||Yes||Yes|
|Minimum number of shareholders/partners?||1||1||1||1||2||Parent company||Parent company|
|Minimum statutory paid up share capital? (EUR)||2,500||2,500||2,500||25,000||None||None||None|
|Must sign an physical office lease agreement during incorporation?||No||No||Yes||No||No||No||No|
|Shelf companies available?||Yes||Yes||No||No||No||No||No|
|Time to incorporate a new entity?||1 month||2 weeks||2 months||2 months||2 months||2 months||2 months|
|Can easily convert to a PLC?||Yes||Yes||Yes||Yes||No||No||No|
|Can have preference shareholders/partners?||Yes||Yes||Yes||Yes||Yes||No||No|
|Business Considerations||LLC||Fast business setup solution||Free zone LLC||Public limited company||LLP||Representative office||Branch office|
|Good entity for trademark registration?||Yes||Yes||Yes||Yes||Yes||No||Yes|
|Can secure an import and export license?||Yes||Yes||Yes||Yes||Yes||No||Yes|
|Sponsorship by a local citizen required?||No|
|Our Client needs to travel to Estonia for business set up?||No|
|Temporary physical office solutions available?||Yes|
|You need a local resident as bank signatory?||No|
|Can be wholly foreign owned?||Yes|
|The entity will likely be regulated by?||Estonian Centre of Registers and Information Systems|
|Minimum number of directors/managers?||1|
|Monthly VAT reporting to the Government?||Yes|
|Public register of shareholders and directors?||Yes|
|Government approval required for foreign owners?||Yes|
|Shareholders & directors documents to be attested/translated?||Yes|
|Can bid for Government contracts?||Yes|
|Each foreign director needs a personal income tax number?||No|
|Foreign non resident director needs a residence visa?||No|
|Maximum number of staff allowed?||No maximum number for any entity|
|Expatriate to local staff ratio?||None|
|Can secure residence visa for business owner?||Yes|
|Other useful information|
|What will be included in my customer sales invoice?||Click link|
|This country has signed free trade agreements?||Yes|
|This country is a member of WIPO/TRIPS?||Yes|
|This country is a member of the ICSID?||Yes|
|Average custom duties suffered?||1%|
|Government foreign investment approval required?||Yes|
|Maximum shareholding for foreigners?||100%|
|Average monthly office rental? (EUR per sq m)||9|
|Minimum statutory monthly salary? (EUR)||390|
|Average monthly salary for local skilled employees? (EUR)||1149|
|Security deposit to be kept with Government?||No|
|US$ deposit interest rate? (1 year average)||0.4%|
|Overseas remittance currency controls?||No|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||Yes|
|Quality of e-banking platform?||Moderate|
|Crowd funding available in this country?||Yes|
Estonia business setup summary
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Advantages and disadvantages
Advantages of Estonia company registration
- Registration of a company in Estonia can be completed with only i) one shareholder and ii) one director, and both can be foreigners and reside overseas. The minimum paid-up capital is €2,500 and the incorporation procedures can be completed within 7 weeks.
- Estonia is a stable and dynamic location for investing in the EU for the following reasons:
- Since joining the European Union (EU) in 2004, the Estonian government has maintained liberal policies; foreign investors have equal rights and obligations as local entrepreneurs. All foreign investors may establish a company in Estonia in the same way as local investors, no special restrictions are applied;
- Estonia’s economy is growing fast, at a rate of 3.1% in 2016 according to the OECD. This rate of growth should also accelerate to 3% per year until at least 2020, according to the same institution;
- There are no risks of a debt crisis in Estonia. The country’s public debt is recorded at only 11% of its GDP, one of the lowest rates in the European Union and in the world;
- Estonia is ranked as the 22nd least corrupt country in the world, according to Transparency International;
- For all the reasons listed above, Estonia is ranked as the 29th most competitive country in the world by the World Economic Forum.
- Estonia is an excellent cost-efficient base for production and export and is geographically well-placed for access to the affluent markets of the Baltic states and the north-west Europe.
- Our Client’s company in Estonia will benefit from low operational costs because:
- Their company will benefit from labor costs of only €10 per hour, the 10th lowest amongst all European countries;
- Profits realized by an Estonian company are not subject to any income tax in Estonia provided the income is re-invested in the same company or kept in the company’s corporate bank account. This “upside down” tax system allows entrepreneurs and investors to re-invest all their income into the development of their businesses without any deductions by the government;
- Tallinn, the capital city of Estonia, is the second cheapest capital in the European Union after Zagreb for the cost of renting an office: average rental price for its CBD only amounts to €13 per square meter according to Cushman and Wakefield’s latest research report;
- Costs to import and export products are much lower in Estonia than the rest of the European Union. They average €765 per container according to the World Bank, to be compared with close to €1,100 for the global OECD average;
- Foreign corporations can use Estonia’s free trade zones as a hub to export their products across the globe, while being exempted from customs duties, excise taxes nor VAT.
- Estonia has a world-class infrastructure for technology.
- Estonia has heavily invested in its telecommunications infrastructure. As a result, the country is gaining reputation for its expertise in Information Technology, and is gradually becoming a hub for IT-related services;
- Estonia is the birthplace of the software, Skype- the mother of video conferencing and social networking. The software was created by three Estonians Ahti Heinla, Priit Kasesalu and Jaan Tallin and later was founded in 2003 by a Swedish and a Dane.
Disadvantages of Estonia company registration
- The domestic market opportunities in Estonia are limited, because:
- Estonia’s population is relatively small, at only 1.3 million;
- The annual purchasing power per person is below US$20,000;
- The country is not a tourism hot-spot, with low numbers of international tourists.
- Estonia’s taxes are slightly higher than what one would expect from an Eastern European country: corporate income tax and VAT rates are both fixed at 20%. Employers must also remit social contributions averaging 33% of their employees’ gross salaries.
- Estonia has been recently ranked poorly at the 76th position (out of 190 countries) by the World Bank in terms of the protection given by the nation to its minority investors. This is largely due to a lower extent of rights enjoyed by the shareholders as well as a lower extent of disclosure in Estonian businesses;
- It is mandatory for the Director of an Estonia-incorporated company to provide an Annual report in Estonian at the end of every business year.
Best uses for an Estonian company
- Estonia is the optimal destination for registering a new, cost-efficient business in the Baltics and employing quality staff;
- Research and Development companies focused on reinvestment prefer to register in Estonia, because reinvested profits are exempt from corporate taxation.
- Estonia is an excellent jurisdiction for trading and manufacturing companies. This is due the presence of the following major free trade zones of i) Paldiski; ii) Muuga; and iii) Sillamae. Foreign entrepreneurs investing in them are provided with attractive incentives, including i) exemption from VAT, excise and customs duties; ii) world-class infrastructural facilities; and iii) excellent access to the consumer markets of Russia and other Nordic countries.
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Useful links for Estonia
Government and public authority websites:
- Estonia Tax Authority
- Estonia company name search
- Central Bank of Estonia
- Estonia Stock Exchange
- Estonia Chamber of Commerce
- Estonia airports
- pWC – Doing business Estonia 2014
- KPMG – Estonia country profile
- PWC – Doing business and investing in Estonia
- Doing Business and Investing in Estonia 2014 – PwC
- Estonia investment guide
- Tax Card 2013 Estonia – KPMG
- Commercial Laws of Estonia – EBRD
- Corporate Governance in Estonia – OECD
- Estonia – EUDO Citizenship
- Why invest in Estonia?
- Business in Estonia
- Estonia – perfect for Business
- Fox Business – Estonia ranks higher on economic freedom list than U.S
- Financial Times – Estonia’s euro advice for Latvia
- Did you know about Business culture in Estonia?
- Business in Estonia
- Estonia — Perfect for Business
- The investor experience in Estonia
- Doing Business in Estonia