Since 2003, Healy Consultants Group 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.

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Estonia business setup summary

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• Advantages and disadvantages

  Advantages of Estonia company registration

  

  1. 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.
  2. 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 22^nd least corrupt country in the world, according to Transparency International;
     • For all the reasons listed above, Estonia is ranked as the 29^th 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.
  3. 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 10^th 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.
  4. 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

  1. 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.
  2. 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.
  3. Estonia has been recently ranked poorly at the 76^th 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;
  4. 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

  1. Estonia is the optimal destination for registering a new, cost-efficient business in the Baltics and employing quality staff;
  2. Research and Development companies focused on reinvestment prefer to register in Estonia, because reinvested profits are exempt from corporate taxation.
  3. 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.