How to open a company in Estonia?

Mihai-Alexandru Cristea 26/12/2022 | 18:48

The establishment of a company in Estonia is considered as a means of immigration to the European Union. Having formalized the company, its owner receives the right of residence. This opens up additional prospects. Due to the fact that Estonia is a member of the EU, the immigrant has the right to move freely in all countries of the Union and to work with them on better terms. Estonia favours foreign entrepreneurs. It works on improving the business environment, creating a comfortable environment for people from other countries.


To make a non-resident feel comfortable on the Estonian market, it is enough to conduct business honestly. The entrepreneur is only required to pay taxes in a timely manner, to provide reports and not to violate the rules related to the specific conduct of business.  Despite the loyal attitude to business, the state strictly monitors compliance with all established norms. This means that the entrepreneur is not pushed out of the market just because someone has decided so. The country has a competent fiscal policy. This approach reduces inflation. In addition, the state controls unemployment, constantly reducing it. The European financial system offers opportunities for entrepreneurs. Almost all banks present in the state market have a high level of reliability. Corruption is reduced as much as possible. The legality of the activities of civil servants is strictly monitored. That is why it was possible to form a business environment in Estonia.


Advantages of the business environment in Estonia

Estonia is considered one of the most convenient and profitable for foreign business in the EU. If an entrepreneur decides to open a company in Estonia, he will face the following advantages: Civil. Non-residents have access to most of the opportunities and benefits that provide citizens of the state. So, a person can be a founder or a member of the board of an Estonian company. You can also apply for a residence permit. This opportunity appears, and if the capital of the enterprise invested more than 65,000 euros. Economic. Setting up your business in Estonia can be considered as an investment in European business. Such a company can bring great profit. Estonia has stable economic performance, high credit rating, low public debt. This makes the state promising for investment. Regional-legal. There is no need to enter the authorized capital immediately at the establishment of the company. Its size will simply be indicated in the founding documents. They also record the period during which you need to provide money. Territorial. The state is geographically advantageous. As a result, it is possible to optimize logistics costs.


Jurisdiction of company formation in Estonia

There are many reasons to Estonia company formation. List the most important arguments.

  • Electronic service. All documents can be submitted via e-services.
  • Relative to European countries, low cost of opening and maintaining the company, low rent for offices.
  • Getting a VAT number at company registration.
  • Possibility to conduct business throughout the EU.
  • Residence and movement in the EU.
  • No restrictions on bank currency movements.
  • Possibility to own European property, issued on jur. person.
  • Obtaining electronic citizenship without registration of residence in the country.
  • Loyalty of European partners and the connection of European payment, banking systems.


Basics of accounting support of an Estonian company

Estonia attracts entrepreneurs with preferential taxation and generally comfortable business environment. And this European country is not offshore without financial reporting requirements. The obligatory conditions for Estonian business are accounting, reporting, declaration. And the accounting requirements in this country are strict. Firms in Estonia, regardless of the size and type of activity, must keep records.


What are the challenges facing the accountant of an Estonian company?

Annual accounting report. This tax document is submitted to the Business Register electronically until June 30. The report includes information for the previous year. The 12-15-page file contains balance sheet, profit and cash flow data, information about the company’s activities, capital, founders. A detailed explanatory note is attached to the balance sheet. It will be difficult for an accountant with little experience to prepare a report according to the requirements of the Business Register. After all, besides the figures, all the data will have to be explained and compared. Even experienced specialists can take 2-3 weeks to prepare a report for a functioning business.


Terms of business in Estonia

The advantages of opening a company in Estonia derive from the peculiarities of its tax legislation and financial system. There are practically no special restrictions for foreigners. They have the same rights as locals when it comes to obtaining loans, benefits and subsidies.
Possible remote business in Estonia. The main thing is that the company has an appointed director. For this you will need to apply for residency. It will meet all the requirements for submitting documents, completing declarations and paying taxes via the Internet. For Estonia, such work with entrepreneurs is considered the norm. Every Estonian company must annually submit an annual (financial) report to the Estonian Commercial Register. This document is an overview of your company’s financial performance for the previous financial year. All Estonian companies fall under the same rules, but reporting to micro and small enterprises is simplified. Even if your company is not already engaged in commercial activities, the only thing you need to do is to ensure that your company and its management do not violate the laws of Estonia and are not fined is to submit an annual report.


Estonian banking system

Estonia has a developed financial sector. It is concentrated in the banking sector, which operates on the principle of Scandinavian capital. This speaks to high reliability and stability. The banking sector also works using high technology. This simplifies interaction with financial institutions. Calculations are made in euros. The banking system in Estonia is considered one of the most convenient for business. One of the advantages are low tariffs. They help to save money. In addition, the state operates the European payment system SEPA. It greatly simplifies the execution of all banking operations. As a result, they will pass faster. To open an account, European banks are available to customers. You can choose the most suitable one and apply to it. If the client has managed to form a working business and built a good history of relations with the bank, this opens the owner of the company access to European loans. However, there are certain complications. They are related to the overall political situation in the world. As a result, CIS nationals may encounter some difficulties in opening corporate accounts. However, they are not insurmountable if cooperation is carried out with a competent representative.


Taxation of company in Estonia

No European country has such a tax system as Estonia. There is a concept of offshore, which implies fully transparent business. In such jurisdictions, there is no preferential taxation. In this Baltic country, there is a zero income tax for enterprises. Another feature, which has no analogues in the territory of the EU states, is the formation of the authorized capital. Registration of the company is accompanied by a declaration of funds on its account. This amount is 2,500 euros. In Europe, it is required to reserve it on the account at the time of opening the firm. Estonia proposes to determine the timing of capital formation from one year. The timeline is perpetual. However, in the case where the enterprise has no actual capital, the owner shall answer his finances in an amount equivalent to that indicated in the constituent documents. The state has reduced taxes. So, sometimes the amount of contributions to the budget with the profit is 0%. The rate is valid if the money received is not withdrawn but is reinvested or invested. Low taxes also apply in other areas. Thus, the amount of contributions to the budget for land varies from 0.1 to 2.5%. On the property the rate is zero. This means that persons who have established a legal entity may acquire premises for conducting business additional fees. This is done to expand the scalability of the company and expand the business. As a result, it will be possible to easily acquire new premises for the company. There is no transport tax. The organization is obliged to pay VAT only if its domestic turnover exceeds 40,000 euros. There will also be no need to contribute if the firm operates under Estonian jurisdiction and the transactions are within the European Union. If the above conditions are met, there are also no customs duties. Such a progressive tax system was created to attract new companies to the market.

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Mihai-Alexandru Cristea | 12/04/2024 | 17:28
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