Since its independence in 1991, Estonia has rapidly established itself as both a financial hub and a tourist destination. Situated in Northern Europe, its capital city, Tallinn, is less than 100km from Helsinki across the Gulf of Finland and the official language, Estonian, is very close to Finnish. However, the language of business communication is English, and the government run an innovative online communication system in English, allowing businesses to deal with any issues quickly and easily via remote access.
In Estonia, there is an innovative eResidency programme – they are the first country in the world to offer this. This allows you to register and manage a company entirely online – and entirely remotely.
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Benefits of Estonia
Estonia has several obvious benefits that make it the jurisdiction of choice for many businessmen across the world.
Estonia is the only country in the world to offer e-residency for online-based start-ups, and it is also extremely easy to administer physical businesses, with business banking also easy to open and run. With a minimum shares capital of 2,500 EUR and only one shareholder required, it is undoubtedly one of the least labour-intensive countries in the EU for new business establishment.
In terms of tax, the territorial system allows full exemption on income earned abroad. Retained and reinvested profits are not taxed at all unless there is a permanent presence or income gained within Estonia itself, with 14% tax on profit distribution – lowered in 2018 from 20%.
In terms of levy, corporate income tax is applicable when dividends are distributed to shareholders, with no surplus tax on non-residential dividends. However, the withholding tax rate on royalties is set at 10%. It is relatively quick to get the requisite VAT ID if you exceed 40,000 EUR in sales within the EU. You will require a clear business activity plan with supporting evidence and the process typically takes fewer than 7 working days.
- Manage your business and communicate with the government online.
- LOW MINIMUM SHARES CAPITAL
- Only 2,500 EUR, with only one mandatory shareholder.
- REINVESTED PROFIT TAX EXEMPTION
- No tax on retained or reinvested profits .
- LOW DISTRIBUTION TAX
- 14% tax on distributed profits for shareholders.
- NO DIVIDEND SURPLUS TAX
- Non-residential dividends are not taxed.
- FAST PROCESSING FOR VAT ID
- The process is efficient, taking fewer than 7 working days.
FREE E-BOOK: INCORPORATE YOUR BUSINESS IN ESTONIA
Learn more about company formation in Estonia.
Both types of company that you can open in Estonia are exempt from tax, with the following restrictions:
PUBLIC LIMITED COMPANY
A PLC is the most popular choice for foreign companies establishing themselves in Estonia. Share capital is distributed in terms of individual shares. Shareholders hold limited liability.
LIMITED LIABILITY COMPANY
With an LLC, the PLC is liable for asset debt. Shareholders do not have liability when it comes to debt. Their liability is limited only to share capital contributions.