Company Formation in Estonia

When you are founding a new company there are many things to consider. Most importantly, you want to set up the new company in a legal setting that benefits you the most. And makes it as easy as possible to conduct day-to-day business.

And one of the most convenient places in the world for company formation is the small European country of Estonia.

Estonia is a small Baltic country in Northern Europe. It is a member of the European Union (giving companies here access to the common market), and one of the most digitalized countries in the world. It is famous for e-election, and electronic government, and is the birthplace of Skype, Bolt, Wise, and others. In the business and startup world, it also has the most unicorns per capita.

All in all, Estonia has emerged as a hotbed for entrepreneurship and innovation. It has established itself as a global leader in technology and digital governance. Entrepreneurs from around the world come to Estonia because of its startup ecosystem, favorable business environment, digital infrastructure, and progressive policies.

Estonia is renowned for its efficient and hassle-free business setup process. It takes just minutes to register a company online. This advanced digital infrastructure is a significant advantage for entrepreneurs.

The country has embraced digitalization in every aspect of its society, including governance. The e-Government system enables entrepreneurs to easily interact with government agencies, file taxes, manage licenses, and access public services online. This efficient and transparent system reduces bureaucracy, enhances productivity, and minimizes administrative burdens. You can focus on your core business operations rather than dealing with paperwork and red tape. This simplicity and efficiency save time and resources, allowing entrepreneurs to hit the ground running and work without unnecessary delays.

Estonia offers one of the most attractive tax environments for startups and businesses. The country operates on a unique corporate income tax system known as the "Estonian model." Under this system, companies are not taxed on their retained and reinvested profits, incentivizing businesses to grow and expand. Instead, you only pay corporate income tax when you distribute profits as dividends, which is 20%. This system encourages companies to reinvest their earnings, fostering innovation and long-term sustainability.

E-Residency of Estonia is a government-issued digital identity that gives global entrepreneurs remote access to the country. It provides the possibility to securely authenticate yourself online and sign documents using the most secure and efficient electronic signatures. Plus, the ability to start a company 100% online from anywhere.

Estonia was the first country to offer e-Residency in 2014. It remains the most popular program of its kind for ambitious entrepreneurial people. By now, Estonia already has more than 100 000 e-Residence from more than 170 countries.

The e-Residency has been a game-changer for entrepreneurs in Estonia. It allows individuals to establish and manage a location-independent company from anywhere in the world. Through e-Residency, entrepreneurs gain access to the country's advanced digital infrastructure, which includes digital signatures, secure authentication systems, and online services. This enables them to establish and operate their businesses seamlessly, opening doors to international markets and establishing a global presence

Setting up a company in Estonia is a straightforward process. Thanks to the efficient digital infrastructure and streamlined procedures, most of the process takes very little time and can be done online. Still, you should remember that it is advisable to consult with legal, tax, and accounting professionals to ensure compliance with all legal requirements. And to make informed decisions throughout the company setup process.

Assuming you already know what type of business you want to set up, you can choose the legal business structure that best suits your needs. The most common structure used is the private limited company (OÜ).

You can also apply for e-Residency, which grants you access to the country's digital services and facilitates the company registration process. Visit the official e-Residency website and complete the application or contact us and we will guide you through the process of getting your card.

Then you can register your company. This can be done 100% online.

You need to decide on the necessary information about your company, including its name, legal address, shareholders, board members, and share capital. You will also be required to pay the company registration state fee, which is 290 EUR.

As of 2022, the share capital that is required in Estonia can be as low as 0.01 EUR. Meaning, it is very cheap to start a company in Estonia.

And that there are also other possibilities for the company formation - by physical presence in Estonia or remotely with the help of the Power of Attorney. We can help with all 3 options.

Depending on the nature of your business, you may also need specific licenses or permits to operate legally in Estonia. Research the requirements related to your industry and obtain the necessary authorizations.

Then you need to choose the right Bank or payment institution following your business activity. During onboarding, you will need to provide the necessary documents, including your company's registration certificate, articles of association, and identification documents of authorized signatories.

Once that is done, you can register your company as a VAT payer and get the relevant EU VAT number. It will help you to conduct VAT-free payments with other VAT-registered companies. You can do this online via the Estonian Tax and Customs Board (EMTA) on their official website yourself if you already have your e-Residency card on hand. You can also rely on our support if you need assistance with that.

We are happy to help you get familiar with Estonia's tax system, including VAT (value-added tax), corporate income tax, and payroll taxes.

Finally, you need to establish an accounting system to manage your company's financial records per Estonian accounting standards. Determine whether you will handle accounting in-house or hire an accounting service provider to assist you with financial reporting and tax filings.

Once your company is registered, all necessary licenses and permits are obtained, and your bank account is active, you can start business operations in Estonia and use it to access the combined market of the European Union.

If you need help setting up your company, contact us and we will help you register your company in Estonia.