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Estonia Company Registration

Are you looking to register your new company in Estonia? This article will provide details about company formation, its advantages, why to choose Estonia, and the best way to begin your business in Estonia.

How to Register your Company in Estonia?

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Estonia Company Registration

Estonia is a nation that is located in the northern part of Europe. The country is one of three Baltic countries, sharing a border with Russia as well as Latvia. Estonia is regarded as one of the most welcoming and fastest-growing hubs for start-ups all over the world. There are even those who consider Estonia’s capital city Tallinn as the Silicon Valley in Europe with the highest percentage of startups per capita and an active and economically active populace that is prone to entrepreneurship. 

estonia company registration

Estonia Company Registration

Estonia has an ecosystem that is equipped with high-tech processes, a worldwide connected online resident community, and a favorable investment environment. The absence of bureaucratic restrictions makes it appealing for entrepreneurs all over the world for company registration in Estonia.

Procedure for Registering a Company in Estonia

Procedure for Registering a Company in Estonia

To complete the process of company registration in Estonia, one should follow the process that is outlined below:

  • Selecting a suitable name for the business. 
  • Determining the principal focus of your work. 
  • Locating the legal address and the appointment of the Contact Person for Estonia company registration. 
  • Submitting an application to register a company in Estonia. 
  • Contributing to the share capital. 
  • Additional formalities to complete for Estonia company registration. 

Selecting a suitable name for the business 

The initial step to registering a company in Estonia starts with selecting an acceptable name to represent the business. It is important to remember that the name of the company must be written in latin letters and without any other special characters. 

Deciding on the main field of activity

Once deciding on the desired brand name, the company’s applicant has to choose the principal scope of the business’s activities that it will undertake. To further facilitate this application, the applicant should select an EMTAK Code (The Estonian classification of economic activities) to determine the principal scope of the activity performed by the business. However, the company can engage in different commercial activities for the generation of revenue. 

Finding the Legal Address and the appointment of a Personnel to Contact for Estonia 

The business also requires an address that is legal and can be accessed on an annual basis. The law doesn’t oblige the company to have an executive director who is a resident. However, the business must have a local contact who handles communication with the relevant authorities on behalf of the business. 

Applying to Register the company 

The next step is to create an online application to register a company in Estonia through the e-business portal, or via one of the API suppliers. The process starts with preparing and signing the necessary documents as well as paying the state fees and submitting the form. The cost of the state for registration of a company is payable by the Ministry of Finance, Estonia. The required fee for speedy company registration is EUR265. 

Contributing to the share capital 

The share capital is transferred either through transferring funds to the company’s bank account or the depository account of your Estonia company.  While a share capital contribution is required, the founders can create the company without contributing share capital and instead postpone the time of the capital contribution of shares to the future. 

Complete the required company registration formalities 

After the application has been properly submitted, the business owner must wait for the court’s verdict on the process of application. The court generally gives a few days to render its verdict, and the decision regarding the application is typically communicated by email. The owner of the business must obtain an EU IBAN account if the company doesn’t have a bank account for business in the European Economic Area (EEA). 

Completing the additional formalities necessary for company registration  

Following formalities must be completed to register a company in Estonia:

  • Legal documentation: The company must create legal documents to continue the business’s operations. This is the agreement between the founders and contracts for employment, confidentiality agreements, etc.
  • Tax Administration and Accountability: The founding fathers must be aware of Estonia’s tax and accounting framework and rules.
  • Licensing: The licensing process is based on the kind of commercial activity that will be carried out by the business, specific licenses and permits must be acquired.
  • Registration for VAT: If the annual turnover of the business exceeds an amount of more than EUR 40000 in the commercial activities carried out in Estonia. 

Eligibility Criteria For Estonia Company Registration

The following requirements to register a company in Estonia:

  1. Registration and Digital ID: Digital ID is required fot the initial step to Estonia company registration.
  2. Legal address and contact information in Estonia is a must.
  3. Availability of the chosen company name.
  4. Requirement for banking: A bank account must be established to facilitate financial solutions.

Documents required for Company Registration in Estonia

The registration of a business can be completed electronically via the electronic business portal. 

The notary will assist in the creation of the documents necessary to register a company in Estonia:

  • Information on the founders of the company: It includes their address, visa information, passports, and any other pertinent information.
  • Memorandum of Association
  • Articles of Association that need to be notarized.
  • Board Resolution( If required)
  • Certificate of payment of an amount to share capital.
  • Bank certificate confirming the deposition of capital shares for the company.

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Types of Business Entity in Estonia

Types of Business Entity in Estonia

Once the applicant has made an application for an e-residency permit, received their digital ID, and is now able to start a company in Estonia. When starting any business in Estonia it is important to decide on a legal structure to run the business. It is the Commercial Code of Estonia provides the following types of companies to residents of the country. 

They are in the following order:

  1. Private Limited Company 
  2. Public Limited Company 
  3. Sole Proprietor 
  4. General Partnership 
  5. Limited Partnership
  6. Commercial Association 

Private Limited Company 

Private limited companies (OU) are by far the most popular type of business entity used by those who are e-residents to establish their business in Estonia. E-residents can register approximately 21,000 businesses in Estonia and over 99percent of them were established within private limited corporations.

These are the advantages of the private limited company for residents of Estonia as the company entity for their business:

  • Simple registration process 
  • Share capital low minimum 
  • Directorship number of the founder 
  • Financial liability  

The business has the option to register voluntarily for VAT or apply for VAT registration when the annual turnover that is tax deductible exceeds EUR 40,000.

Public Limited Company (AS)  

An AS is a public-liability company (AS) is a type of business entity that can provide its securities to the general public as well as foreign investors. Shareholders of these entities are liable only for the amount of their share contribution to the business. 

Sole Proprietorship (FIE) 

The used vehicle of a sole proprietorship isn’t an extremely common type of business entity that is used by firms in Estonia and also by electronic residents. The reason for this is that sole proprietorships are not considered to be distinct legal entities within the meaning of the law.

General Partnership 

These kinds of businesses aren’t common for e-residents, despite an easy and quick process to establish. These entities can be created electronically through the e-residency card, or by an intermediary service provider using the Power of Attorney.

Commercial Association (uhistu) 

If the objective of the business is to promote the interest of the members via joint economic activity and the vehicle for business of commercial associations does not have a minimum capital requirement for shares when creating a commercial organization in Estonia. It is necessary to have a minimum of two founders to establish an association commercial.

Branch Office

Imagine a foreign corporation would like to continue to sell goods and services to Estonian market under its name. In that scenario, you have the option to incorporate the company as a branch. It is important to note that a branch does not constitute an independent business entity that is distinct from the parent company. 

Tax Structure For Company in Estonia

All businesses which are registered with Estonia must be liable for corporate tax. 

Taxes like the following are applicable:

  • Corporate Tax to be paid for in Estonia amounts to 20% of profits distributed. However, a lower net efficient rate of 14% is in effect in the event of normal dividends.
  • The rate of Branch Tax is 20 percent in Estonia.
  • The tax on capital gains can be paid at a 20% rate
  • The standard tax rate for VAT is 20 percentA lower rate of 9 percent applies to certain items. Some items are not rated, and there are some items for which exemptions have been made available.

Advantages of registering a company in Estonia

The following are some benefits of registering a company in Estonia:

Tax benefits 

Estonia provides a unique method of taxation for company registration in Estonia. One of the advantages that are part of Estonia’s Estonian fiscal system is that the profits made by the business aren’t subject to taxation at the moment of earning. 

Full Online Registration process

One of the biggest advantages for entrepreneurs when company registration in Estonia is the complete online registration and administration process provided by the Estonian government. 

Benefits of a single EU market

Estonia is also part of a single European Union market which gives the Estonian business with registered name accessibility to the largest economies in the world. The members and their citizens enjoy the advantages of traveling throughout the bloc and reaping the economic benefits with no obstacles. 

Conducive business environment

Estonia has always performed very well in the ease-to-do-business indexes (such as the World Bank’s Ease of Doing Business Report) as one of the most favored nations worldwide, offering the right conditions for business to flourish and grow. Estonia is also ranked as the best jurisdiction having the most efficient tax system of the OECD countries.

Initial stages of registering a Company in Estonia

To register a company in Estonia all founders must have electronic residency digital ID cards from Estonia as well as Latvian, Belgian or Estonian ID cards as well as Lithuanian as well as Estonian mobile IDs and be individuals who are not public. If the company’s founder doesn’t possess any of these documents, he has to go to a notary public in Estonia to check the validity of these documents.

This is the process to be an e-resident in Estonia:

  • A web-based application: The applicant has to fill out an online form and pay for the application fee which could range from EUR100 to 120. 
  • Picking the appropriate service: If the board of management is not located in Estonia, the management board of the Estonian company is not located in Estonia.
  • Online Registration of a company through the e-Business Register: The applicant must decide on the structure of the company and pay the required state fee for company registration in Estonia. EUR265.
  • Application for business banking: The applicant needs to apply for commercial banking through Fintech partners who will handle all financial needs of the business.
  • Network worldwide: When you join the community of e-residents, the applicant can access the worldwide network of the e-resident community. This allows them to increase their business’s reach.

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Conclusion

When choosing a location to establish your business there are a lot of things to think about. Estonia offers a lot to provide, which makes it an excellent choice for people who are just beginning to get started. Estonia has low taxes and is an international digital leader and is simple to conduct business in.  

Additionally, Company registration in Estonia allows the establishment of a legally-enforceable entity within the EU which makes it much easier for you to start a business.

If you have any queries to register a company in Estonia. Consult Odint Consultancy. We are here to help you. 

FAQ’s

The cost of state registration for incorporation of a company within Estonia costs EUR265. The fee is payable by Estonia’s e-Business Registry of Estonia at the time of the online registration of the company.

It usually takes 3 to 5 weeks to create a business in Estonia.

There isn’t a requirement to choose the position of resident director. The only requirement is to choose a local service provider to manage correspondence on behalf of the business.

The company registration process through Estonia Business Registry can be completed online, without the need to physically be in the office. The founders of the company must have their Estonian E-resident ID at the time of company registration.

The Estonia Public Limited Company (AS) should be registered with at least one founding member and at minimum 3 persons of the supervisory board when it is time to register registration.

The minimum share capital needed in a private-liability corporation (OU) for Estonia amounts to EUR2,500. The capital required for the registration of a public limited corporation (AS) can be as high as EUR25,000.

The most effective option for registration of a company in Estonia would be a Private Limited Company (OU) since this form of business offers the advantage of limiting liability for the founders equal to the shares of capital that are invested in the company. The tax structure is advantageous for foreign investors as compared to sole proprietorship businesses.

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