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Company formation Estonia
Company formation Estonia has been popular among new startups especially due to its strong IT infrastructure, highly qualified yet cost friendly labor costs, EU membership and much more. Estonia is located in Eastern Europe, and has a land area of 45,000 sq km. The population is around 1.3m. The official language is Estonian Business sectors in Estonia include engineering, electronics, wood products, textiles, information technology and telecommunications.
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To avoid mistakes as you set up your new company, it is essential to seek advice. We would be happy to provide you with the best advice on how to set up your company abroad. We are offering you a short, intial, free and non-binding consultation via email. It will go a long to way to help you setup your company the right way.
Tatjana Lintner
Key account manager at W-V Law Firm LLP
Tatjana Lintner
Key account manager bei W-V Law Firm LLP
Estonia: Types of Company
The two widely used company structures in Estonia are as follows:
Private Limited Liability Company
This type of company has its capital in the form of shares, owned by shareholders. Individual shareholders are not liable for the legal obligations of the company. A Private Limited Liability Company must have a management board that constitutes the body that gives strategic direction to the company. Members of the board must be legal residents of Estonia, though do not necessarily need to be a shareholder.
A supervisory board is required where the total share capital exceeds EEK25,000. It is a requirement of law that a Private Limited Liability Company has an auditor once the size of the company’s share capital exceeds the EEK400,000 limit.
Public Limited Liability Company
A Public Limited Liability Company’s share capital is comprised of public shares. As with a Private Limited Liability Company, shareholders have no liability for the company’s legal obligations. Details of shareholders must be recorded in the Estonian Central Register of Securities.
A Public Limited Liability Company is required by law to have a management board and a supervisory board. The former may be comprised of several members, none of which need be shareholders although 50% must be residents of the EU. The supervisory board, which is normally made up of three members, directs and organised the management board and ultimately makes the key decisions about the running of the company.
The biggest mistakes when starting a company abroad
Not all topics related to founding a company abroad are always free of prejudices and false information that have prevailed over the years. We give you an overview of the most important questions about founding a company abroad.
Founding a company abroad as a citizen of another country is legal?
Founding a company abroad as a citizen of another country is legal?
Yes, in most countries foreigners can be sole shareholder of a local entity.
Do you have to live in the country where you start a company?
Do you have to live in the country where you start a company?
No you can set up a company anywhere in the world, as long as the country in question allows you, as a foreigner, to acquire shares in local companies. If this is not the case, trustees can be used. Freedom of establishment applies within the European Union. However, it is important that the management takes place locally, in the country in which the company is registered. In addition, a permanent establishment must be set up. Without this, a German tax office will not recognize the company and, in the worst case, would demand back payment of corporate and trade taxes plus late payment penalties. We rent you a real office and set up a permanent establishment that meets all requirements without a doubt. In addition, we have real managing directors who run companies in the home country and are resident there.
Problematic law firms: closure is made more difficult
Problematic law firms: closure is made more difficult
Some law firms tie clients with gag contracts and apply pressure when the client wants to close their business. If you are a client of a law firm that has set up a legally unsound company for you, you make yourself vulnerable to blackmail. Because in the event of a tax problem, law firms without a license are not bound by a duty of confidentiality.
Changing offices is made more difficult
Changing offices is made more difficult
We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. Switching to us is then often made more difficult. So horrendous final bills are made, which have to be paid before a change is possible. Therefore we have developed a trust principle. If you are not satisfied with us and want to switch, you can do so at any time. You will receive the necessary documents (resignation letter) from us in a standardized form after the foundation. This protects you from unexpected costs and you are free to go to another law firm at any time. So far we have not lost a client to another law firm.
Privacy Policy/Office Location
Privacy Policy/Office Location
Your accounting documents are safe with us. In addition, all electronic data is only stored in encrypted form and apart from us, who are bound by professional secrecy, no one has access. All accounting documents are also only stored locally. Neither authorities nor hackers can access this data.
No taxes?
No taxes?
There are certainly locations in the world that do not charge any taxes to companies and private individuals or only charge a very low flat-rate tax. However, this can rarely be used without a corresponding change of residence. If you are resident in Germany, the relevant double taxation agreement is decisive. Providers who promise otherwise will tempt you into tax evasion, which is usually severely punished if discovered. We advise you not to set up companies in countries that have already been blacklisted by the OECD. The foundation is usually very cheap, but the tax consequences in Germany can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous account or company no longer exists.
Taxation in Estonia
Company formation Estonia has a unique structure which may be highly advantageous for various type of businesses. All undistributed corporate profits are tax exempt. This exemption covers both active (e.g. trading) and passive (e.g. dividends, interest, royalties) types of income. It also covers capital gains from the sale of all types of assets, including shares, securities, and immovable property. This tax regime is available to Estonian resident companies and permanent establishments (PEs) of non-resident companies that are registered in Estonia.
The taxation of corporate profits is postponed until the profits are distributed as dividends. Or deemed to be distributed, such as in the case of transfer pricing adjustments, expenses and payments that do not have a business purpose, fringe benefits, gifts, donations, and representation expenses.
Distributed profits are generally subject to the 20% CIT at 20/80 of the net amount of profit distribution. For example, a company that has profits of 100 euros (EUR) available for distribution can distribute dividends of EUR 80, on which it must pay CIT of EUR 20.
However, the new government coalition has announced its plan to lower the CIT rate from 20% to 14% for companies who pay dividends on a regular basis. But it has be only in cases where dividends are paid to legal persons. Further details are still pending.
VAT rates in Estonia
The Estonian VAT standard rate is 20%. There is also a reduced 9% rate that applies to certain goods and services that includes books and learning materials, medicines and medical equipment, accommodation services,sanitary and toiletry products.
There are also goods and services exempted from VAT payment like transactions of securities and financial services. Insurances, postal, health and social services are also tax exempt. Property rentals, lottery, betting, gambling, education and transportation of sick people are also exempted from VAT payment in Estonia.
The biggest advantages of a Estonian limited company
- - 100% foreign ownership and directorship allowed
- - No withholding tax on profit distribution
- - Excellent framework for business in the EU
- - Low bureaucracy and clear rules
- - Low startup and maintenance costs
- - 0% corporate income tax on undistributed profit
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We can give you advise on choosing right jurisdiction for your business. Contact us today.
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We comply with the following code:
- - Legally secure foundations
- - No unexpected(hidden) costs
- - No false promises
- - Finding the right solution by focusing on your requirements
With this strategy, we have been on the market since 2013 and have not disappointed any customer so far. And we prioritize it in keeping that way. We strive to ensure that every client is satisfied and does not take risks with the solutions we provide for them, but only exploits legal opportunities. Starting a company that involves doing real business is more costly than a letterbox company, but it is the only way to save on taxes without risking legal action.
Tax structure in comparison
Here are some examples of the tax differences between a highly taxed jurisdiction versus major tax havens.
| Belgian Limited (SPRL/BVBA) | Estonian Limited (OÜ) | Malta Limited (Ltd.) | |
|---|---|---|---|
| Profit | 100,000 EUR | 100,000 EUR | 100,000 EUR |
| Corporate tax | 33% including. surcharge tax rate 3% Totally 36,000 EUR(36%) | 14,000 EUR(14 - Starting from 1st of January 2018) Reduced to 0% on retained and reinvested profit | 5,000* EUR (5%) Effectively reduced from 35% |
| Profit after taxes | 64,000 EUR | 86,000 EUR | 95,000 EUR |
| Key advantages | Strong economy, highly reputed country | Tax exemption on reinvested profits, modern and technologically advanced infrastructure, ideal for start-ups | Stable and growing economy, high anonymity, low start-up capital |
| Tax burden | 36,000 EUR | 14,000 EUR | 5,000 EUR |
Ready-made Shelf Companies with VAT For Sa...
- Shelf company / ready-made company with VA...
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We would be happy to advise you by telephone or email as part of a non-binding initial consultation. Please describe your request as precisely as possible and the responsible contact person will Request a free quote! with you as soon as possible.
Fabian Wilk
Member at W & V Law Firm LLP
+44. 208 089 1423-10 069. 247563060For callers from Germany (landline) [email protected] Mon to Fri 09.00 to 18.00
Fabian Wilk
Member at W & V Law Firm LLP