Estonia is a country with a very attractive economic environment, which, in turn, creates a favorable environment for investment. Estonia is actively developing fin-tech technologies, offers zero tax rates and acts as one of those jurisdictions that have never been included in any “black lists”. A company based on the territory of this state gets the opportunity to trade with European partners without an intermediary, work with cryptocurrencies and others.
Estonia has already signed several agreements to avoid double taxation. In addition to tax privileges, the Estonian jurisdiction stands out due to the following advantages:
- lack of monthly reporting. Companies that have tax liabilities must submit reports every 12 months;
- no audit requirement. Audits are carried out only if the company’s turnover exceeds 1.6 million euros, the staff consists of more than 24 people, and the amount of assets is 800+ thousand euros;
- the registered capital is not limited, it can be formed within a year or even more;
- the e-Governance system makes it possible to actively interact with the state apparatus;
- a company can only have one director. There are no residency requirements for board members.
Business forms in Estonia
Non-residents in Estonia are granted the right to incorporate a business using one of the following options:
- private company with limited liability type – OÜs;
- open or private JSC – AS and OÜ, respectively;
- different types of partnerships – UU, TU, etc.;
- individual entrepreneurship – FIE.
Non-residents most often create companies in the first form. This is an analogue of LLC. The very owner can found such a company, and he is also allowed to join the board. The board must have Estonian residents. The capital is required in the amount of EUR 2,500+. It is not necessary to deposit capital immediately upon registration; however, capital must be paid before distributing dividends.
Estonian tax privileges
Estonia is not offshore, however, this state has rightfully earned a reputation for being tax-loyal and respectable jurisdiction. For companies that have not distributed profits, the tax rate is set at 0%. If the firm does not do business in the country and does not interact with local legal entities, the zero threshold remains.
After the dividend distribution is carried out, the rate rises to 25%. The corporate tax duty is also zero. In order to distribute profits, an Estonian company can:
- deposit funds into Estonian bank accounts;
- engage in reinvestment without violating the boundaries of the zero regime;
- resort to foreign economic loans. In this case, only interest will be subject to taxation, not touching the body of the loan.
VAT for non-residents is 20%. This is a standard indicator. In addition, if the company does not trade in goods in the Eurozone, then VAT is not charged. If the organization hires an Estonian resident, an additional tax duty of 33% will have to be paid. This is a social contribution.
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