An Estonian company has many advantages, one of the most important: income tax is 0% if the profit is not paid in the form of dividends, the only caveat, the profit from Estonia will need to be transferred to the EU countries (the company will have to be able to get a residency certificate , if necessary) or the Isle of Man and Guernsey, as there are problems when Estonia works with classic companies.
2. Before starting work, the company will need to discuss in detail the scheme of work.
3. Limited liability companies (osauhing - OÜ) can be founded by one participant, the minimum authorized capital is 2,500 euros.
4. Registration of companies in Estonia
Basic tax rates
Standard VAT rate - 20%
In some cases, the VAT rate is 0% (for example, when exporting services to EU countries);
Automatic VAT refunds within 1-30 days from the filing of the application after the deadline for filing the declaration, as a rule, up to 1600 euros per month is not checked by the Tax Department, but sometimes they may ask for checks and bills for confirmation.
5. Income tax
Income tax is 0% if the profit is not paid in the form of dividends;
Dividend tax rate - 25%;
Losses do not affect the corporate income tax.
Individual income tax
Personal income tax - 21%;
Social tax paid by the employer - 33%;
Unemployment insurance - 0.3% for the general wage fund (paid by the employer), as well as an additional 0.6%;
Payments to the pension fund - 2% or 1%;
Travel expenses for board members in the amount of 32 euros per day are not taxed.
Taxation of payments to non-residents
In Estonia, the following income tax rates are applied when paying to non-residents (both individuals and legal entities):
Payments from the provision of services in Estonia - 10%, outside Estonia - 0%;
License fee 10%;
Income tax 0%;
Rental for movable property, regardless of where the service is provided 0%.
6. Dividends are not taxed.
7. VAT exemption
The following services are not subject to VAT in Estonia if they are provided to a company that is registered in the EU and is a VAT payer, or to a company that is outside the EU:
Licensing of intellectual property rights or transfer of such rights;
Consulting services, engineering, accounting, audit, translation services, data processing and information delivery;
Banking, financial and insurance services;
HR services (staff supply);
Services that are delivered electronically (e-services);
Telecommunication services, television and radio broadcasting;
If an Estonian company is registered as a VAT payer, the rule for applying a 20% or 0% rate on the above services is as follows:
If an Estonian company sells a service in Estonia or a product to a client (both an individual and a legal entity) who is in the EU and is a non-payer of VAT, then 20% VAT must be added to the price;
If an Estonian company sells a product or service to a client who is in the EU and is a VAT payer, then VAT is 0%;
If an Estonian company sells a product or service to a Ukrainian client, then VAT is 0%.
The main forms of doing business
The activities of companies in Estonia are regulated by the Commercial Code, which is based on EU law and entered into force on September 1, 1995. This code provides for various types of companies (including limited liability companies, partnerships, business associations and private entrepreneurs).
The most commonly used forms of companies are:
Limited liability companies (osauhing - OÜ);
Joint stock companies (aktsiaselts - AS).
7. Audit and reporting requirements:
- According to the Commercial Code, an audit is mandatory for all joint-stock companies and for private limited companies if their authorized capital exceeds 400,000 euros, as well as if the audit requirement is specified in the Charter.
- In addition to the requirements of the Commercial Code, in accordance with the Accounting Act, auditing is mandatory for all companies that meet two of the following three criteria:
- net sales exceed 2 million euros;
- the number of employees exceeds 30 people (with employment 40 hours a week);
- total assets exceed 1 million euros.
- Accounting registers may be kept in print or in electronic form.
- All documents must be kept for at least 7 years.
- Annual financial statements must be prepared in Estonian. However, the law does not specifically establish the language in which accounting is conducted and primary documents are written. At the same time, tax authorities require documents in Estonian to be verified;
- Annual financial statements must be submitted to the Commercial Register within 6 months from the end of the financial year.
- All financial statements are publicly available.
- If the turnover exceeds 40,000 euros, it is mandatory to receive a VAT number, to receive it a member of the board (director) must fly for an interview in Estonia tax. The cost of co-participation in obtaining VAT is 1000 euros. VAT reports are handed over monthly - from 250 EUR / 1 VAT report + annual financials are handed over. reporting. A member of the board must be charged monthly minimum wage, from which deductions to the social fund will be paid.
8. Benefits of owning an Estonian company
An Estonian company is an excellent tool for conducting operations and accumulating profits;
The absence of income tax allows you to accumulate earned money;
The absence of VAT on some operations allows reducing prices for services of an Estonian company for non-residents;
Travel can be attributed to the expenses of the Estonian company (within the established limits) without explaining the reasons for the trip to the tax authorities of the country and without travel certificates;
Lack of obligations for regular payment of wages to a member of the board.
9. Administrative benefits
Thanks to the developed banking system of Estonia and the use of IBAN accounts (international bank account number), an Estonian company can quickly and easily receive payments from EU countries and the USA to its accounts;
You can manage your account via the Internet from anywhere in the world;
To close small operations, an electronic copy of the account is sufficient, which is the basis for payment.
10. Other benefits
The Estonian Consulate in Ukraine usually issues long-term visas to directors and owners of Estonian companies that are citizens of Ukraine