Business Opportunities in Estonia
Estonia provides a viable business environment for foreign investors and entrepreneurs looking to establish and grow their businesses there. With a strategic location in Northern Europe, Estonia offers attractive business prospects and access to consumer markets in Russia, the European Union, and other CIS nations.
Despite a small domestic market with only 1.3 million people, Estonia’s competitive and investment-friendly taxation system makes it a prime destination for businesses to operate and expand. The government actively encourages foreign investment in the country through various policies and measures for investors and entrepreneurs looking to start a business in Estonia.
Other factors that make Estonia an attractive location for foreign investors are its transparent pro-business legislation and the lowest national debt in Europe.
Several sectors in Estonia offer viable prospects for foreign companies, including energy, transportation, information technology (IT), and logistics. The human resource in the country is invaluable, with a bright and hardworking workforce.
Foreign investors planning to start a business in Estonia must be acquainted with the procedure for company incorporation in Estonia. Understanding the rules and regulations around setting up a company and the steps to incorporate a company in Estonia is imperative to tap into its supportive business environment.
Benefits of Starting a Business in Estonia
Here are the key advantages of doing business in Estonia:
- A simple and transparent company registration process
- A competitive and investment-friendly taxation system
- Encouragement of foreign investments
- Incentives to foreign investors in the form of tax exemptions, grants, and subsidies
- Digitally-enabled business ecosystem
- A strategic location with connectivity to major European markets
- A skilled, efficient, hardworking, and tech-savvy workforce
Requirements for Starting a Business in Estonia
The business-friendly environment of Estonia is conducive to growth and development. However, those looking to start a business in Estonia must fulfill legal and regulatory requirements.
Here are the essential requirements to do business in Estonia:
Apply for e-Residency
Foreign nationals setting up a company in Estonia must obtain an e-Residency card to complete the online business registration process. They can apply for e-Residency through the Estonian e-Residency website and fill out the application form. Applicants will get the card mailed to them after a few weeks.
Identify your business model
Business owners and investors setting up a company in Estonia must have a solid understanding of the nature of their business, the products and services they will sell, the target market, and the estimated cost of incorporating a company in Estonia.
Choose a business name
The next step in company incorporation in Estonia is to choose a unique name for the business or company. The name should not infringe on existing trademarks or company names in Estonia. Business owners can check for the availability of the name through the Estonian e-Business Register.
Get a legal address
Foreign companies in Estonia must have a registered legal Estonian address. Business owners can use their addresses or rent a virtual office in Estonia.
Appoint a contact person
In addition to a legal address, foreign companies in Estonia must appoint a contact person (an Estonian resident). The contact person is the means for official correspondence between the company and the local authorities.
Register the company
Once foreign business owners get their e-Residency card, they can log in to the Estonian e-Business register and register their company online. Applicants must provide information about the company, such as the name, address, owners, and share capital. The entire process is digitized and takes about 15 minutes.
Companies with employees or eligible for VAT payments must register with the Tax and Customs Board of Estonia.
Open a bank account
Foreign nationals will need a business banking account to start a business in Estonia. As e-residents, the best option is to use EEA-based online banking services to manage finances remotely and efficiently.
File taxes
After company registration, foreign companies in Estonia must file tax declarations online using the e-Residency card.
Types of Business Structures in Estonia
Businesses in Estonia can take on different structures based on several factors, such as share capital and the amount of liability involved.
The types of legal structures available for company registration in Estonia are:
- Private limited companies: The most common type of company incorporation in Estonia, private limited companies are simple and inexpensive to set up. The minimum share capital is comparatively low and is suitable for remote teams with remote management.
- Public limited companies: A public limited company in Estonia is similar to a corporation and suitable for larger businesses. Public limited companies have a board of directors and can issue shares.
- Partnerships: Partnerships in Estonia can be general or limited, the difference being the amount of liability involved. Although these structures are rare for foreigners setting up business in Estonia, partnerships are relatively quick and easy to form.
- Sole proprietorships: A sole proprietorship business structure is simple to set up and operate. In such an entity, the owner has complete control of the business while solely liable for any business debts and obligations.
Company Registration Process
The company registration process in Estonia involves pre-registration, registration, and post-registration steps.
Pre-registration
- Obtaining an e-Residency digital ID card
- Choosing a business name unique in the Estonian company registry
- Getting a legal address
- Appointing a contact person who is a resident of Estonia
Registration
- Registering the company on the Estonian e-Business Register
- Paying the company registration state fee (€265)
- Registering with the Tax and Customs Board if applicable
Post-registration
- Filing annual reports
- Holding annual meetings
- Maintaining proper records
- Paying taxes on earnings in Estonia
- Ensuring compliance with other legal requirements
How Much Does it Cost to Incorporate a Company in Estonia?
The cost of incorporating a company in Estonia depends on multiple factors, including:
- The nature and type of business
- The volume of business activities
- The types of services needed
- The fees of service providers
Here is the price breakdown for starting a private limited company in Estonia:
- e-Residency application state fee: €100-€130
- Company registration state fee: €265
- Minimum share capital contribution: €0.01 per shareholder
- Getting legal address + appointing licensed contact person: Yearly €200-400 (average)
- Additional service fees: Minimum €50 per month
Are Foreigners in Estonia on Certain Passes Allowed to Start a Business in Estonia?
Foreign nationals with an Estonian e-Residency or digital ID card can establish a private limited company. Holders of EU member state ID cards are also eligible for the same. Foreign companies must register through a notary if an e-Residency card is unavailable, documents cannot be digitally signed, or the company’s share capital contribution is non-monetary, such as a proprietary right.
Government Assistance for Foreign-owned Businesses
The Government of Estonia offers grants to foreign investors interested in setting up a company in Estonia. These grants for starting a business in Estonia encourage transitioning to a climate-neutral economy and cover different sectors and target groups.
Grants can be up to €153,000,000 (support for investments in Ida-Viru business), with a minimum support amount being €300,000 (support for the digital transformation of companies and SMEs initiating R&D in innovative products and services).
Estonia does not impose a corporate tax on retained and reinvested dividends. Thus, foreign companies and their branches pay 0% income tax on retained and reinvested profits. However, a 14%-20% tax is applicable on all distributed profits.
Estonia encourages FDIs, with foreign investors enjoying the same status as local investors. Moreover, there are no limitations yet on foreign ownership, reinforcing Estonia as a profitable destination for foreign investors and business owners.
How Multiplier Can Help?
Setting up a company in Estonia involves strict adherence to local laws and industry regulations. However, thanks to the country’s digital infrastructure, the procedure for offshore company registration in Estonia is seamless and hassle-free.
Multiplier can make the process easier by offering the infrastructure you need to set up a business in Estonia.
Leverage the benefits of our integrated SaaS-based platform and attract talent without establishing a subsidiary. Experts at Multiplier can help streamline payroll management, ESOPs for startups, employment contract generation, and contingent workforce management seamlessly and at affordable costs.