Company Formation in Estonia

Overview :

Estonia has a modern market-based economy and one of the higher per capita income levels in Central Europe and the Baltic region. The economy benefits from strong electronics and telecommunications sectors and strong trade ties with Finland, Sweden, Russia, and Germany. Its physical and cultural proximity to Denmark, its attractiveness to foreign investors and the high quality of its institutions ensure that strong economic growth continues.

Advantages of Incorporating Business in Estonia

• Estonia has a free, market-based economy which includes a balanced budget, a flat-rate income tax system and a fully convertible currency pegged to the Euro.
• Estonia owns a competitive commercial banking sector, and a hospitable environment for foreign investment, including no tax on reinvested corporate profits.
• The climate to operate a business in Estonia is very easy as there is very little bureaucracy.
• There is always an excellent supply of well educated, honest and hard working work force.

Tax Regime

Estonia’s tax system consists of state taxes & Local taxes. Estonian taxes are low and simple. There is a general flat income tax rate of 21 percent which applies to private individuals’ earnings whether out of work or capital. There is no corporate profit tax, instead the flat 21 percent tax is withheld when profits are distributed, e.g. as dividends, to the owners of the company. Social fees are levied at a rate of 33 percent of gross wages, but sick- and maternity leave costs are covered by the state. Estonia’s value-added tax rate is 20%.

Types of Entities

Private Limited Company :

A private limited company is a company that has its share capital divided into private limited company shares. A shareholder is not personally liable for the obligations of the company. A private limited company is liable for the performance of its obligations with all of its assets.

Public Limited Company :

A public limited company is a company that has a share capital divided into public limited company shares. A shareholder is not personally liable for the obligations of the public limited company. A public limited company is liable for the performance of its obligations with all of its assets. One or more natural or legal persons with or without share subscription may found a public limited company.

General Partnership :

A general partnership is a commercial undertaking in which two or more partners operate under a common business name and are solitarily liable for the obligations of the partnership with all of their assets. A general partnership must operate on the basis of the partnership agreement concluded by the partners. There is no minimum capital requirement and partners make monetary or non-monetary contributions in the amount prescribed by the partnership agreement.

Limited Partnership :

A limited partnership is a company in which two or more persons operate under a common business name, and at least one of the persons (general partner) is liable for the obligations of the limited partnership with all of the general partner’s assets. At least one of the persons (limited partner) is liable for the obligations of the limited partnership to the extent of the limited partner’s contribution

Sole Proprietorship :

A sole proprietor must be entered in the Commercial Register on his or her petition, or on another basis provided by law. A sole proprietor is liable for his or her obligations with all of his or her assets.

Time Required

It usually takes 7 days to incorporate a business in Estonia.