Interesting facts about Estonian company
In this article we will provide some interesting facts about managing a business through an Estonian Company.
Main purpose
Most of Estonian companies are used as a trading company for transactions with European and American companies or as a software development company (serving as an intermediary between big companies and freelance developers).
Some unconventional ways of working through Estonian company include using it as a holding company (when Estonian company is a shareholder of other companies) or a freelance company (when company is represented by one person which makes all the work).
Taxation
There are 3 main taxes in Estonia:
- income tax (22%),
- VAT (24%)
- social tax (33%).
Income tax is normally paid from the distributed profit. So as long as company beneficiaries do not distribute profit or pay salaries the actual rate of income tax will be 0%.
And to pay VAT a company has to obtain VAT number first and Tax Department does not like to issue it much (they start to ask lots of questions and try to figure out if company will have activity and if there will be any taxable turnover). Since most of Estonian companies, which were established by non-residents of Estona, have most of their turnover outside of Estonia which allows to apply 0% VAT.
Social tax is only paid from salaries. So as long as company has no employees, there is no social tax as well.
Starting from 2026 new security tax of 2% will be introduced, which will be calculated from the annual sales revenue. More about this tax you can read in this article.
As the result lots of Estonian companies founded by non-residents (including e-Residents) pay very little taxes or no taxes at all. They contribute massively to Estonian business environment though, giving lots of work for local businesses and thus indirectly creating jobs in Estonia.
Reporting
Reporting in Estonia is rather simple.
There is an annual report to be submitted once per year till 30 of June of the following year. Meaning that report for 2025 shall be submitted till 30.June.2026.
As a matter of fact Commercial Register normally also allows July and August for submitting annual reports before it starts to send warnings and impose fines.
Besides that Estonian companies have to submit 2 monthly tax reports: TSD and KMD.
TSD is submitted only if company has registered employees or distributes profit.
KMD is only submitted if company has VAT number.
There is no obligation for Estonian company to submit so called 0-reports.
Meaning that if Estonian company does not have employees, does not distribute profit and has no VAT number, then it only submits annual report once per year.
Payment & bank accounts
Opening payment account for Estonian company with non-resident in its structure would be challenging, but not impossible. It will depend on activities, turnover and payment partners.
We are not talking about Estonian bank accounts, since those are rather impossible to open in the beginning. Estonian residency (life permit) is obligatory in any case (for an Estonian bank).
So normally Estonian company starts with payment institutions like Wise, Paysera, Payoneer etc.
There are options for opening bank accounts outside of Estonia. But those are very specific cases and they shall be considered for each company individually (depending on substance of a company and its ability to pass compliance procedures).
Company maintenance
Estonian company needs to have a legal address and there are different providers of such service with different prices. Virtual office and post service are normally also included into this service.
Besides that, Estonian company can have some local representatives: contact person and prokurist.
Contact person – legal or private person authorised to receive documents and notifications on behalf of the company.
Prokurist – legal representative of a company, which can act without PoA. It is very useful option when managements and shareholders are constantly abroad. Also prokurists have access to Commercial Register of Estonia on behalf of Estonian company and it makes simpler to make some changes in the Register.
Life-permit
Being a board member of Estonian company can serve as a ground to obtain residence permit in Estonia.
It was difficult to get permit several years ago because of the limit of the permits allowed to be issued per year.
But now it is easier, since there are much less applications compared with previous periods.
Also being a board member allows to apply for Estonian D-visa, which allows to stay in Estonia for 1 year + 6 month extension.
Brief summary
Estonian company is a good solution for people which want to perform location independent business activities.
It offers simple and low-cost maintenance, low taxation and provides additional benefits, like opportunity to obtain life permit in Estonia or get involved in the local start up community.
In Panthera Leo we undertake all possible matters to maintain Estonian company, which allows company beneficiaries to focus on actual business activity. It is worth mentioned that we provide our service for more than friendly fee.
Just contact us here and let’s see how we can assist you.
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