So, you have heard about Estonia, know a little bit about e-Residency and why having a company in Estonia is a good option, but there are still so many questions left unanswered? Here are the most frequently asked questions about starting a company in Estonia.
We are here to make it easy for you and answer all the questions you might have! Therefore we have collected together 32 most common FAQ questions about Estonia, e-Residency, and Estonian companies.
In case you feel something is still unclear, please contact us!
1. Questions about Estonia as business environment
Let’s have a look at some of the main questions about Estonia and starting a business here:
Can a foreigner start a business in Estonia?
Yes, of course. Estonia is a perfect place for foreigners to start a business. Thanks to e-Residency, a government-issued ID card meant for digital signing, starting a business is an easy and fully online process. You can start the company formation process here.
You can also start a business without e-Residency, but the process is a bit more complicated and can take more time. Of course, if you decide to go with that option, we are here to help you. Just check out this service for non-residents.
Is it difficult for a foreigner to start a business in Estonia?
No, starting a business in Estonia is an easy process for foreigners.
If you are an e-resident you can do it fully online by checking the company name and filling out the registration form here. The form moves directly to the Business Register and after 1 working day, your Estonian company is ready.
If you are not an e-Resident you can also start your business without travelling to Estonia. But you will need an official service provider like 1Office who can help you in the process.
You have to appoint a lawyer to represent you in the notary’s office and with that, you can still do everything without travelling. Of course, you should still consider applying for an e-Residency because managing the company will be easier if you have an option to use your e-Residency card for digital signing.
Is Estonia good for business?
Yes, Estonia is perfect for business. Doing business is made really easy and favourable in Estonia as the bureaucracy level is minimal – filling in the company registration form takes only 15 minutes, 99% of bank transactions are done online and submitting the tax declarations is done in minutes!
Here are some main reasons why Estonia is good for business:
- Estonia is one of the most digitally advanced societies
- Membership of the EU, NATO, OECD, Eurozone, and Schengen Area offers stability
- The Estonian economy is growing and hassle-free
- The state fees and starting & managing costs are low
- Corporate income tax is 0% on retained and reinvested profits
- Estonia has a low level of bureaucracy
- Foreign entrepreneurs who are e-residents have access to online services – registering and managing the company online
- Unique share capital rules
Is Estonia good for startups?
Yes! Estonia is one of the friendliest and fastest-growing startup hubs in the EU, often called the Silicon Valley of Europe. Already 7 unicorns have grown out of small Estonia which makes Estonia the leader in unicorns per capita in Europe.
So, Estonia is a very good place to launch your startup. It was even ranked among three of the best European countries to set up a startup. Amongst other things, Estonia is well known for its:
- highly digitised processes
- entrepreneurial visa
- vibrant e-Residency community
Some of the success stories of Estonian startups include Wise, Veriff, Bolt, Pipedrive, Monese, Starship, Skeleton Technologies, Fortumo, Cleveron, Bondora, and Playtech.
Is Estonia good for freelancers?
Yes, definitely! As in the EU acting as a freelancer without a company is basically impossible (it is not possible to issue invoices as a freelancer), an Estonian company is a perfect solution for freelancers.
Estonian company is a low-cost and online option that every freelancer will appreciate. Its low bureaucracy levels and highly digitised options make an Estonian company a good bet for every freelancer looking for options to conduct business in the EU.
Is Estonia good for digital nomads?
Yes, Estonia is good for digital nomads. Actually, digital nomads make up the largest part of Estonian foreign entrepreneurs.
The part that attracts digital nomads is the fact that with an Estonian location-independent company you are not tied down to one place, it follows you anywhere you go and is manageable from your mobile phone. And of course, if you decide to also visit Estonia, you should know that in Estonia Wifi is practically everywhere (even in a deep forest), the nature is really pristine and English is one of the main business languages.
Moreover, if you are a digital nomad you most probably can also benefit from the unique and very favourable tax system of Estonia. Meaning you will not pay corporate income tax on earnings that will stay inside the company and that you plan to reinvest. The corporate income tax will only be paid on the money you pay out as dividends.
But, of course, to be sure, please contact a professional as tax topics can be very complicated and case-sensitive.
Is Estonia a tax haven?
No, Estonia is definitely not a tax haven.
As Estonia has a corporate income tax rate of 0% on earned and reinvested profits, it often sounds like a tax haven, but the reality is somewhat different. Although the corporate income tax is indeed 0% for Estonian tax residents, it does not automatically apply to foreign entrepreneurs, even if they have applied for the e-Residency program.
Estonia is not giving out its tax residency as many famous tax havens do and therefore you probably have to pay your taxes in your home country. A foreigner is regarded as an Estonian tax resident if their place of residence (the place where they permanently reside) is in Estonia or if they have lived in Estonia for at least 183 days over a consecutive 12-month period. But fortunately, Estonia has signed taxation treaties with many countries to avoid double taxation.
So, if you are looking for a tax haven, then Estonia is not it. It’s rather a bureaucracy and location-independence haven. These are the main reasons why many foreign entrepreneurs have decided to start a company in Estonia.
What are the tax rates in Estonia?
Personal income tax in Estonia is flat 20%. But the amount of the annual tax-free income is progressive:
- if you earn up to 1200 € per month (gross monthly income), the tax-exemption is 500 €,
- if you earn 1201-2100 € per month, the tax-exemption gradually decreases,
- If you earn more than 2101 € per month, no tax-exemption is applied.
The corporate income tax in Estonia is not assessed on the profit earned. Therefore, the tax rate is 0% if you retain and reinvest the profit. If the profit will be paid out as dividends, a tax rate of 22% will apply.
The social tax in Estonia is 33%.
The value-added tax (VAT) in Estonia is 22%.
What business can I do in Estonia?
You can basically do any kind of business in Estonia (it has to be legal, of course!).
But the most popular fields amongst foreign entrepreneurs and e-residents are IT, consultations, marketing, advertisement, retail/wholesale, e-commerce, and publishing.
Commonly they all choose to start an Estonian private limited company (OÜ), but the variety is wide for the company types and you should make a decision based on your business type and goals.
2. Questions about Estonian e-Residency
Let’s move on to the most frequently asked questions about e-Residency:
What is Estonian e-Residency?
E-Residency is a government-issued ID card meant for digital signing.
With that you’ll be able to start and run a company in Estonia fully online, conduct online banking, exchange encrypted documents, and digitally sign all business-related documents like contracts, annual reports, and tax declarations. It means you have all the same convenience and ease for doing business in Estonia as any locals.
How does e-Residency help foreigners?
E-Residency makes all business-related activities like starting and running your company much easier for foreigners. With an e-Residency card, you can do everything online and don’t have to travel to Estonia or visit an attorney’s office to start a business or make changes to your company.
Read more about e-Residency and Estonian company establishment from our full guide to starting a company in Estonia.
Is e-Residency mandatory when starting a company in Estonia?
No. It’s possible for foreigners to start a company in Estonia without e-Residency.
It’s a bit more complicated process, but it’s still very possible. Basically, you have two options:
- You can travel to Estonia and execute all the necessary operations here.
- You can hire a lawyer to represent you in the notary and thanks to that you won’t need to travel anywhere.
Even if you want to start your business without e-Residency, you should still consider applying for an e-Residency card because managing the company will be easier if you have an option to use your e-Residency card for digital signing.
How many e-residents does Estonia have?
Estonia has almost 90 000 e-residents (as of February 2022).
How much does Estonian e-Residency cost?
The state fee for applying for e-Residency is 120 euros.
It applies if the e-Residency card will be picked up from an Estonian embassy. There are many pick-up locations and a suitable location has to be chosen when submitting the application.
Is e-Residency an actual residency?
No, it’s not. The name can be deceiving as it has nothing to do with your actual residency.
E-Residency is not a residency, a work permit, or permission to live in Estonia or in the EU. It is a digital tool for foreign entrepreneurs that can be used to open a company online (by digital signing) and give your company trustworthiness, as it is an EU business that you will be running. But these benefits will not expand to the private persons behind the company.
Can I enter Estonia with e-Residency?
No. E-Residency status is not a visa or travel permit, it does not grant you a permit to travel to Estonia or to the EU without a visa. An E-Residency card is also not a travel document.
If you do not require a visa to enter Estonia then of course you can travel to Estonia and visit the country. It’s just that the e-Residency status won’t give you any extra rights.
3. Questions about Estonian company
And finally, most popular questions about Estonian companies:
How much does it cost to open a company in Estonia?
The state fee for registering a company in Estonia is 265 €.
If you wish to use the help of professional service providers like 1Office, the service fee also applies and the final price is 305 € (including the state fee).
If you are not an e-resident, the service fees are higher as the process needs representation by power of attorney, an appointment in the notary’s office, and preparation of some additional documents. The fee for this service is 825 € (including the state fee).
How long does it take to register a company in Estonia?
Usually 1 working day.
The company registration process is really quick and easy in Estonia. If you have an e-Residency card and you have thought through all the information you need for company establishment (like company name, shareholders, share capital, etc), filling in the form on the 1Office company registration portal takes about 15 minutes. The application will automatically move to the Business Register and the company will be registered in 1 working day.
If you wish to do everything yourself and fill out the form directly on the Business Register page, the application part usually takes a bit longer, but the processing times are still the same.
What is required for company registration in Estonia?
If you are an e-resident, you’ll need:
- your e-Residency card
- a copy of your passport (necessary to meet anti-money laundering regulations)
- legal address and contact person for your company (mandatory for all Estonian companies, all service providers offer this service for reasonable prices)
If you are not an e-resident, you’ll need:
- power of attorney (to give permission for a lawyer to represent you in the notary’s office)
- a copy of your passport (necessary to meet anti-money laundering regulations)
- legal address and contact person for your company (mandatory for all Estonian companies, all service providers offer this service for reasonable prices)
How do I register a company in Estonia?
The easiest way is to find a suitable service provider and register the company through them. This helps to avoid additional bureaucracy and you’ll also get all the mandatory additional services from them.
1Office process for company registration is really convenient. Check out the step-by-step guide with screenshots here.
Can I open a bank account in Estonia?
Yes, of course.
Although keep in mind that if you wish to get an account in a traditional Estonian bank like Swedbank, LHV, SEB, or Luminor, you are probably asked to come to Estonia and meet the bank representatives in person.
If travelling to Estonia is not possible, there are also very good online business banking options available. It doesn’t matter if your Estonian company has an actual Estonian bank account, as Estonia accepts business accounts from all banks and fintech companies based in the European Economic Area.
So, online banking partners like Wise or Payoneer are perfect low-cost options to get your business started.
Can anyone start a company in Estonia? Do you accept customers from all countries?
Almost anyone. There are some limitations regarding the country where you are from. Also, when applying for e-Residency, a person’s previous compliance with the law and criminal record is assessed by the Estonian Police and Border Guard Board.
1Office accepts customers from all over the world except limitations due to anti-money laundering policies. Therefore we can’t unfortunately support countries that are on FIU high risk countries list.
What company type is the best for an Estonian company?
OÜ is a good choice for any foreign and local entrepreneur.
There are quite a lot of different Estonian company types – most popular are private limited company (OÜ), public limited company (AS), branch of a foreign company, sole proprietorship (FIE), and non-profit organisation (MTÜ). Read more about all the company types in Estonia here.
Although there are many options, you can be sure that a private limited company (OÜ) is a safe and right choice in 90% of the cases.
How much is the share capital in Estonia?
The minimum share capital for a private limited company (OÜ) is 0,01 €.
The minimum share capital for a public limited company (AS) is 25 000 €.
Do I need to pay in the share capital when establishing a company in Estonia?
Yes, the share capital must be paid and also declared in the Estonian Tax Department, minimum share capital is EUR 1 cent.
Also, the share capital is not a fee in any way. It is your personal money that goes into your company and it is your company’s right to spend it as it chooses as long as it is in support of the business activities.
Read more about share capital from our full guide to starting a company in Estonia.
What’s the difference between a founder, owner, and director?
The founder is the first owner of the company (either legal or private person). Therefore, the founder never changes, even if the founder is no longer the owner of the company.
Owners, also called shareholders, are persons who own the shares of the company. The founder can transfer or sell shares of the company and therefore, the company can have multiple owners or if the founders sells all the shares, the new owner will be the only owner of the company.
Directors, also called board members, are the ones who can represent the company. Usually, the owners are also board members.
Who needs legal address service for their Estonian company?
Every Estonian company needs a legal address that will be entered into the Business Register.
The address has to be local and it can’t be a residential address. Therefore, legal address service is the best solution for non-residents (incl. e-residents) who have started their company in Estonia but don’t have an office here.
Read more and check the legal address prices here.
Who needs contact person service for their Estonian company?
Every Estonian company whose registered address is management board address, located outside of Estonia needs to have a local contact person appointed.
Contact person is the first contact used by the authorities for delivering official documents.
Read more and check the contact person prices here.
Is monthly accounting mandatory in Estonia?
No, not for all companies.
Monthly accounting is necessary if the company has the Estonian VAT number (mandatory for companies with EU turnover more than 40 000€) or when the company pays salaries to employees in Estonia.
If the company has no VAT number (and any regular monthly payments, purchases, invoices) then it is sufficient to do the whole accounting once a year, before submitting the annual report. So, monthly accounting is not mandatory, but submitting an annual report most definitely is mandatory!
If you want to create sales invoices and keep expenses in one place, you can use a special service called myAccounting.
What are the accounting costs for an Estonian company?
Accounting costs depend on the volumes.
1Office monthly accounting costs start from 75 €.
Is an annual report mandatory in Estonia?
Yes. Estonian annual report is mandatory and required by the law to keep a transparent business environment.
Even if you don’t have any activities during the financial year, you still have to submit an annual report. Also, check out the most frequently asked questions about Estonian annual report.
Is VAT number mandatory for Estonian companies?
No.
Registering a VAT number is mandatory if the annual turnover in the EU is more than 40 000 €. But it’s always possible to register a VAT number before reaching the threshold.
In conclusion
Deciding where to establish your company is definitely an important decision and needs to be thought through. Hopefully, these questions and answers helped to make things clear for you.
If you didn’t find an answer to your question or need further assistance with your specific case, please contact us. And if these answers helped to reach a decision about starting a company in Estonia, you can start the process here:
