Company formation in Estonia - have you heard about the benefits of doing business in Estonia? Perhaps some of your colleagues, friends or business partners have already registered a company in Estonia?
Anyway, we will share with you everything that we know about this beautiful country and about the horizons which will open before you as soon as you decide to set up a company in Estonia, and we will also give you step-by-step instruction on how to start doing business in Estonia.
Firstly, we will talk about the limited liability company (similar to LLC in the USA or LTD in the UK. In Estonian its called ОÜ – osaühing.
In our opinion, this country is a top-tier jurisdictions with a friendly environment for:
- company formation and doing business;
- ongoing administration (tax and corporate);
- interaction with public authorities;
- and even liquidation (dissolution) of an Estonian company.
According to the Doing Business chart, Estonia is ranked 18th (out of 190) in the "Ease of Doing Business", and 12th in the "Taxation" category. Well deserved, Estonia.
Company formation in Estonia - key benefits
| Advantage | Description |
|---|---|
| Low cost | It is relatively cheap. If we compare the cost of company formation and maintainance in Estonia with any other European jurisdiction, then Estonia simply has no competitors; |
| Remote incorporation | Remote incorporation procedure. You can form a company in Estonia without travelling to Tallinn. You can get an E-residency card or prepare a power of attorney and send it by courier service to the Republic of Estonia; |
| Simple administration | The company is really easy to administer. You shoukd simply provide us with account statements, contracts and invoices so that we could prepare and submit the VAT and annual reports by our accountant; |
| No local director required | No need to hire a local Director and pay any salary. There is no such requirement in Estonian legislation; |
| Easy VAT registration | No problems obtaining a VAT number. A VAT number can be obtained in Estonia remotely by E-residency card or by POA; |
| Minimal share capital | The minimum share capital is 0,01 EUR; |
| English-speaking professionals | No problems communicating with the accountant. Estonians know English and some other languages; |
| Good reputation | No offshore reputation. A company formed in Estonia is reputable. Unlike most offshore jurisdictions like Belize, Panama or the BVI; |
| Tax treaties | A wide network of double taxation treaties. This is rarely thought about when choosing a jurisdiction for setting up a company. However, this would be useful if, for example, you decide to work with clients from the USA; |
| Access to banking | Companies formed in Estonia still have opportunities to open accounts not only in payment systems (PSP's, EMI's), but also in classic banks in Europe; |
| PayPal compatibility | An Estonian company can give you the opportunity to work with PayPal; |
| Potential for residency | Under certain conditions, you can get a residence permit in Estonia; |
| Versatile for business types | A wide range of businesses are perfectly suitable for an Estonian company - product IT companies, outsource IT companies, SAAS-services, export / import of goods and many others; |
| Supportive tax authority | Estonian tax authorities are aimed at helping law-abiding taxpayers to administer your taxes properly. The punitive function is used only in extreme cases of obvious abuse by the taxpayer. |
Company in Estonia - structure
Board member (Director)
Company established in Estonia should have at least one board member.
There are no requirments regarding residency of the board member.
Only an individual person can be a board member. Corporate directors (companies) are not allowed.
There is no requirement to pay salary to the director. This approach is extremely convenient if the founder and director of the company is a foreigner (One Man Company). The entrepreneur himself decides what is more convenient or profitable for him - to pay salary to himself or to direct this money for the needs of business development.
Founder of the Estonian company
At least one person can form a company in Estonia.
No requirments with regards to residency.
The founder can be an individual or a legal person.
Some of our clients complained that they were required to appoint a local citizen / resident as one of the directors of the company when forming a company overseas. We refer to the countries like Finland, Singapore, or even Ukraine. As for Estonian companies, a director and also the shareholder can be a citizen and resident of any country. This opportunity appeared in Estonia in 2011 and has significantly improved the business environment for foreigners.
Nominee services for Estonian companies
Estonia, as a country with a continental legal system has no legal framework for nominee services. This means that the shareholder is considered to be the ultimate beneficial owner of the company. The same applies to director who holds full liability regardless of whether he is acting on his own behalf or by instructions from a third party.
Nonetheless, in a limited number of cases a nominee Director makes sense.
Based on practice, the services of nominee board members and shareholders are not widely used in Estonia.
Share capital of Estonian company
Starting from 1 February 2023 the minimum share capital is 0,01 EUR in case of a single shareholder in the company. Previously, the minimum share capital of an Estonian company was 2500 EUR.
The minimum par value of each share is 0,01 EUR.
When setting up a company in Estonia the shareholders should pay the share capital. However, from a practical perspective, the director of the company simply declares that the capital is formed and paid up. We do not recommend paying the share capital via the Registry's website as it involves an Estonian bank. Further, upon the bank's decision to reject account opening, the incorporation procedure will be more time consuming.
As a general rule, we incorporate Estonian companies with 100 EUR share capital.
We do not recommend incorporating companies with minimum share capital of 0,01 EUR as this would add difficulties when adding new shareholders to the company and the company would have to undergo the increase of share capital procedure.
There are certain additional requrements to the minimum amount of the share capital when the company's business requires licensing.
The share capital of an Estonian company may even be formed by non-monetary contributions in kind.
How to set up a company in Estonia?
If you want to get things done on the first try, you better call a professional lawyer who knows his job and incorporates companies in Estonia on a daily basis.
And of course, always ask for a legal advise prior to setting up any company in Estonia. There may be cases when incorporating abroad isn't always the best solution. When consulting the client, we always suggest a better solution, if any exists.
So, there are three options of setting up a company in Estonia.
How to set up a company in Estonia using the Internet?
- What is necessary. The most common way to form a company in Estonia is to incorporate an OU using the E-residency card. In order to get one, you would require 4 to 6 weeks since the date of submitting the application.
- Pros and Cons. Pros: no need to get off the couch; the cheapest option if compared to the others; the E-residency card will allow you to manage the company in the most convenient way. Cons: the E-residency card is issued within at least one month.
- Pitfalls. Estonian Police and Border Guard Board may ask additional questions regarding your application for issuing the E-residency card. Such requests should be handled in a proper manner in order not to be denied in issuing the E-residency card.
How to set up a company in Estonia by Power of Attorney?
- What is necessary. A faster way to incorporate a company in Estonia remotely is to issue a legalized Power of Attorney. In some cases such POA should be Apostilled depending on the country where it is notarised. Such option is more expenisve if compared to company formation using the E-residency card;
- Pros and Cons. Pros: the speed of forming a company. Cons: you have to pay extra for issuing the POA and courier dispatch to Tallinn; the procedure of incorporation itself is more expensive; whenever you need to do anything with regards to your Estonian firm (e.g. change the Board Member or the legal address), you would require a new POA for such actions.
- Pitfalls. The POA should be carefully revised prior to dispatching to Estonia. The slightest mistake may lead to being rejected in incorporating a company in Estonia. Also you should check if Apostille is required on the documents.
How to set up a company by personal visit?
- What is necessary. First of all, you need to travel to Tallinn. In case you are lucky enough to travel to this beatiful country, our representative shall guide you during the incorporation process.
- Pros and Cons. Pros: the fastest way to set up a company in Estonia; you will see the process with your own eyes; a good excuse to travel to Estonia as a tourist. Cons: you have to get off the couch.
- Pifalls: If you are OK with the cold Baltic climate and lack of sun in the sky, you risk falling in love with Estonia and moving to live there permanently.
How long will it take to incorporate in Estonia?
If you use the E-residency card, the company will be incorporated withtin 1-2 business days.
If you use the POA, the company will be set up within 2 weeks from the moment of delivery of the POA to Estonia.
Incorporating a firm in Estonia by personal visit will only take several days. However, a meeting with the notary should be scheduled beforehand.
How much does it cost to incorporate a company in Estonia
The cost of setting up a firm in Estonia starts from 1000 EUR depending on the actual amount of services you require.
The final price depends on:
- whether you require translation of Articles of Association from Estonian into English by a sworn translator;
- whether you require Apostille on documents (Extract from the Registry and Articles);
- whether you require obtaining a VAT number;
- the procedure of setting up a company (by POA or E-residency card).
If you want to know the exact cost of setting up a firm in Estonia in you particular case just fill in the feedback form on our website.
Requirements to set up a company in Estonia
To start the incorporation procedure of the Estonian firm you will have to provide us with the following:
- Several name options of the future company. This will allow us to do a name check in the Registry and tell you if the relevant names are available;
- Scanned copy of the passport of each director and shareholder;
- E-mail of the company;
- Personal E-mail of each director and shareholder;
- Contact phone number;
- Description of business;
- Amount of the share capital;
- Actual address of each director and shareholder;
- Scan or photo of the E-residency card.
Based on the data and documents received, we will prepare everything you need to register a company and you will only have to take two steps: follow the link in the letter, and then - sign the document using the E-residency card.
Language of the documents
Estonia uses English and Estonian languages for corporate documents.
Articles of Association of your Estonian company will be in Estonian. If necessary, it can be translated into English or other language by a sworn translator.
Extract from the Registry can be either in English, or Estonian. The extract can be obtained online at the Register's website.
Registry of Companies in Estonia
The Registry contains publicly available information regarding Estonian companies, icluding information аbout:
- shareholders;
- board members;
- financial accounts;
- VAT number and validity;
- other information submitted to the Registry.
You can get an extract from the companies' Registry online free of charge.
Company administration in Estonia
You will be required to pay for the legal address in Estonia on an annual basis.
The contact person service is no longer required by law.
Accounting and bookkeeping services in Estonia
The Estonian company shall submit the yearly financial accounts not later than 6 months after the end of the accounting period, i.e. by 30 June.
The first accounting period may be up to 18 months. For example, of a company is incorporated after 30 June 2022, its accounting period starts from the date of registration and is due by 31 December 2023. And the accounts should be submitted by 30 June 2024.
What types of business is Estonia good for?
- Transportation services;
- IT-business;
- sale of goods (export and import). And it is not at all necessary that the goods pass through the customs zone of Estonia;
- Provision of various types of services (for example, legal business, consultancy services);
- Affiliate marketing and traffic arbitrage.
For a number of reasons, we do not recommend Estonia as a jurisdiction for holding companies. There are better options for such cases.
Benefits of doing business in Estonia
You can spend quite some time listing the advantages of Estonia (which we did at the very beginning of this page), but it will be easier to say what you will definitely not encounter when working through an Estonian company:
- absolutely no outrage on the part of the tax service and other public authorities;
- no one will be able to steal your business, because in Estonia the right to private property is respected and protected by a strong and independent judicial branch;
- you will not have any headache about constant changes in legislation, including tax legislation. If something changes in Estonia, then, as a rule, only in favor of the taxpayer.
Taxation of business, corporate income tax in Estonia
Tax Changes in Estonia in 2025–2026
Starting from January 1, 2025, changes to the tax legislation in Estonia will take effect:
The personal income tax rate will increase from 20% to 22%;
For companies, the tax rate on distributed profits will change from 20/80 to 22/78;
The reduced rate of 14/86 for regular dividend payments will be abolished;
The 7% income tax previously withheld from dividends paid to individuals will be eliminated.
Additionally, starting from July 1, 2025, Estonia will introduce a temporary "defence tax," effective until December 31, 2028, which will include:
An increase in the VAT rate to 24%;
An increase in the personal income tax rate to 24% from January 1, 2026;
The introduction of a new corporate profit tax at a rate of 2% from January 1, 2026.
Important: The base for calculating the corporate profit tax will be the profit for the year 2025, regardless of whether it has been distributed or paid out.
The funds collected from the defence tax will be directed toward strengthening the country's defence capabilities and investing in national security. The possibility of extending or amending this tax will be considered after the 2027 parliamentary elections.
Residence permit in Estonia when opening a company
Firstly, let's figure out on what grounds you can obtain a residence permit in Estonia:
- family reunion;
- becoming a student;
- marriage with an Estonian citizen;
- on the basis of an employment contract;
- based on business activities.
Lets focus on the last two items as the most relevant.
Residence permit in Estonia under an employment contract
One of the frequently asked questions we hear from clients sounds like this: "Can I get a residence permit in Estonia after I become an E-resident and register a company in Estonia?"
Our answer to these kinds of questions: "it's not that simple".
The fact is that in order to apply for a residence permit in Estonia on the basis of an employment contract, the employee's monthly salary for the last five months must be at least 1407 EUR gross (that is, before taxes and other mandatory payments).
Accordingly, in order to follow this path, you need to be patient and have a certain amount of money in order to pay your own salary and at the same time pay taxes in Estonia from an official employment.
Residence permit in Estonia for entrepreneurs
There are two options:
- invest at least 16,000 EUR in Estonian business as an individual entrepreneur;
- invest at least 65,000 EUR in your own company as a shareholder or director of an Estonian company.
How to open account in Estonian bank
This is close to impossible nowadays if you are not a resident of Estonia. That is the actual resident who lives in Estonia, not an E-resident.
Before 2016, opening an account in Estonia was in fact no different from, for example, opening an account in Latvia. The account was opened quickly and easily, and the compliance did not ask too many questions.
Unfortunately, these days are long gone, and after Estonian banks appeared in several scandals related to money laundering by negligent clients of Estonian banks, the Estonian financial regulator actually restricted Estonian banks from working with non-residents if they did not have sufficient economic ties with Estonia (substance). The same also applied to Estonian companies owned by non-residents.
In 2024, in order to open an account in an Estonian bank, it is necessary to set up local substance:
- rent an office in Estonia;
- hire a local director and some other staff;
- find suitable contractors in Estonia;
- draw up a competent business plan, which, among other things, would provide for the economic presence of the company specifically in Estonia;
- get an E-residency card for the founder of the company;
- perform any other actions that would confirm the close relationship of the company with Estonia.
It is important to understand that even such a set of measures is not a 100% guarantee that the Estonian bank will accept you as a client.
Written by: Pavlo Dubynskyi, January 2024. Information updated in April 2025
FAQ
What documents will I receive upon incorporation?
Articles of Association in Estonian and Extract from the Registry in English. These documents can be apostilled if necessary.
How to withdraw funds from the company?
By distibuting dividends to the shareholder or by paying salaray to the director
Is it possible to register for VAT in Estonia?
Sure! In some cases this is mandatory
How to get rid of the company?
By way of dissolution. Or by selling the shares in the company to a different person.
