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Company registration in Estonia: Private Limited Company (OU) – a limited liability company. Service offer

Major advantages of doing business in Estonia. Budget for setting up business in Estonia. Time frame for setting up business in Estonia. Company incorporation. Structure. Subsequent administration of a company.

Major advantages of doing business in Estonia:

Positive image of a European jurisdiction;

Not on any offshore blacklists;

The advantages of the Estonian corporate and tax system can be used in international holdings and trade, financing and investment, royalty payments and property ownership;

Developed banking system, Internet banking is available in English and Russian;

Estonia is a full member of the EU and OECD, it joined the eurozone in 2011 and applies all EU Directives;

No profit tax until distribution of dividends is made. When distributing profit from business activities, the profit tax rate is 20% on gross profit;

Starting from 2018, companies that regularly distribute profit can apply a reduced profit tax rate of 14%. If the recipient of dividends paid out of profit taxed at 14% is an individual, resident or non-resident, the 7% withholding tax rate applies, unless the tax agreement provides for a lower withholding tax rate;

No withholding tax on outgoing dividends (except the aforementioned 7% tax) or interest, even if paid to offshore companies in zero-tax or low-tax jurisdictions;

No withholding tax on royalties paid to EU or Swiss companies, when ownership conditions under the EU Directive are met.

Budget for setting up business in Estonia:

Services
Fees (EUR)
Total cost of company incorporation with one shareholder and standard Articles of Association
5,400
Local bank account opening
from 1,210*
Total:
from EUR 6,610

Time frame for setting up business in Estonia:

Company registration from 2 weeks;

Local bank account opening from 3 weeks.

Company incorporation

An Estonian company incorporation process includes the following steps:

1) You need to select:

  • company name to be checked for its availability (at least two names), such name: must not be identical or similar to the name of an existing company; must contain an indication of the type of entity: for a private limited company it is “osaühing” or “OÜ”;
  • company structure (directors, shareholders);
  • share capital and distribution of participations between the shareholders (min. EUR 2,500; minimum par value of a share is EUR 1);
  • activity and geography of business.

2) Payment of fees

3) The documents for directors / shareholders / attorneys must be provided:

  • Notarized copies of passports with notarized translation into English (internal and international passports);
  • Bank reference letter showing the residential address, original;
  • CV;
  • Completed and signed client declaration, original;
  • Power of attorney in Russian, original with signature certified by a Russian notary.
Please note that the registration agent has the right to request any further documents and information

4) Preparing a package of documents for company registration, having the documents signed by the directors and shareholders.

5) Depositing the initial share capital (if the share capital is over EUR 25,000, or if the shareholders decide accordingly).

6) Filing an application for registration with the Commercial Register.

It takes 2 to 4 weeks to register a company once all the necessary information and documents are provided

The apostilled set of corporate documents of the company includes an extract from the register and the Articles of Association duly translated into English.

There are no such documents as Certificate of Incorporation, or Resolution on appointment of director, or share certificate in Estonia; they are replaced by the following documents:

  • Foundation Resolution – shows information about the registration of the company, including appointment of the first director;
  • Initial Printout from the Commercial Register – shows initial information about the registration of the company;
  • Resolution of Shareholder – shows appointment of the director;
  • Register of Shareholders.

Structure

Directors

Directors can only be individuals; the minimum number of directors is 1. Half of the directors must be residents of EEA (European Economic Area) countries. If more than half of the directors reside outside Estonia, the company must provide the Commercial Register with a contact in Estonia where necessary documents can be sent. A foreign business owner is obliged to provide his residential address and email.

Shareholders

The minimum number of shareholders in a company is 1; they can be individuals or legal entities; there are no statutory requirements as to their residency.

Share capital

The minimum share capital is EUR 2,500. If the founders are individuals and the share capital is less than EUR 25,000, the founders are free not pay in the capital after the company is established, but it is necessary to make the relevant provision in the Articles. Until the capital is paid, the founders are personally liable for the company’s obligations to the extent of their unpaid contribution. The share capital can be denominated in euros only.

NB! The minimum share capital for obtaining the licence is EUR 12,000

Subsequent administration of a company

Registered office and registered agent services are paid annually.

All Estonian companies are required to annually prepare their financial statements.

Almost all Estonian companies can choose to prepare financial statements in accordance with International Financial Reporting Standards (IFRS) or in accordance with Estonian accounting standards.

The financial year lasts 12 months. At the end of each financial year, a private limited company is required to prepare an annual report consisting of financial statements and director’s report. Reports must be submitted to the Commercial Register within 6 months of the end of the financial year.

An audit should only be conducted by companies that meet two of the following conditions:

  • net sales of EUR 2 million or more;
  • balance sheet total of EUR 1 million or more;
  • average number of employees is 30 people.

An audit is also mandatory for companies that meet one of the following conditions at the balance sheet date:

  • net net sales of EUR 6 million or more;
  • balance sheet total of EUR 3 million and more;
  • average number of employees is 90 people.

Estonian companies are required to keep tax records and file the following tax returns with the Tax and Customs Board:

  • Form TSD – Declaration of profit and social tax, mandatory pension contributions and unemployment insurance premiums – must be submitted monthly if the company has contracted workers and made taxable payments. If the company is registered for VAT, the TSD must be submitted on a monthly basis, even if the company has no contracted workers and made no taxable payments. In the latter case, a nil return is submitted;
  • Annex 4 to form TSD – for declaring fringe benefits, if, for example, the company gave an employee a car to use free of charge or at a discounted rate, or paid the employee’s holiday or entertainment expenses, etc.;
  • Annex 5 to form TSD – for declaring gifts, donations and entertainment expenses, if the company paid for catering and accommodation of business partners;
  • VAT return, if the company is registered for VAT.

In addition, dividends and shareholding payments must be declared, as well as excise duties on goods and packaging.

This offer is not a consultation. To assess the company’s tax burden, we recommend seeking tax advice (which can be arranged upon request)

Obtaining a licence for cryptocurrency exchanges and exchangers

In 2017, Estonia amended its anti-money laundering legislation (Money Laundering and Terrorist Financing Prevention Act, 2017), introducing within its framework the regulation of cryptocurrency exchanges and exchangers.

The main regulatory body is Estonia’s Financial Intelligence Unit (FIU).

A licence must be obtained for activities related to:

  • Virtual currency, i.e. a value represented in the digital form, which is digitally transferable, preservable or exchangeable and which individuals or legal entities accept as a payment instrument, but which is not legal tender in any country;
  • Virtual currency wallet” service, in the framework of which keys are generated for clients or clients’ keys are stored, which keys can be used to keep, store and transfer virtual currencies.

Previously, the legislation provided for two types of licences, but since March 2020 the FIU has been issuing a single licence called Licence for Virtual Currency Service Provider.

Basic requirements for obtaining the licence (the list is non-exhaustive):

The company must have a physical office in Estonia which can be visited by the regulator at any time

The director (effective management body) must be a resident of Estonia

The company must employ a Compliance/AML Officer (also a resident of Estonia), who can be summoned by the regulator for an interview and who must permanently reside in Estonia

The company must also develop and adopt: AML Regulations, Internal Control Rules, and Procedural Rules based on the International Sanctions Act

GDPR compliance requirements must be taken into account

The minimum share capital is EUR 12,000 which must be fully paid up by the time of filing the licence application (the capital cannot be expressed in cryptocurrency and must be deposited into an account with IBAN held at an EEA (European Economic Area) financial institution.
Before registering a company and applying for a licence, it is recommended to conduct a legal analysis of the project for compliance of the proposed activity with Estonian legislation and selected licence (which can be arranged upon request)

Licence applications are assessed by the Estonian regulator within 60-120 days from the date of submission of a complete set of documents and information, including answers to additional questions asked by the local regulator (does not include the time for registering a company and preparing a set of documents).

Fees**

Services
Fees (EUR)
Total cost of new incorporation (including preparation and provision of original constitutive documents of the company and apostilled copies of such documents, company documents, and common seal)***
5,400
Share capital
12,000
Local director per year (if necessary)
For licensed structures with “high-risk” activities, employees are selected individually
Registered office, starting from the first year (including a local representative, if the director of the company is a non-EU resident)
from 1,760
Preparing and submitting financial statements
100 – 400 / hour (depending on time spent)
Dedicated telephone line per year (individual telephone number)
1,335
Office rent: arranging the rent, selecting the premises, drafting a lease agreement
from 1,820 + monthly rent (depends on the office size and location)
Compliance fee. Payable in the cases of: renewal of a company, liquidation of a company, transfer out of a company, issue of a power of attorney to a new attorney, change of director/shareholder/beneficial owner, except the change to a nominee director/shareholder)
250 (standard rate, includes the check of 1 individual) + 50 for each additional individual (director, shareholder, or beneficial owner) or legal entity (director or shareholder) if such legal entity is administered by GSL; + 100 for each additional legal entity (director or shareholder) if such legal entity is not administered by GSL. 350 (rate for high-risk companies, includes the check of 1 individual)
Fees for supporting in Estonia the licence application for conducting cryptocurrency related activities (not including government fees)
from 19,800
Government fee for assessment of licence application for conducting cryptocurrency related activities
3,300

*Please check with the consultant of GSL Law & Consulting the possibility of opening a bank account for the specific activity.

**The fees are valid as of the date of sending of this offer.

***The fee does not include certification or translation of copies of passports of directors / shareholders / beneficial owners or of powers of attorney for the making of constitutive documents.

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