General information about the country
Estonia is one of the three Baltic republics having declared independence on 24th February 1918. After regaining independence in 1991 the country has carried out successful economic reforms. Estonia is currently one of the most economically developed countries in North-Eastern Europe.
Legislative power is vested in the unicameral parliament which consists of 101 members and elected in equal and direct suffrage. The head of state is the President who is elected for five years.
The current Constitution of the country was adopted by a nationwide referendum in 1992.
Estonia joined the European Union in 2004 and adopted the Euro as the national currency in 2011.
The legislative system of Estonia is part of the Romano-Germanic legal family which has been developed over the past 150 years as a result of the interaction of different legal cultures being mainly German and pre-revolutionary Russian.
Also, the general principles of European Union law and international treaties are an integral part of the current legislation of Estonia.
The Estonian taxation system has been harmonized in accordance with the European Union general standards whilst at the same time containing beneficial differences that make the country attractive to foreign investors.
|Company type||Limited Liability Company|
|Corporate legislation||Commercial Law of Estonia 1995|
|Language of company documents||Estonian|
|Corporate ending||Osauhing, OU|
|Minimum amount||EUR 2,500|
|Standard amount||EUR 2,500|
|To be paid||At registration|
|Maximum number||No restrictions|
|Publicly accessible records||Yes|
|Local director||Not required|
|Status||Only physical persons|
|Publicly accessible records||Yes|
|Minimum number||Not required|
|Local secretary||Not required|
|Publicly accessible records||NIL|
|Filing an Annual Return||Not required|
|Fiscal year||January 01 – December 31|
|Publicly accessible Financial Statements||Yes|
|Auditor||Depending on criteria (see below)|
|Filing a Tax Return||Yes|
|On trading income||0% (see details below)|
|On passive income||0% (see details below)|
|Double Tax Treaty network:||Agreements with more than 40 countries|
Additional information on taxation
The main advantage of Estonian companies is the special tax status. In the event that the profit received by the company is not distributed as dividends and is retained by the company, the tax rate for such profit is 0%.
Meanwhile, Estonian companies are not globally treated as tax-free. In the event that the profit is distributed as dividends then the tax will be paid at the standard rate of 21%. The same treatment applies to other payments that may be treated as dividends such as gifts, awards and representational expenses.
In this regard there is no separate withholding tax in Estonia. The tax is paid at the company level regardless of the location and status of the shareholder.
The non-taxation of retained profit also applies to passive income such as:
- Income received from capital gains such sale of shares.
- Income received as dividends.
The financial statements of the company shall be filed by 30 June and must be certified by an auditor if at least two of the following three criteria are met:
- The number of the employees of the company exceeds 30.
- The turnover of the company for the financial period exceeds EUR 2 million.
- The net asset value of the company as at the reporting date exceeds EUR 1 million.
In addition, the financial statements of the company must be certified by a licensed auditor if the company meets any of the following three criteria:
- The number of the employees of the company exceeds 90.
- The turnover of the company for the financial period exceeds EUR 6 million.
- The net asset value of the company as at the reporting date exceeds EUR 3 million.
An Estonian company is a fully-fledged company which is subject to the EU Parent Subsidiary Directive and the EU Interest and Rоyalties Directive. This status, combined with the possibility to derive profit without assessment to any corporate tax, as well as a wide network of double tax treaties makes an Estonian company a favourable tool for both international trade and holding operations.
A further positive aspect is also the highly developed Estonian banking system which enables the opening of an account for these companies with a bank in Estonia, thus allowing the combination of the advantageous tax regime of this country with the favourable conditions of a highly developed banking system.