Currently it is possible in Estonia to establish a company of any legal form. The main forms of ownership are LLP (Limited Liability Partnership) and JSC (Joint-Stock Company).
The most common form in Estonia is a limited liability partnership (LLP – Osaühing – OÜ). First of all, this popularity is due to the fact that the amount of the authorized capital is not that large (minimum – 2500 euros), the management structure of the company is simple, and the owners’ liability is limited by their contributions.
The founder or owner of an LLP may be one or more individuals or legal entities; they can be both EU residents (permanent residents or citizens) and residents of foreign countries. 100% of the charter capital of an Estonian company may belong to foreigners.
JSC is used, as a rule, either by very large companies, or those companies that are legally required to be JSC (e.g. banks). Registration of JSC is more expensive, authorized capital is more (minimum – 25,000 euros), the structure is more complicated (in addition to a managing board of 3 members, there must also be a board of directors). Maintenance is also more expensive – an audit is required, etc.
Registration of a company in Estonia provides a great opportunity to freely, avoiding intermediaries, enter the markets of EU member states, as well as acquire real estate in Europe, thanks to an effective system of double taxation treaties concluded by Estonia with countries such as Finland, Denmark, Norway, Sweden, Lithuania, Latvia, Poland, Great Britain, Ukraine, Germany, Belarus, Moldova, etc.
A very attractive option for a foreign investor is the establishment of an Estonian company with a minimum authorized capital, when the company is financed mainly through loans from a parent foreign company. The income received in the future can be used to redeem the loan to the parent company. Such payments will not be taxed, since there is no profit distribution. In other words, the cash flow goes as an initial investment from the parent company through the Estonian company and returns back without taxation as a refund until the loan is fully redeemed.
Interest paid on the loan will be taxed at a rate of 20% in most cases.
However, with a favorable, in the sense of bilateral tax agreements, choice of a holding company, you can reduce the tax rate to 10%. Estonian companies can receive a European VAT number and EORI number.
One of the most effective schemes involving Estonian companies is international trading structures, when an Estonian company is used as a sales agent for a principal. It is the responsibility of the Estonian company to enter into agreements and issue invoices for remuneration of a certain percentage of the turnover or a fixed amount per year by agreement of the parties.
As all invoices and agreements are signed by the Estonian company, thus, it will act as a sales agent of another company and will only declare a commission as income, the tax on which will not arise until the funds remain in the company and are not distributed.
There are many opportunities for using companies, contact us and we will find the one that is most suitable for you!