Estonia Company Formation

SETTING UP A COMPANY IN ESTONIA

Introduction

Estonia's economy has boomed in recent years as it has pursued a liberal business agenda in preparation for EU membership which was finally achieved in 2004. Foreign investment has flooded into this small Baltic state enabling it to create a relatively relaxed environment for the international business community. However Estonia is still developing and investors should tread carefully. It is particularly important here to seek professional advice on all legal, financial and tax matters. We have a network of carefully-selected local advisers, so please contact us for assistance.

What is the most common type of company in Estonia?

There are two main kinds of business entity in Estonia:

  • public limited company - Aktsiaselts (AS)
  • private limited company – Osaühing (OÜ)

How much share capital is required to establish an AS?

  • The minimum share capital for an AS is €25,000.

What other requirements are there for an AS?

  • if Member of the Management Board is not resident of Estonia or EU, official representative is needed. This representative must be resident of Estonia, it can be legal or natural person
  • audited accounts are required
  • a local serviced office is advisable, click here for details.

How much share capital is required to establish an OÜ?

  • The minimum share capital for an OÜ is €2,500.

What other requirements are there for an OÜ?

  • if Member of the Management Board is not resident of Estonia or EU, official representative is needed. This representative must be resident of Estonia, it can be legal or natural person
  • a local serviced office is advisable, click here for details
  • an auditor’s report must be appended to the annual report of an organisation subject to accounting requirements who meets at least two of the following three conditions:

      Figures for financial years that started on 1 January 2016 or later:

  • annual net sales of €4 000 000 and more;
  • balance sheet volume of €2 000 000 and more;
  • average number of employees is at least 60.

What other types of company are there?

  • General partnership (TU) – no minimum capital requirement or financial reporting requirements, all partners separately liable
  • Limited partnership (UU) – similar to TU but makes distinction between general and limited partners
  • Sole trader (FIE) - no capital requirements or financial reporting obligations

How easy is it to recruit staff?

The recruitment industry in Estonia has been slow to develop. Many Estonian companies remain content to rely on the official state employment agency to find staff. However, a number of private-sector employment agencies have emerged and Estonian job-seekers are avid readers of local press advertisements. Estonia has a well-educated and skilled labor force and wage costs are very low by EU standards.

What is the regulatory environment like?

Estonia operates one of the most liberal foreign trade regimes in the world, with virtually no tariff or non-tariff barriers. This approach has been carried through into the wider regulatory arena. Capital and earnings can be freely repatriated. Estonia has no exchange controls or restrictions on foreign investment. The amount of foreign capital that can be invested in an Estonian business enterprise is unlimited and companies can be in full foreign ownership. However, tax regulations must be strictly adhered to and there are severe penalties for infringement.

Are there financial incentives available – and what about banking facilities?

There are no start-up incentives in the formal sense of the word, but other advantages associated with Estonia, such as liberal business regulations and low labor costs, compensate for this. The local banking infrastructure is well developed, if a little slower than elsewhere in the EU. Read more about how we can help you to open a bank account in Estonia.

How can I get more information?

Please contact us and EuroCompanyFormations.com will be pleased to discuss matters in greater detail.