Osaühing OÜ (Private Limited Company)
Estonia is, perhaps, the most technologically advanced country in the world when it comes to government. During the last years the legislative body, voting, education, justice, healthcare, banking, taxes, and policing areas have been digitized in a single platform under the E-Estonia Project.
In addition, Estonia is the first country in the world to introduce the E-Residency concept, which is a transnational digital identity card for non-Estonian citizens issued and backed by the Estonian Government.
Estonia has become a technology hub during the last decade where dozens of successful startups have taken off.
Tech entrepreneurs are usually attracted by its simple and relatively reasonable tax environment – no tax on retained profits and a 20% tax on distributed profits. Also, its ease of corporate compliance as all mandatory filings can be done electronically via its e-Residency card. This card is a transnational digital identity card for non-Estonian citizens issued and backed by the Estonian Government.
Estonian companies may also be considered by certain e-commerce and internet entrepreneurs as it offers a low-cost set up and has access to the broad range of payment processing options in the European Economic Area.
Country code – EE
Legal Basis – Civil law (German)
Legal framework – Commercial Code
Company form – Private Limited Company (Osaühing, OÜ)
Liability - The liability of the shareholders for the company is limited to the amount of their respective shareholdings.
Share capital – The share capital of a company must be a minimum of EUR 2,500, with a minimum nominal value per share of EUR 1. If the share capital is less than EUR 25,000, capital does not need to be paid up at the time of incorporation. However, a company is not allowed to distribute profits if the share capital is not paid in.
Capital contributions can be made in cash or in kind, but at least half of the contribution must be paid in cash.
Shareholders – An Estonian company may be incorporated by one or more natural persons or legal entities, residents or non-residents. Details of the shareholders are disclosed publicly.
Directors – A company must have at least one director, who must be an individual, resident or non-resident. If more than half of the Board of directors are not Estonian residents, the company must appoint a local representative with the local address.
A supervisory board is compulsory if at least two of the following three criteria are met: 1) sales revenue or income 2,000,000 euros; 2) total assets as of the balance sheet date 1,000,000 euros; 3) average number of employees 30 or at least one of the indicators of the financial year exceeds the following conditions: 1) sales revenue or income 6,000,000 euros; 2) total assets as of the balance sheet date 3,000,000 euros; 3) average number of employees 90.
Secretary – Estonian companies may appoint a secretary but is not mandatory.
Registered Address – A company must have a registered office in Estonia.
General Meeting – Each year, every company shall hold a general meeting, or pass a written shareholder resolution in lieu.
Electronic Signature – Permitted.
Re-domiciliation – Inward/outward re-domiciliation is not allowed.
Compliance – Private limited companies must submit annual reports with financial statements to the commercial register electronically and file tax returns to the Estonian Tax and Customs Board.
The applicable reporting and audit requirements depend on the size of the company.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Civil law (German) Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- EUR 2,500 Minimum issued capital
- - Minimum paid up capital
- EUR Capital currency
- Anywhere Location of annual general meeting
- 2017 AEOI
Basis – Corporate income tax is levied on worldwide income.
Tax rate – Undistributed profits are tax exempt. Profits distributions are usually subject to a 20% tax (20/80 of the net distributed amount).
A lower rate of 14% may apply for companies making regular profit distributions: payment of dividends in the amount that is below or equal to the extent of taxed dividends paid during the three preceding years.
Capital gains – Capital gains are considered ordinary income and taxed when they are distributed.
Dividends – Dividends are considered ordinary income and taxed when they are redistributed. However, corporate income tax will not apply to redistribution of dividends if the underlying dividends are received from a subsidiary that is tax resident in EEA or Switzerland, and the Estonian company holds at least 10% of the shares or votes of the distributor. This exemption also applies if the subsidiary is a non-EEA/Switzerland resident and profits have been previously taxed in the foreign jurisdiction.
Interests – Interests are treated as ordinary income and taxed when company profits are distributed.
Royalties – Royalties are treated as ordinary income and taxed when company profits are distributed.
Withholding Taxes – There is no withholding tax on dividends. However, if dividends are subject to the reduced corporate income tax (14%) and are distributed to individuals (residents or non-residents), they may be subject to a 7% withholding tax, unless it is reduced due to a tax treaty.
There is no withholding tax on interests unless interests are derived by a non-resident investor from an Estonian contractual fund or other pool of assets (10%).
Royalties paid to non-residents are subject to a 10% withholding tax unless the tax rate is reduced under a tax treaty or exempted via the EU interests and royalties directive.
Foreign-source income – Foreign-source income is generally subject to corporate tax.
Losses – As taxes are levied on distributed profits, there are no adjustments to accounting profits for tax purposes.
Inventory - As taxes are levied on distributed profits, there are no adjustments to accounting profits for tax purposes.
Anti-avoidance rules – Transfer pricing rules are applicable to all types of transactions between related persons, which must be conducted at arm’s length.
There are no thin capitalization rules and CFC rules only apply to individuals.
Labor taxes – Employers must pay social tax on certain payments to individuals at the rate of 33%. Additionally, employers and employees must pay unemployment social contributions at 1% and 2%, respectively.
Tax credits and incentives – There are no additional tax credits or incentives.
Personal income tax – An individual is considered a tax resident in Estonia if he or she has a permanent residence and/or stay more than 182 days in Estonia in a 12-month period.
Tax residents are subject to income tax on their worldwide income at a flat rate of 20%. Non-residents pay taxes on their income accrued in Estonia.
Capital gains are considered ordinary income and taxed at standard income tax rate. Investment income is usually taxed at normal rates. However, a tax deferring may be available under an investment account scheme where individuals can reinvest investment income and capital gains tax-free.
Domestic dividends are exempt from taxation, dividends obtained abroad are exempt provided that were taxed on source. Interests from financial institutions of the EEA are tax exempt.
Rental income and royalties are considered ordinary income and therefore taxed at the applicative tax rate.
Other taxes – V.A.T. standard rate is 20%. Reduced rates of 9% and 0% apply to certain goods and services.
Lands are subject to a property tax that ranges from 0.1% to 2.5%, except for residential lands. There are no transfer, inheritance and net worth taxes in Estonia.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 20% Offshore Income Tax Rate
- 20% Corporate Tax Rate
- 20% Capital Gains Tax Rate
- 20% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 10% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 0 Losses carryforward (years)
- 50 Tax time (hours)
- 8 Tax payments per year
- 2% Social Security Employee
- 34% Social Security Employer
- 20% Personal Income Tax Rate
- 20% VAT Rate
- 58 Tax Treaties
The Republic of Estonia, is a Baltic Republic located in the north of Europe. Being independent of the Soviet Union in 1991, since 2004 it has been part of the European Union (EU) and NATO. It is bordered to the south by Latvia, to the east by Russia, to the north by the Gulf of Finland and to the west by the Baltic Sea.
The country is inhabited by approximately 1,287,000 people. Its capital and most populated city is Tallin. Its official language is the Estonian, although about a third of its population is Russian-speaking. In 2011, the Euro (EUR) replaced the Estonian kroon (EEK) as its official legal tender currency. The country also stands out for its responsible public finances, being the least indebted state (9.6% of GDP) of the OECD.
Estonia is a world leader in digital governance and is one of the most digital advanced countries. All Estonians receive a digital ID card that gives them access to around 4,000 services online, from managing their finances, registering companies, signing digital contracts, paying taxes or asking for prescriptions, even voting.
They are also pioneers in the conception and implementation of the E-Residency, a transnational digital identity card for non-residents issued and backed by the Estonian Government.
Its developed telecommunication and digital infrastructures offer a superior environment for business operation. Being one of the world’s top countries in tech areas such as fintech, cyber security centers, security software development, systems integration and defense software, mobile security and wireless security. Estonia has an innovative talent pool, with a strong international reputation for know-how and innovation, and a vibrant and growing ecosystem for tech startups.
Estonia is also one of the most business liberal countries. Non residents can register a company online in less than 1 hour and manage it remotely. It has also a competitive tax system, where reinvested profits are tax free.
Tax treaties Map
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