Many people would like to have a business in the European Union. A great way to immigrate to the European Union is to open your own company in Estonia. In addition, a business in this country can be opened in a relatively short time, and if necessary, it can be managed remotely.
What do Foreign Investors find and receive in Estonia?
Foreign investors who open a business in Estonia have the same rights and obligations as local businesspersons.
Estonia is a small country and its government understands that it should be free of any barriers for foreign investors and be happy with investments from any country. Estonia is striving for open borders for goods, services and capital.
Today, foreign investors dominate in such sectors of the Estonian economy as banking and telecommunications. The largest market players from the Nordic countries dominate these areas of the Estonian economy. The food and gadget industries in Estonia also depend on foreign investors.
What should an international investor and businessmen know about before starting a business in Estonia?
- Main principles of tax policy in Estonia: simple tax system, wide tax base, and low tax rates
- The aim of the current tax policy in Estonia is to shift the tax burden from employees to consumers
- Estonia has applied a flat income tax rate since 1994 and this flat rate of 20% applies to both individuals and companies
- Since 2000, Estonia has applied a unique system of corporate taxation – all undistributed profits of the company are actually exempt from taxation, as they are taxed at a rate of 0%.
- Individuals can open an investment account with a personal holding company to take advantage of this 0% rate.
- In the Estonian tax system, local taxes play a significant role, so it is important to choose the correct registration address for the Estonian company.
- The electronic tax reporting system in Estonia is well developed. Entrepreneurs (any corporate taxpayer in Estonia) can submit, view and correct their tax reports online in the eTaxBoard system (eMaksuamet). In this system, owners of Estonian companies will be able to view their tax balances and VAT refunds, as well as apply for VAT refunds. By the way, in Estonia VAT is paid immediately and without problems. Moreover, at the same time, no additional checks are carried out, that is, there are no cases like in Latvia, when it is sometimes easier for a business not to refund VAT, so as not to provoke additional state checks.
- Estonia has no thin capitalization and rules for controlling transactions with foreign companies for corporate taxpayers.
- Estonian VAT legislation is based on the EU VAT Directive – (2006/112 / EEC).
- The standard VAT rate in Estonia is set at 20% starting from July 1, 2009 and the reduced rate is 9%.
- Estonia applies various tax refund mechanisms as well as tax exemptions for some supplies.
Corporate income tax in Estonia
Income tax in Estonia is levied in such a way as to motivate an entrepreneur to invest again and again and to reinvest profits in his business, growing and strengthening his business.
Resident companies in Estonia, as well as permanent establishments in Estonia, must pay corporate income tax in the amount of 20% only in cases of distribution of profits (both in actual cases and in cases when the tax authority calculates expenses as distribution of profits), namely:
- dividends and other types of profit distribution;
- additional benefits;
- gifts, donations and hospitality;
- expenses and payments of the company not related to business.
Income that remains in the company’s bank account is taxed in Estonia at a 0% tax rate.
Outcome
Estonia has a number of advantages when starting a business there:
- There is no reporting as such to the Estonian Tax Department in the absence of payroll and VAT number for the company.
- Absence of a blacklist of jurisdictions (offshore companies) officially approved by the Estonian Tax Department, transactions with which were subject to income tax.
- There is no need to actually deposit the authorized capital (min. 2,500 euros) during the registration of the company; it is enough to simply declare it.
- Costs of maintaining the company (from 240 euros / year).
- Due to the high image of the Estonian jurisdiction, it is practically hassle-free to open an account in any European bank.
- Only a few types of entrepreneurial activities are subject to licensing, most of the permits are simply for notification purposes.
- Possibility to obtain an annual (and then three-year) business visa.
- The opportunity to obtain a residence permit in Estonia without the obligatory stay in the country for at least 183 days a year. The minimum annual cash
- Only in Estonia corporate income tax – 0%! This is beneficial primarily to those entrepreneurs who use the income received not for payments to individuals, but for investing in the further development of their business.
- When taxes are paid, the accumulation takes place in your pension account, that is, in the future, you can count on a pension from the Republic of Estonia.