Estonia - COREDO

What is a Trust Fund in Estonia?

The Investment Funds Act of the Republic of Estonia (IFS) enables the establishment of an investment fund (Usaldusfond) in the form of a joint stock company, a limited liability company or a pension fund. The provisions of the Estonian Commercial Code and the provisions of the Investment Funds Act shall apply to the establishment, operation and termination of an investment fund.

Advantages of setting up a Trust Fund in Estonia

Among the distinctive advantages of this structure, the following can be highlighted:

No requirement to publish the identities of their investors;
No requirement to publish the amount of investment made by each investor;
Lower establishment costs compared to many other states in the European Economic Area;
Quick registration procedure.

Taxation

A trust fund established as a limited liability company is a neutral legal entity from the point of view of Estonian tax legislation, to which the principle of “look-through tax treatment” is applied.

The fund distributes profits to investors without paying taxes; each of the investors pays taxes by the taxation applicable to it in its tax jurisdiction, which contributes to the tax transparency of the fund.

However, we note that a trust established as an LLC is required to keep accounting records and file an annual report for the fiscal year with the commercial registry.

Registration Timeline

Depending on the complexity of the structure and the scope of work, the timeframe for registration may vary. In our experience, the procedure usually takes approximately 2 ‑ 3 months. However, it should be noted that this is an approximate timeframe and may vary depending on the specific circumstances. When applying for the registration of a trust fund, it is important to deem possible delays related to the verification of documents and necessary activities.

Registration Fee

The cost of implementing this project is 15,000 EUR + VAT, but this amount may vary depending on the circumstances of a particular case.

Please be advised that the legislation regulating the activities of a trust fund in Estonia may change over time, therefore, in order to fulfil all legal requirements of the regulator promptly, you will need the advice of specialists experienced in the implementation of such a project.

The COREDO team is ready to help you overcome the thorny path by providing qualified advice, customised solutions and continuous support at all registration stages.

How is a Trust Fund managed in Estonia?

A trust established as a limited liability company may manage its assets independently. In this case, the assets are managed by the general partner (täisosanik) in accordance with the terms and conditions set out in the limited liability company agreement. He may also enter into a management agreement with a third-party manager. A trust fund established in the form of a limited liability company may be managed by a small fund manager registered with the Estonian Financial Supervisory Authority (EFSA) – the body that supervises the registration and reporting of trust funds – or by a fund manager with a licence from Estonia or any other member state of the European Economic Area.

Under § 3 (6) IFS, a small fund manager is a person who:

directly or indirectly owns and manages assets with a total value not exceeding €100 million; or
if the total asset value does not exceed €500 million, provided that the fund portfolio consists of small unleveraged funds and the right to redeem units or shares cannot be exercised within five years from the date of investment in each fund.

What is the Order of our Service

As part of the process of setting up a trust fund, we can help you through the following steps:

In the first instance, we will register a limited liability company (OÜ);
We will then register OÜ as a small fund manager (if the total value of assets does not exceed the figures above). At this stage, we will prepare and submit a written application to the Financial Supervision Authority with all necessary documents. Note that the Financial Supervisory Authority has the right to request additional information. A decision on registration is usually made within two months;
After successful registration, OÜ becomes a full partner, so we prepare and facilitate the conclusion of an agreement between the investors to establish an investment trust fund;
In the last step, the general partner applies for the company to be entered into the register of trust funds. The trust fund is created when the entry is made in the register.

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Trust Fund in Estonia