Legal services and legal protection of business in Estonia

Estonia is often regarded as one of the most developed among other post-communist countries. According to the Corruption Perceptions Index (CPI) published by Transparency International, the level of corruption here is one of the lowest worldwide, and the country ranks 15th in this indicator. The Estonian economy is primarily based on the service sector, including hotel services and trade, as well as industrial production, which includes engineering, chemical industry, shipbuilding, and woodworking. Estonia boasts a robust information technology (IT) sector and is considered one of the most advanced countries in Europe in terms of government and public service digitalization, known as “E-stonia digital state.” Tallinn serves as the financial centre of Estonia, and the Central Bank of Estonia is a member of the European System of Central Banks. Although Estonia is known as one of the most favourable jurisdictions for foreign investment and doing business by non-residents, businessmen here may encounter difficulties both at the stage of a company registration and during its further activity (especially if the business requires obtaining a licence).

SPECIFICS OF DOING BUSINESS IN ESTONIA

At the end of 2014, Estonia launched the e-Residency program, which provides access to various public services, such as company registration, banking services, payment processing, and more, to non-citizens of the country. Such virtual residence does not equate to citizenship and does not grant the right to personal visits or relocation to Estonia. Additionally, it does not affect the taxation of income or else require individuals to pay income tax in Estonia. Since 2016, government spending on innovation has significantly increased here, fostering a welcoming environment for all kinds of start-ups and enterprises in modern information technologies, fintech, artificial intelligence, and other related fields. There are many start-up accelerators and incubators currently operating in Estonia.

When registering a company, businessmen have the option to apply for a business visa (first an annual, and then a three-year one). As soon as the capitalization of the company reaches 65,000 euros, the businessman gets the opportunity to apply for an Estonian residence permit.

TAXATION

Estonia has a unique corporate taxation system: undistributed and reinvested profits are not subject to tax here. The corporate tax rate of 20% is only applicable to dividends if the company chooses to distribute them. Moreover, Estonia has implemented a special taxation regime for non-residents: remuneration for non-resident employees whose place of work is located outside the EU is not subject to local taxes. Instead, it is deemed that the employee is responsible for paying income tax in the country of his/her tax residence.

As of 2023, tax rates in Estonia are expected to remain largely unchanged. The social tax rate remains at 33%, the personal income tax rate is 20%, while pension insurance stands at 2%, and the unemployment insurance rate remains at 1.6%.

LICENSING

Estonia does not have a unified law on licensing, accordingly, no standardized procedure for obtaining licences or notifications for specific activities exists. Ministries or departments in charge of licensing activities independently determine the procedure and order for obtaining a licence or notification. It is required to apply for a licence after registering a company, but before starting activities in a field that requires licensing. Carrying out certain activities, such as organizing sea, air, or railway transportation, conducting geological work, manufacturing and selling weapons, providing medical services, and others, requires a licence.

REPORTING

The official document flow in Estonia is maximally simplified, all reports can be submitted online, without a personal visit to the authorities. However, it is important to note that all documents must be filled in Estonian. The submission of the annual report is mandatory for all companies operating in Estonia, without any exceptions. This report must be filed within 6 months after the end of the financial year. All company reports are publicly available in the Commercial Register.

OUR SERVICES

COREDO specialists offer legal support for businesses in Estonia at every stage of their development. We provide a wide range of services, including:

  • assistance in the development and execution of any necessary documents;
  • making changes to the registration data and statutory documents of the enterprise;
  • assistance in the preparation and conclusion of various agreements and contracts;
  • preparation of the required documents for obtaining licences;
  • representation of the interests of a business in various official bodies;
  • legal analysis, examination of documents and contracts, and more.

With the expertise of COREDO specialists, doing business in Estonia becomes simpler, more efficient, and more successful. Do not hesitate to contact us; we are always ready to help.

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