How to start a business in Estonia - company formation & trading with Eastern Europe
Estonia’s economy has been buoyed by the foreign investment that has flooded into this small Baltic state, enabling it to create a relatively relaxed environment for the international business community. It's particularly popular with businesses trading with Eastern Europe. However as Estonia is still developing, it is particularly important to seek professional advice on all legal, financial and tax matters. We have a network of carefully-selected local advisers that can help you with any of these issues.
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)
Requirements for OÜ (Ltd) company formation in Estonia
- The minimum share capital for an OÜ (Ltd) is €2,500.
- Auditors are required if share capital exceeds €25,500.
- The minimum number of board members is one - this can be the director/shareholder of the company.
- Non-EU owners do not have to provide a supervisory board with three members. If not, they are required to take a Nominee Representative.
- The business plan needs to be presented to the VAT office together with copies of contracts and any invoices that prove that you wish to trade in the EU or through Estonia.
Requirements for AS company formation in Estonia
- The minimum share capital for an AS is EEK 400,000 (€25,500)
- At least half the members of the Board of Management must be resident in Estonia
- Audited accounts are required
- A local serviced office is advisable
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?
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 labour force and wage costs are very low by EU standards. Please contact us if you need any help with recruitment.
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. The local currency, the Estonian Kroon (EEK), is pegged to the Euro and is fully convertible on current account and capital account transactions. 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. It is therefore essential to engage an English-speaking accountant for tax planning purposes.
Financial incentives and banking facilities
There are liberal business regulations and low labour costs in Estonia. The local banking infrastructure is well developed and our banking contacts within Estonia allows for easy introductions with banks for foreign entrepreneurs.
If you need any help with opening a bank account, or any other issues regarding company incorporation in Estonia, including trading in Eastern Europe, simply phone us on 0033 (0)1 53 57 49 10 or email us from our contact page and we'll be happy to help.