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Start a company in Estonia with substance: everything you need to know
Today Mundo presents an article for those who want to start a company in Estonia. Being one of the best jurisdictions in Europe to establish a business, this country brings great opportunities. Keep reading to find out what you need to access all these benefits.
Company registration: Estonia tax advantages
Estonia is one of the best places in the world where we can follow our self-development path. When it comes to finances this is a very convenient jurisdiction because it has applied a corporate tax of 0%. This makes it the ideal place to establish a holding company for a family office that wants a position in Europe. Moreover, the benefits of a company in Estonia are huge. Under the BEPS and CRS requirements, companies must share information with their jurisdiction of residency. This means that your Estonia offshore company, if it has tax residency in Estonia, will have to report only to this country. Luckily, the payment of corporate tax can be postponed as long as you reinvest in your company.
When it comes to company registration, Estonia brings amazing advantages like the possibility to invest your earnings indefinitely in financial instruments, brokerage accounts, and precious metals.
If you wonder where the trick is, it's simple: you have to pay 20% of taxes when you choose to distribute the earnings. Nonetheless, this is not a bad percentage at all, especially in Europe. It always helps if you have accountants that are fluent in the local requirements and legislation.
What do you need to open your company: Estonia
An Estonia company can be established at a similar price to any offshore jurisdiction if you base the process on a power of attorney. Keep in mind that the entity will need a member of the board (who can be the founder himself/herself) and for every additional member or owner, you have to pay an extra fee.
The good news is that you don't need to travel to start the company in Estonia thanks to the POA. The company can be established 100% remotely and Mundo’s experts provide the following services:
- Consultation about company incorporation and bank account opening
- Preparation of documents in the Estonian language
- Translation of the power of attorney
- Notary legal fees
- Government fee
- Receiving the documents including articles of incorporation (in Estonian) and register certificate (in English and Estonian).
- The Mundo team will act as the local representative of your Estonia offshore company, which is necessary if more than half of the board members are foreigners. Our providers have the necessary qualifications and license to provide this service.
Why starting a business in Estonia is a good option
- 0% corporate tax as long as you reinvest your company's earnings.
- Founders or board members can be nonresidents and assigning a local director is not mandatory.
- It's not mandatory to pay a salary to the director of your Estonia company. There are no salary requirements.
- Establishing an initial authorized capital is not mandatory.
- Possibility to manage your Estonia offshore company remotely by acquiring an E-residency status.
- Board members can apply for a residency permit of five years if they are doing business in Estonia.
- Possibility to acquire vehicles and real estate tax-free under the Estonia company.
- Double taxation treaties with over 59 countries which, if used smartly, can help you reduce the tax burden.
- Transparent system without progressive taxation.
- Many European banks reject transactions from traditional offshore jurisdictions, but this does not happen with Estonia.
- One of the best jurisdictions to start a cryptocurrency business. You can get a license relatively easily to sell, exchange and issue cryptocurrencies.
- Remote incorporation is possible.
Getting Economic substance in Estonia
Starting a business in Estonia is now more complicated due to international regulations. However, this happens all over the world, and no matter where you want to start a company you have to prove to have real connections to the country. Economic substance in Estonia is important if you want to comply with all regulations and avoid sanctions and issues when it comes to your transactions.
Not complying with these requirements can bring serious consequences like being subject to higher taxes or being investigated by the tax authorities. The tricky part is that the concept of substance does not appear as such in the laws of any country which makes it open to interpretation. Contrary to what this may seem, it's another reason why to give economic substance in Estonia the importance that it deserves. An Estonia offshore company cannot afford to misinterpret these regulations at all.
But either way, having local providers like the ones that Mundo can offer is of vital importance to make sure that all the legal aspects of your company are in order.
Economic substance in Estonia: requirements and definition
The economic substance regulations require a company registered in a low-tax country to have the relevant infrastructure for the activities it conducts. In the same way, the company must have a purpose in the country besides getting the coveted tax benefit.
All in all, as long as your company has genuine activities and bonds in and with the country, you’re being compliant with economic substance in Estonia. However, there are a few requirements that you should apply to each jurisdiction and each may have its peculiarities. Generally, this involves having a physical presence, real in situ staff, and an economic flow in accordance with the company’s day-to-day activities. The good news is that Estonia doesn’t require a physical office as many other jurisdictions do. Here you will only need a legal address and a contact person to meet substance requirements.
Although economic substance is open to interpretation and can be defined differently by the authorities, these are a few guidelines that never fail:
- The company must have a legal address.
- Qualified managers and directors located in Estonia.
- Employees with relevant roles must be residing in the country.
- Employees, directors, and other staff members must be registered for social insurance.
- Accounting books must be maintained inside Estonia and must be carried out by Estonian accountants.
- The company must have an operating bank account and signatories must be Estonian residents.
- The Estonia company must have relevant assets in the country including equipment, staff, and other infrastructure needed to conduct the activities.
- The staff must be involved in the company's operations.
- The company must have an e-mail address and a website.
- The company must have its own phone line.
It's worth noting that these requirements are viable only in Estonia. If a foreign resident has an Estonia offshore company, he or she may have to prove its substance abroad. For example, a Canadian citizen with an Estonian company may have to prove before Canadian authorities that the structure has economic substance in Estonia. Naturally, the requirements, in this case, may vary.
Elements that can be evidence of economic substance in Estonia
- Receipt of paid taxes in the country
- Having local registered employees
- Having a VAT number
- Participants must be available in Estonia
- One of the members has a residence permit in Estonia
- Leasing an office or a warehouse in the country
- Having a startup visa
- Having a functioning website in a local domain
- Shipping goods through Estonia
Start a company in Estonia with Mundo
With these regulations applying in every country in the world, the offshore industry just got more interesting. There are plenty of options for those who want to access a healthier financial environment to develop their startups and projects. If you're one of these people, Mundo has your back. We specialize in global financial services including bank accounts, investments, real estate, trusts, companies, and investment migration.
Our team in Estonia works hand in hand with our different offices across the world including Panama, Saint Kitts and Nevis, and Riga. Besides helping you establish your Estonia offshore company with economic substance, we can help you achieve your goals by combining them with a variety of services across the globe.
Don't miss this opportunity and contact your Mundo representative right now. Mundo helps you reach your financial and spiritual goals so that you can find happiness.
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