Are you thinking about starting a business in Estonia but don’t know where to begin? Don’t worry! Estonia is a fantastic country to set up your business, and the process is simpler than you might think. With the help of Estonia’s e-Residency program, anyone from anywhere in the world can run a company online. Whether you’re an entrepreneur, consultant, or have a specific service or product to offer, Estonia is a great place to get started. Here’s a simple step-by-step guide to help you on your way.
1. e-Residency Card
The first step to starting your Estonian business is applying for an e-Residency card. Estonia’s e-Residency program gives you digital access to Estonia’s business environment, even if you’re not physically present in the country.
What is an e-Residency card?
It’s a government-issued digital ID that allows you to sign documents, access secure online services, and manage your Estonian company remotely. You don’t need to visit Estonia to apply for this card, and it’s available to citizens of most countries. You can apply online, and once approved, you’ll receive the card by mail.
Why is it beneficial?
Having an e-Residency card allows you to start and manage a business easily, access Estonia’s secure digital ecosystem, and take advantage of the country’s efficient tax and legal systems. It’s perfect for digital nomads, remote entrepreneurs, and businesses looking for an easy, online-first approach to running a company.
2. Taxes in Estonia
Estonia offers a very attractive tax system for businesses. One of the main benefits is the corporate tax system: companies only pay taxes when they distribute profits, rather than when they earn them. This means you can reinvest your earnings into the growth of your company without paying corporate taxes until the money is paid out as dividends.
Some key things to know about taxes in Estonia:
- Corporate Income Tax: 0% on undistributed profits and 20% when profits are paid out as dividends.
- Value Added Tax (VAT): The standard VAT rate in Estonia is 20%. You will need to register for VAT if your business makes over €40,000 in annual sales.
- Social Security Contributions: If you hire employees in Estonia, you will need to pay social security contributions for them.
The Estonian tax system is designed to be simple and transparent, making it a very business-friendly environment.
3. Accounting
Estonia offers a straightforward approach to business accounting. While you don’t need to worry about managing complex paperwork, the finance automation system efficiently handles most processes. However, it remains crucial to maintain accurate financial records.
Here’s a breakdown of accounting in Estonia:
- Bookkeeping: All Estonian companies need to have proper bookkeeping. This includes recording all transactions, generating financial statements, and preparing for tax filings.
- Annual Reports: Estonian companies are required to submit an annual report to the Business Register. This report includes financial statements, shareholder details, and company structure. The report can easily be submitted online.
- Outsourcing: Many entrepreneurs opt to outsource their bookkeeping and accounting tasks to professionals, which is a common practice in Estonia due to the simplicity of the online systems.
There are several accounting software options available for managing your company’s finances, or you can hire a local accountant to handle everything for you.
