Setting up a company in Estonia means creating a company in the European Union, being able to open a bank account in euros and having a corporate tax of 0% in many cases. You do not need to reside in Estonia, not even in the European Union, any person in the world can open a business in Estonia in a matter of hours over the internet.
And best of all, it’s completely legal.
Sound good right?
Then I will describe step by step how to create your company in Estonia online and explain all the details you have to take into account.
E-Residency to set up your company in Estonia
All this is possible thanks to the program launched by the Estonian Government in 2014, under the name of E-Residency, which is nothing else than offering digital residency in Estonia to anyone in the world who wants it.
Being a digital resident of Estonia does not give you permission to reside physically there, something that you can do anyway if you wish and have a European passport. It is not any type of visa, nor does it give you any additional advantage when traveling to Estonia.
The great value of this digital residence card is to be able to start a business in Estonia and direct it from anywhere in the world, thanks to the fact that in this country you can do practically any bureaucratic procedure over the internet.
With this card you can:
Create your company in a matter of hours over the internet based in Estonia.
Open a bank account in euros at an Estonian bank, also online. Thanks to this you can use PayPal and take your money to that account without problems.
Pay your taxes in Estonia.
Sign on the internet any document required by the Estonian Government.
Main advantages of setting up your company in Estonia
Is this a way to evade taxes, can I start a business in Estonia and live in Spain?
Opening a company in Estonia does not serve to evade taxes, on the contrary, from Estonia they even commit themselves with any other EU country to share any information that they are required in relation to the tax issue.
But still there are many advantages, which I will try to clarify, but even reading this, I always suggest contacting an expert on tax issues, as each case is a world and my explanation can be quite general and even incorrect depending of a certain case. But to give you an idea …
What to pay taxes depends on the country where you live, each one has its own laws. If for example you reside in Spain, you would have to pay the taxes of all your profits (including those that you generate abroad) in Spain.
The most common type of company for e-residents is an LTD.
With this type of company you only pay taxes for the dividends you distribute, which are usually 20%.
That is, if your company in one year generates € 100,000, but you only take out € 10,000 for dividends, you would only pay 20% of those € 10,000.
If those dividends are going to be enjoyed living in Spain, you would also have to declare it in Spain on your annual income tax return. Mind you, you would not have to declare the rest of the € 90,000 left in your Estonian company.
The money left in society is not subject to taxes. That money that remains in the society can be taken out to invest in your own company, in which case you also pay 0%.
Another interesting feature is that you can take up to € 1,230 a month from the company, free of taxes for food and travel expenses. This is ideal for digital nomads, since with that amount you can live practically anywhere in the world.
If for example you want to reside in Spain, you have to pay the taxes of the money you receive in Spain. In this case the simplest thing would be to hire yourself, put a salary and pay it in Spain with the corresponding IRPF.
That would be the easiest way to set up your business in Estonia and run it from Europe in a completely legal way and without having messes with the hacienda.
The rest of the money would be left in your company in Estonia that you could always get it by paying 20% tax and tax in the country where you reside fiscally or use it to invest in your own company with 0% tax on the amount you use.
Not with all types of businesses you can set up your company in Estonia legally. For example, if you are a freelancer with all your clients in Spain and you exercise all your work in this country, it would not be valid either.
The ideal profile is freelancers who work by computer and have clients in several countries of the world.
How to set up your company in Estonia, step by step
Now that I hope you have more clear the advantages of creating your business in Estonia and you can know whether it suits you or not, I’ll describe how to set it up step by step in a few hours and without moving from home, you can do everything online.
Apply for your E-Residency card
The first step would be to request your digital residence card, the E-Residency, you can do it through this link. Fill in the information, pay the fee of € 100 and expect to be sent to the consulate or embassy of Estonia that you choose, where you will have to go to pick it up personally. All this process usually takes around a month.
Once you have the card in your possession, you can start your business. For this the ideal is to go to an Estonian advice. They are very cheap and once again, you can also do all the procedures online.
One of those recommended by the Estonian Government itself is LeapIn and with it you will save yourself from doing all the following steps on your own, with its consequent costs. Since they manage to have an Estonian address for your company and bank account, in addition to processing the payment of all your taxes. All this from € 49 per month.
Legal address for your company in Estonia
If you prefer to continue to set up your company in Estonia on your own, the next step, once you have your digital residence card in your possession, would be to obtain a legal address for your company in Estonia. You can continue doing this without setting foot in the country, hiring a virtual office, a service that usually costs around € 125 per year and which usually includes your legal address in Estonia, virtual office and authorized contact person.
Register your company
Once you have contracted your virtual office, you can register your business in Estonia in less than 20 minutes, through the website that the Estonian Government has created for it. The fees that you have to pay to register your company in Estonia are € 190 for registering your company + € 25 for doing it online.
Until recently you had to go to Estonia to open a bank account, but the Holvi bank has created an online bank account especially designed for e-residents, so that any digital Estonian resident can open a bank account online.
This bank account has a maintenance cost of € 35 / month.
Travel to Estonia
And that’s how simple it is to set up a company in Estonia online, to be able to direct it from anywhere in the world legally.
Also if you want to travel to the Estonian capital, Tallinn, considered by many as the Silicon Valley of Europe, you have very cheap flights, from just over € 100 round trip from several points in Europe and rooms in hotels for less than € 20 the night.
Do you have any doubt left?
Well leave it in the comments and I will try to answer you as soon as possible 🙂
Also published on Medium.