Estonia LLC (OU)
Formation of Private Limited Company in Estonia
An Estonian company name can be in any language but must be unique. A registered name can be changed upon request and certain names are prohibited by the Estonian Company Law.
Shareholders can be legal or physical persons of any nationality and residence. The minimum number of shareholders is one. No upper limit to the number of shareholders.
The minimum share capital required to establish a limited liability company is €2500 which may be contributed by shareholders in cash or in kind before the company registration with the Commercial register. The minimum nominal value of a share is €1.
It is possible to establish a company without prior payment of contribution. However, the share capital mentioned in the Articles of Association should be paid at a later stage at a specific period of time. OÜ without contribution is not a new form of Limited Liability Company and the regulation for general OÜ will apply. The Commercial Register will make a notice in the company’s official extract that the company is established without contribution.
Requirements for LLC without contribution:
1. Shareholders may be natural persons only.
2. Articles of Association shall include the term during which the share capital is covered.
3. Until the contribution is made – the shareholders are personally liable for the company’s activities.
4. Until the contribution is made – it is not possible to distribute dividends.
5. The maximum share capital of an OÜ without contribution is €25,000.
Directors And Secretary
Only physical persons can be appointed as directors of the company and directors do not have to be shareholders. All of the management board of the company can be non-residents of Estonia or any other EU member country with a contact person appointed.
There is no requirement to appoint a local secretary.
Every Company must have a registered office and address in Estonia which should be notified at the Commercial Register.
Board meetings can be held anywhere as per the convenience of the board.The articles of association or a resolution of the management board or the supervisory board may prescribe that the meeting shall be transmitted in full or in part in real time via the Internet, using two-way communication or any other technically secure manner.
Usually takes 1 – 2 weeks.
Basic Tax Notes
Corporate Income Tax: The rate of corporate income tax is 20%. Residents are taxed on worldwide income. Non-residents are taxed only on income derived from Estonian resident companies and to permanent establishment of foreign companies. Estonian levies a corporate income tax on company’s distributed profits (in lieu of an annual corporate tax). Retained earnings are not taxed until profit distributions are made. Profit distributions may be specific (i.e. dividends, share buybacks or profit distributions via capital reductions) or deemed (which include expenditure and payments unrelated to business activities, as well as gift and donations).
Dividends are treated as regular income and are taxed upon distribution.
Capital Gains Tax (CGT):
Capital Gains are treated as regular income and are taxed upon distribution.
As Corporate Tax applies only upon distribution of the profit, there is no separately charged Withholding Tax.
Value Added Tax (VAT):
EU VAT regime. The standard rate for inland sales is 20%.
Financial Statements And Audit
Accounting is obligatory for all Estonian companies and audit will depend on income, turnover and number of employees. After the termination of the business year, the board prepares the annual accounting report and the business activity report in accordance with the Law on Accounting Financial Reporting, which should be submitted to the Auditor and presented to the Commercial Register. The report for the business year approved by General Meeting should be submitted to the Estonian Business Register not later than 6 months from a business year-end.