Setting up a business in Estonia17 November 2009
by Ina Dimireva -- last modified 28 January 2014
An overview of the process of starting a new business in Estonia.
There are two ways of doing business in Estonia: self-employment or establishing a company. In both cases, registration is carried out pursuant to the requirements of the Commercial Code. In order to operate in Estonia, persons from foreign countries may in addition register their companies' branches in the Commercial Register or register their permanent establishment with a regional Service Bureau of the Tax and Customs Board.
Legal forms of business
A sole proprietor (FIE) is a natural person whose permanent activity is the sale of goods and services. A private limited company (OÜ) is a company that has share capital divided into shares. The shareholder is not personally liable for the obligations of the private limited company. Share capital must be at least 2500 euros. A public limited company (AS) is a company that has share capital divided into shares. The shareholder is not personally liable for the obligations of the public limited company. Share capital must be at least 25,000 euros.
A general partnership is a company in which two or more partners operate under a common business name and are jointly and severally responsible for the liabilities of the partnership with all of their assets. A limited partnership is a company in which two or more persons operate under a common business name with at least one of them (full partner) being responsible for the liabilities of the partnership with all of his/her assets, and at least one of them (limited partner) being responsible for the liabilities of the partnership to the extent of his/her contribution.
A commercial association, the activities of which are regulated by the Commercial Associations Act, is an association with three or more members whose objective is to support the household or other activities of the members by providing services, and to receive revenue.
Business activities and related rules
Register of Economic Activities
Undertakings operating in areas of activity subject to special requirements are registered in the Register of Economic Activities in the areas of activity the list of which can be found on their homepage.
To succeed, a new business needs a sound commercial strategy and secure financing.
Some standard requirements to be completed when setting up a business are the same as when opening a branch.
Registering a company
Companies and business of sole proprietors must be registered in the Commercial Register. Registration is free of charge and you must take your personal ID with you. In order to do so, a notarised application must be submitted and a prescribed state fee must be paid.
The registration procedure depends on the company's form of business. The Commercial Code also provides for an expedited procedure for the initial entries of private limited companies, sole proprietors, general partnerships and limited partnerships, and for the transformation entries of sole proprietors and companies. For an expedited procedure, the registration applications are reviewed within the following working day at the latest.
Holders of Estonian ID card can set up a company electronically via the Company Registration Portal of the Commercial Register.
Social tax registration
Social tax is paid in full by the employer to the Tax and Customs Board. Sole proprietors also pay social tax. Companies and registered sole proprietors do not have to register separately as persons liable to social tax. Non-residents who have no permanent establishment in Estonia but who are employers in Estonia are registered with the Northern Service Bureau of the Tax and Customs Board for social tax to be paid before their tax liability arises.
Companies and sole proprietors registered in the Commercial Register do not have to register separately as taxable persons with the Tax and Customs Board. Non-residents who operate in Estonia through a permanent establishment and who are not registered in the Commercial Register, or as non-resident employers, are required to register themselves as taxable persons.
Registration as a person liable to value added tax is carried out with the Tax and Customs Board, though it may also be performed with the Commercial Register or through a Notary Public.
For many areas of business, you need to apply for an activity licence. The classification of economic activities can be used to find out whether the chosen activity has special requirements and which activity licences should be obtained.
Points of single contact in Estonia
The Services Directive is a European law that aims to make life easier for businesses that wish to provide services in the European Union – in their home country or abroad. The Directive defines the rules that apply to entrepreneurs wishing to establish a business or perform temporary services in the EU/EEA area (the 27 EU member states, plus Iceland, Liechtenstein and Norway). It obliges member states to eliminate unnecessary bureaucracy, simplify formalities for businesses and make public administrations more efficient.
For the implementation of the Directive, each member state had to set up ‘Points of Single Contact (PSC) ’ , e-government portals which help businesses complete their administrative procedures on-line. The PSCs provide comprehensive information on all administrative matters related to setting up or expanding a services business in a given country. This includes for example:
- Which licences, notifications or permits do I need to obtain to start a business (at home or abroad)?
- What do I need to do when I want to offer my services abroad on a temporary basis?
- What do I need to do to apply for a licence? Which authority is responsible?
- Are the licences subject to a fee? What kinds of deadlines apply?
- Which acts and decrees apply in my sector?
- What do I need to do to establish, for instance, a restaurant or a shop? Or to work as a tour operator in another country without actually setting up a company?
- Where can I turn for personalised advice and further information?
With the PSCs, you no longer need to approach various authorities one by one!! The PSC allows you to find all relevant information and to send in your online applications to the responsible authority through one single contact point, the PSC. You can complete your administrative formalities electronically through the PSC. Just contact the PSC of the country that you want to do business in.
All PSCs are part of the European EUGO network; through a central website you can easily access all PSCs in Europe. Of course, the services of the PSCs are optional. You may always address yourself directly to the relevant authorities, too.
Source: Your Europe