Estonia, the country where you can open a business completely online, even as a foreign citizen

Estonia is known for being “the most advanced digital society in the world” with minimal bureaucracy, as 98 percent of government interactions are done online, and many people who are not Estonian citizens have chosen the country to start a business – they don’t even have to go to Estonia to set it up, and their companies can operate internationally from day one!

Estonia has more start-ups per capita than any other country in Europe, and you may be surprised that some very well-known companies are actually Estonian: do Skype, TransferWise or Taxify ring a bell? The country is in first place on the Entrepreneurship ranking by the World Economic Forum, in OECD’s tax competitiveness ranking and in the European Commission’s EU Digital Economy and Society Index.

As the first country to offer e-Residency, Estonia allows anyone to base business and finances in the country. E-residents have full access to Estonia’s digital infrastructure and the same rights in business as an Estonian citizen. You just need to be over 18 years old and have no criminal record.

You can open the following types of businesses in Estonia:

• Private limited company
• Public limited company
• Sole proprietor
• General partnership
• Limited partnership
• Commercial association

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The most common type of business is the private limited company (also known as osaühing).

If you open a business through e-residency, you’ll be completely location-independent, administration costs are low, and taxes are simple. If you take all the correct steps, you should be able to activate a private limited company in less than a day! Here is what you need to do:

1. Get Estonian e-Residency 

First, you will need to pay the state fee of EUR 190. As expected, this can be done online. You’ll have to get your ID card and reader from the nearest Estonian embassy or special collection point, where they will also take your fingerprints.

You will, however, need to provide a legitimate reason for wanting to use the Estonian services. Answers will be read by the authorities, who may or may not approve your application depending on the reasons you give.

2. Provide an Estonian address for the company

You can obtain a legal address remotely, so you don’t actually have to travel to the country. Since the country relies so much on digital communication, you won’t have to worry about important documents being sent to your registered office by post.

3. Check availability of company name

Your company name must be written in Latin alphabet, preferably without special characters or symbols, and it has to be unique in the country’s registry. You’ll also want to check if there are other similar trademarks across the EU – this wouldn’t necessarily stop you from using it, but you may want to know in order to avoid confusion, especially if you’re going to provide products or services in other countries besides Estonia.

Paying the share capital

For a limited company, the minimum share capital is EUR 2,500, but you can choose to defer the payment for as long as you want if the share capital is under EUR 25,000, but before you make any dividend payments. The payment is done online, of course.

Paying taxes

Estonia has the most competitive tax environment among the OECD, which empowers rapid growth for companies. The corporate earnings taxation system is unique, as it shifts timing of corporate taxation from the moment of earning the profits to the moment of their distribution.

In other words, earning profits in itself does not bring income tax liability – it arises only when earned profit is distributed to shareholders. Distributed profits are taxed at a rate of 20 percent.

Employers also must pay social tax at a general rate of 33 percent of the employee’s gross earnings.

If your company turnover will be high, you might need to register for VAT. This is mandatory if your company annual taxable turnover exceeds EUR 16,000, regardless of the type of company.

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