Estonia has become an attractive destination in Europe for entrepreneurs who want to launch and manage a business with minimal bureaucracy.
Known for its fully digital government services, unique e-Residency program, and favorable tax system, the country allows foreign business owners to establish and run companies online from anywhere in the world.
This article will explain everything you need to know about Estonia company formation, including the step-by-step registration process, the cost of setting up a company in Estonia, available business structures, taxation rules, and compliance requirements.
It will also outline the benefits of opening a company in Estonia and address common questions foreign entrepreneurs ask about starting a business as a foreigner.
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Le informazioni contenute in questo articolo hanno un valore puramente indicativo. Non costituiscono consulenza finanziaria, legale o fiscale e non rappresentano una raccomandazione o una sollecitazione a investire. Alcuni fatti potrebbero essere cambiati dal momento della stesura.
Why Open a Company in Estonia?
Estonia has built a reputation as a digital hub for international business, attracting freelancers, startups, and established companies alike.
Benefits of Opening a Company in Estonia
For entrepreneurs looking to expand into the European Union, the country offers several distinct advantages:
- Digital-first infrastructure – Estonia’s government services are almost entirely online. Using the e-Residency digital ID, company founders can register, sign documents, submit tax filings, and manage compliance without ever needing to be physically present.
- Tax efficiency – Estonian companies pay 0% corporate income tax on retained and reinvested profits. Tax is only applied when profits are distributed as dividends, which encourages reinvestment and growth.
- Ease of incorporation – Most companies can be set up electronically in less than one business day, making Estonia one of the fastest jurisdictions for incorporation in Europe.
- Access to the EU single market – Registering in Estonia gives entrepreneurs the ability to operate across all EU member states, with credibility as an EU-based business.
- Transparent legal environment – Estonia is consistently ranked high in global ease-of-doing-business indexes, offering clear regulations and investor protections.
Basically, entrepreneurs are drawn to Estonia for its streamlined online processes, unique tax advantages, EU market access, and the ability to establish and manage a business entirely remotely.
Setting Up a Company in Estonia
Estonia offers several structures, but most foreign entrepreneurs choose the Private Limited Company (OÜ) due to its flexibility and low entry barriers.
Private Limited Company (OÜ)
- The most common and practical choice for both local and foreign business owners.
- Requires a minimum share capital of just €0.01, though in practice entrepreneurs often contribute more.
- Shareholders’ liability is limited to their contribution, making it a safe option for startups and small businesses.
- Suitable for most business activities, including consulting, digital services, and product sales.
Public Limited Company (AS)
- Designed for larger enterprises that may seek outside investment or stock exchange listing.
- Requires a minimum share capital of €25,000.
- Typically chosen by companies planning to scale significantly or operate in regulated industries.
Other Business Structures
- Sole Proprietorship (FIE) – A simpler structure where the owner is personally liable for business debts. Less common for foreign entrepreneurs due to personal risk.
- General and Limited Partnerships – Options for businesses formed by two or more partners. Liability may extend to personal assets depending on the partnership type.
- Non-profit Associations and Foundations – Used for charitable or non-commercial purposes.
The Private Limited Company (OÜ) is the most popular choice. It requires minimal share capital, limits shareholder liability, and can be managed entirely online, making it ideal for foreign entrepreneurs setting up remotely.
Step-by-Step Guide: How to Register a Company in Estonia
One of the main advantages of starting a business in Estonia as a foreigner is how simple and digital the process is. With an e-Residency card, you can handle the entire process online through the e-Business Register, often in just a day.
Here’s how it works:
1. Prepare the Basics
- Get e-Residency if you don’t already have it. This digital ID lets you sign documents, register your company, and file taxes online.
- Choose a company type. Most foreigners opt for a Private Limited Company (OÜ), which requires only a symbolic minimum share capital.
- Pick a company name and check its availability.
- Arrange a legal address in Estonia. If your management board is outside the country, you’ll also need a licensed contact person.
2. File in the e-Business Register
- Log into the portal, fill in the details (founders, articles of association, share capital, business activity code), and submit.
- Pay the state fee of €265.
- Processing is fast. Standard applications are reviewed within a few days, but expedited filings are usually confirmed by the next business day.
3. Open a Business Account
- Once registered, you’ll need a business bank account to deposit share capital and handle payments. Estonia accepts accounts in Estonian or other EEA banks and many fintech platforms, making this step possible remotely.
4. Register for Taxes
- If your annual turnover exceeds €40,000, you must register for VAT. The standard VAT rate is 24%.
- Corporate income tax is unique: 0% on retained profits and 22% (gross) only when dividends are distributed.
5. Meet Ongoing Obligations
- File an annual report within six months of the financial year’s end.
- Keep proper accounting records and update beneficial owner data if it changes.
- If you hire employees in Estonia, register them with the Employment Register before they start.
Cost of Setting Up a Company in Estonia
In Estonia, the first-year cost to set up a company starts around €265 for government fees, with additional costs for legal address, contact person, and accounting bringing total expenses to several hundred euros.
It is relatively low compared to many EU jurisdictions, which is one reason it attracts international entrepreneurs.
Government Fees
- State fee: €265 if you register electronically through the e-Business Register.
- Notary route: About €200 state fee plus notary service charges, if digital signatures cannot be used.
Share Capital
- A Private Limited Company (OÜ) requires a minimum share capital, but since 2023 this can be as little as €0.01 per share. The old €2,500 threshold is no longer mandatory unless you choose to set it.
Address and Contact Person
- Every company must have a legal address in Estonia.
- If your board is located abroad, you’ll also need a licensed contact person. Many service providers bundle these, usually for a few hundred euros per year.
Banking and Accounting
- Opening a business bank account may involve service or transaction fees, though fintech platforms often provide cost-effective options.
- Professional accounting services are strongly recommended for compliance. Monthly packages vary depending on business volume, typically starting around €50–€100 per month.
Optional Services
- Some founders also pay for virtual office solutions, legal consultation, or help with VAT registration.
How much does it cost to register a company in Estonia?
Expect at least €600 for rough estimates for the first year, €265 of which goes to the state fee, plus additional annual costs for a legal address, contact person, and accounting. The overall setup cost is modest compared to most EU countries, making Estonia a competitive option for small businesses and startups.
What taxes do you pay in Estonia?
One of the biggest benefits of opening a company in Estonia is its tax system, which is simple, transparent, and designed to encourage growth. Instead of taxing profits annually, Estonia only taxes them when distributed as dividends.
Corporate Income Tax
- 0% tax on retained and reinvested profits. Companies can grow or reinvest earnings without immediate tax liability.
- 22% gross tax (22/78 of net) on distributed dividends, effective from January 2025.
Value Added Tax (VAT)
- Companies must register for VAT if their annual taxable turnover in Estonia exceeds €40,000.
- The standard VAT rate is 24% starting July 2025, with reduced rates or exemptions applying in specific cases.
Ongoing Compliance
- Annual report: Every company must submit a financial report to the Business Register within six months of the end of its financial year.
- Accounting: Proper bookkeeping is mandatory, and most foreign-managed companies hire professional accountants.
- Beneficial ownership updates: Any change to ownership must be reported within 30 days.
- Employment compliance: If you hire staff in Estonia, they must be registered before they begin working.
Estonian companies only pay corporate income tax when distributing dividends. Retained profits remain tax-free.
You must also file annual reports, keep accurate accounting records, and maintain a legal address and contact person if the management board is abroad.
Banks in Estonia: Do I need a local bank account in Estonia?
Not necessarily. Estonian companies can use accounts in any EEA bank or fintech provider. However, many founders still prefer an Estonian bank for local transactions.
Once your company is registered, the next practical step is to open a business account and set up smooth operations.
For many foreign founders, this is one of the most important parts of setting up a company in Estonia, since it enables capital contributions, payments, and compliance with financial rules.
Business Bank Account
- Estonian companies are allowed to open accounts in Estonia or anywhere in the European Economic Area (EEA).
- Many entrepreneurs choose fintech providers (such as Wise, Payoneer, or Holvi) for remote onboarding and lower fees, especially when starting out.
- Traditional Estonian banks may require in-person verification, though some accept foreign-managed companies if risk criteria are met.
Share Capital Deposit
- Even if you set a very low share capital (e.g., €1), it still needs to be deposited into a company account. This account also becomes the base for everyday business operations.
Day-to-Day Operations
- Accounting software and cloud-based systems are widely used and integrate directly with Estonia’s digital government portals.
- Most companies outsource accounting and compliance to local service providers, which ensures VAT returns, payroll, and annual reports are filed correctly.
- If hiring in Estonia, employees must be registered with the Employment Register before they begin work.
For foreign entrepreneurs, starting a business in Estonia is fast, straightforward, and can be done entirely online through the e-Residency program.
With clear rules on taxation, simple compliance requirements, and full access to the EU market, the country offers a compelling option for anyone looking to expand internationally.
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Adam è un autore riconosciuto a livello internazionale in materia finanziaria con oltre 830 milioni di visualizzazioni di risposte su Quora, un libro molto venduto su Amazon e un contributo su Forbes.
