If you’re thinking of establishing a business, or want to secure substantial tax advantages, consider registering your company in Estonia. Frequently overlooked as a low-tax jurisdiction, the Eastern European country borders the Baltic Sea and the Gulf of Finland, with Latvia to the south and Russia to the east. A company in Estonia can enjoy these perks:
As an incentive to establish a company in Estonia, the country does not tax undistributed profits, even if retained, are not subject to income tax. Also, profits converted to share capital through a share issue are not taxed.
In 2009, amid economic upheaval and a 20 percent unemployment rate, withholding tax on dividends was done away with. This is good news for a company in Estonia. More than that, a 10 percent withholding tax rate was issued for royalties and fees entertainers and professional athletes. A rate of 10 percent is applies to payments to non-residents for services provided within the country.
The standard rate of Value-added Tax (VAT) for a company in Estonia is 20 percent. Supplies, including books, medical supplies and some medicines are subject to a 9 percent rate. VAT exemptions include postal services, insurance, financial services, health and education. The VAT registration threshold is EUR16,000 per calendar year.
The Estonian Tax & Customs Board, has established three duty-free zones where goods brought in for later re-export are not subject to VAT or excise taxes.
The county also offers matching grants to your start-up or established company in Estonia through Enterprise Estonia. For a 20 percent match, start-ups can receive up to EUR5,000. A larger business can get up to EUR32,000 for a 50 percent match.
Economy & Government
Estonia’s market-based economy boasts a higher per capita income over its Central European counterparts. Telecommunications and electronic industries sectors along with robust trade with Finland, Russia, Sweden and Germany fuel the country’s success. It, as with most countries had a significant downturn in its economy in 2008 and 2009 with an unemployment rate of nearly 20 percent. But a fiscally conservative, pro-business government has worked to balance Estonia’s budget and carry little public debt.
The country is a democratic and politically stable with membership in the EU, WTO and NATO. It welcomes foreign investment with simple corporate and personal income tax systems based on a flat tax. Registering your company in Estonia is a solid move.