Registration of a tax-free company in Estonia
“Paying taxes is a duty, paying little taxes is an art! " (with)
I want to share the experience of successful registration of a company in Estonia. I will give a brief description of jurisdiction, tell you about the pitfalls that exist, and share my experience.
The task was the following - to find a jurisdiction in which you do not need to pay income tax, while it was convenient for customers from the USA, Canada and the EU to work with it. The real office to open in this country was not a problem.
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The main activity of the company is software development (a classic outsourcing company with a staff of ~ 20 developers).
Offshore, we did not want to use, although we could use, for example, the same Belize with its closed share registers and a relatively cheap price tag for registration and use of nominal services.
Hong Kong arranged for all parameters (if you do not operate in Hong Kong, the company is exempt from income tax), with the exception of the cost of registration and maintenance of the company, also did not want to pay for annual audits.
In Scotland and England, it was theoretically possible to register a company (partnership) and not pay taxes on the basis that the founders (partners) are non-residents of these countries, but this is not legally correct, and the founder was just one. It was possible to find a second founder (partner) in the form of a nominal shareholder, but these are extra costs.
Stopped on Estonia. The total budget for registering a company and opening an account was set at 2,500 euros. To accomplish the task, lawyers from Estonia were involved.
So, in Estonia the main are two types of companies:
OÜ is an analogue of Russian and Ukrainian LLC, the minimum share capital is 2500 euros.
AS is a joint stock company, the minimum share capital is 25,000 euros.
The authorized capital is not required to be deposited in the company's account, it can only be declared at registration
(hereinafter I will tell the trick, how to not legally contribute the share capital).
0% - if the company does not distribute profits among its members (shareholders).
~ 26.6% - if the company distributes profits among its members (shareholders) in the form of dividends.
You will be surprised, but really, if you do not pay yourself dividends, you will not be obliged to pay taxes in Estonia. If you do not distribute dividends to the founders, Estonian legislation gives you the right not to contribute real share capital, you simply declare this amount "on paper" during registration. That is, you will not need to deposit an amount of 2,500 euros (and for joint-stock companies it is 25,000 euros) to the company’s account.
The VAT rate is 20%.
If you provide any IT B2B services (for example, software development), there will be no obligation to pay VAT on intra-union sales for the territory of Estonia, as well as invoices without VAT (the reverce charge mechanism will work), and on sales for the EU territory Estonian VAT is not provided at all.
Estonia is a member of the OECD. Membership provides the company's contractors with the convenience of conducting transactions on a corporate account, as well as they (counterparties) without problems (in cases established by their legislation) will be able to recognize payments as deductible business expenses in their country.
As an additional advantage - Estonia has a huge number of treaties for the avoidance of double taxation.
In Estonia, the registers of the founders are in the public Internet. I'm sure not everyone will like it.
In order not to “shine” your name in the registry, you can use nominal services.
We used a nominal shareholder - a Latvian citizen. By the way, we were provided with such services by lawyers from Estonia, with whom we have entered into preliminary partnerships for company registration.
If we talk about the validity of the nominal, I want to upset you: there is a continental law in Estonia and there is no legislative (or through the creation of judicial precedents) of the fixed institution of nominal services.
If you want to use a nominee shareholder - be aware that there is a risk that he will take possession of your company. I advise you to keep all correspondence with the nominee shareholder and collect as much as possible written confirmations with the signature of the nominal value, that it only "replaces" the real shareholder in the register. These hooks will help in court.
It was easier for us, we had certain acquaintances and received recommendations and guarantees of a non-legal nature from close people.
To eliminate the risks of a scam from the nominal shareholder, you can do the following:
a) register the company for yourself and your surname will appear in the register of founders (but do not forget about the prohibition to allocate capital abroad without permits);
b) register the parent company, for example, in an offshore and make an Estonian subsidiary.
In the continuation of the story about the "nominal" I will say that in addition to the nominal shareholder, you can also use the nominal director. You will receive a power of attorney from him, on the basis of which you will act and sign documents on his behalf.
We did not use such a service, since it does not need it especially.
Problems with the nominee director may be the same as with the shareholder. If he wants to "throw" you, he will "throw." Withdraw the power of attorney and you lose control of the company until you return through court (if you return).
B-card is a printout with the date of registration of the company, name of the company, data about the founders of the company and the company which was engaged in registration in Estonia, data about the main activity of the company, legal address, e-mail of the company.
Charter - the standard text of the charter.
A big minus is all in Estonian, but Google helped solve the language barrier problem.
Exemption letter and application of nominee shareholder in English.
Plus printing company
We opened in Latvia, because we found a bank there with interesting conditions for us and with a minimum commission for transferring money to the countries of interest to us - 5 euros.
To open an account, we contacted the manager and filed about this package of documents:
- corporate documents for an Estonian company;
- CV of the beneficiary;
- confirmation of the welfare of the beneficiary (documents for the apartment, land, car);
- description of the company;
- sources of funding (provided extracts and tax returns for the business of the local beneficiary);
- main business partners (gave their details);
- international passport.
You can open an account in Estonia. By the way, after registering the company, we received a huge number of offers from Estonian banks to the post office, which we indicated when registering the company.
There is no currency control in Estonia (there are no restrictions on the size of transactions, on withdrawing funds from an account) and this is a positive thing.
Having a company in the EU, you get a huge number of banks where you can open an account. It is important that the commissions and conditions of the bank are comfortable for you.
In Estonia, it is imperative to keep accounts. The cost of filing a report - about 600-700 euros per year. It is easy to find an accountant, in our case, those lawyers who helped to register a company also help with accounting.
You can withdraw money from an Estonian company to its business entities under the pretext of “consulting services contracts” or “software development contracts”. It is very important that you are not considered bound persons. It is better to first consult with an accountant in Estonia, especially if you do not use a nominal shareholder.
By registering a company in Estonia, you can get a convenient business tool with relatively cheap content and no income tax. There are a number of problematic issues related to nominal services, which must be foreseen and excluded in advance.
I want to share the experience of successful registration of a company in Estonia. I will give a brief description of jurisdiction, tell you about the pitfalls that exist, and share my experience.
The task was the following - to find a jurisdiction in which you do not need to pay income tax, while it was convenient for customers from the USA, Canada and the EU to work with it. The real office to open in this country was not a problem.
')
The main activity of the company is software development (a classic outsourcing company with a staff of ~ 20 developers).
Offshore, we did not want to use, although we could use, for example, the same Belize with its closed share registers and a relatively cheap price tag for registration and use of nominal services.
Hong Kong arranged for all parameters (if you do not operate in Hong Kong, the company is exempt from income tax), with the exception of the cost of registration and maintenance of the company, also did not want to pay for annual audits.
In Scotland and England, it was theoretically possible to register a company (partnership) and not pay taxes on the basis that the founders (partners) are non-residents of these countries, but this is not legally correct, and the founder was just one. It was possible to find a second founder (partner) in the form of a nominal shareholder, but these are extra costs.
Stopped on Estonia. The total budget for registering a company and opening an account was set at 2,500 euros. To accomplish the task, lawyers from Estonia were involved.
Jurisdiction Overview
So, in Estonia the main are two types of companies:
OÜ is an analogue of Russian and Ukrainian LLC, the minimum share capital is 2500 euros.
AS is a joint stock company, the minimum share capital is 25,000 euros.
The authorized capital is not required to be deposited in the company's account, it can only be declared at registration
(hereinafter I will tell the trick, how to not legally contribute the share capital).
Corporate income tax in Estonia
0% - if the company does not distribute profits among its members (shareholders).
~ 26.6% - if the company distributes profits among its members (shareholders) in the form of dividends.
You will be surprised, but really, if you do not pay yourself dividends, you will not be obliged to pay taxes in Estonia. If you do not distribute dividends to the founders, Estonian legislation gives you the right not to contribute real share capital, you simply declare this amount "on paper" during registration. That is, you will not need to deposit an amount of 2,500 euros (and for joint-stock companies it is 25,000 euros) to the company’s account.
VAT
The VAT rate is 20%.
If you provide any IT B2B services (for example, software development), there will be no obligation to pay VAT on intra-union sales for the territory of Estonia, as well as invoices without VAT (the reverce charge mechanism will work), and on sales for the EU territory Estonian VAT is not provided at all.
Estonia is a member of the OECD. Membership provides the company's contractors with the convenience of conducting transactions on a corporate account, as well as they (counterparties) without problems (in cases established by their legislation) will be able to recognize payments as deductible business expenses in their country.
As an additional advantage - Estonia has a huge number of treaties for the avoidance of double taxation.
Nominal services
In Estonia, the registers of the founders are in the public Internet. I'm sure not everyone will like it.
In order not to “shine” your name in the registry, you can use nominal services.
We used a nominal shareholder - a Latvian citizen. By the way, we were provided with such services by lawyers from Estonia, with whom we have entered into preliminary partnerships for company registration.
If we talk about the validity of the nominal, I want to upset you: there is a continental law in Estonia and there is no legislative (or through the creation of judicial precedents) of the fixed institution of nominal services.
If you want to use a nominee shareholder - be aware that there is a risk that he will take possession of your company. I advise you to keep all correspondence with the nominee shareholder and collect as much as possible written confirmations with the signature of the nominal value, that it only "replaces" the real shareholder in the register. These hooks will help in court.
It was easier for us, we had certain acquaintances and received recommendations and guarantees of a non-legal nature from close people.
To eliminate the risks of a scam from the nominal shareholder, you can do the following:
a) register the company for yourself and your surname will appear in the register of founders (but do not forget about the prohibition to allocate capital abroad without permits);
b) register the parent company, for example, in an offshore and make an Estonian subsidiary.
In the continuation of the story about the "nominal" I will say that in addition to the nominal shareholder, you can also use the nominal director. You will receive a power of attorney from him, on the basis of which you will act and sign documents on his behalf.
We did not use such a service, since it does not need it especially.
Problems with the nominee director may be the same as with the shareholder. If he wants to "throw" you, he will "throw." Withdraw the power of attorney and you lose control of the company until you return through court (if you return).
Documents we received after registration
B-card is a printout with the date of registration of the company, name of the company, data about the founders of the company and the company which was engaged in registration in Estonia, data about the main activity of the company, legal address, e-mail of the company.
Charter - the standard text of the charter.
A big minus is all in Estonian, but Google helped solve the language barrier problem.
Exemption letter and application of nominee shareholder in English.
Plus printing company
Bank account
We opened in Latvia, because we found a bank there with interesting conditions for us and with a minimum commission for transferring money to the countries of interest to us - 5 euros.
To open an account, we contacted the manager and filed about this package of documents:
- corporate documents for an Estonian company;
- CV of the beneficiary;
- confirmation of the welfare of the beneficiary (documents for the apartment, land, car);
- description of the company;
- sources of funding (provided extracts and tax returns for the business of the local beneficiary);
- main business partners (gave their details);
- international passport.
You can open an account in Estonia. By the way, after registering the company, we received a huge number of offers from Estonian banks to the post office, which we indicated when registering the company.
There is no currency control in Estonia (there are no restrictions on the size of transactions, on withdrawing funds from an account) and this is a positive thing.
Having a company in the EU, you get a huge number of banks where you can open an account. It is important that the commissions and conditions of the bank are comfortable for you.
Accounting
In Estonia, it is imperative to keep accounts. The cost of filing a report - about 600-700 euros per year. It is easy to find an accountant, in our case, those lawyers who helped to register a company also help with accounting.
Withdrawal of money
You can withdraw money from an Estonian company to its business entities under the pretext of “consulting services contracts” or “software development contracts”. It is very important that you are not considered bound persons. It is better to first consult with an accountant in Estonia, especially if you do not use a nominal shareholder.
Summarizing
By registering a company in Estonia, you can get a convenient business tool with relatively cheap content and no income tax. There are a number of problematic issues related to nominal services, which must be foreseen and excluded in advance.
Source: https://habr.com/ru/post/244445/
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