Create subsidiary or branch in Estonia

HOW TO REGISTER SUBSIDIARY IN ESTONIA?

IF THE FOREIGN COMPANY PLAN ENTER INTO ESTONIAN MARKET (…)

SPECIAL RESOLUTION OF FOREIGN COMPANY

In order to establish a branch of a parent company in Estonia, an act of establishment is necessary. It may be a resolution – usually Special Resolution – adopted by the authorities of a foreign company. How can this decision be made? It depends on the law of the country in which the company is registered (Company Law) and on the Article of Association of the parent company.

This decision must be sworn translated into Estonian and must contain information about the subject of the activity and indicate the person who will be the representative of such branch in the territory of Estonia.

FEATURES OF THE BRANCH OF A FOREIGN COMPANY:

– The company’s branch has no legal personality
– The company’s branch has no legal capacity
– A branch of the company is responsible for paying Corporation Tax only on profits that can be attributed to that branch
– The parent company is responsible for the operation of this branch, including the preparation of billing documentation – Annual Accounts (Profit & Loss, Balance Sheet, Trial Balance)
– The department must have an Estonian representative (Authorized contact person)
– Branch operations must be identical to the parent company.

LIST OF DOCUMENTS FOR PURPOSE OF OPENING THE BRANCH IN ESTONIA

– name and legal form of the parent company
– country in which the parent company is registered
– subject of activity according to SIC Codes classification (EMTAK)
– purpose of company registration
– company address
– list of actual beneficiaries (who owns shares in the company)
– list of board members
– Article of Association
– memorandum of association
– Registration certificate

SHOULD I PAY SHARE CAPITAL – 2500 EUR?

If you decide to establish an Estonian company – you must set a minimum capital of 2,500 EUR. In the case when you register a branch – the law does not require a minimum capital, but the resolution on establishing such a branch should show that the capital will be transferred. It is difficult to imagine a branch that will not be co-financed by a foreign parent company. You need to think about how the branch will be able to function independently – rent an office, pay for accounting or settle accounts with business partners.

FEATURES OF THE SUBSIDIARY IN ESTONIA

  1. Minimum share capital is: 2500 EUR
  2. Management independence as opposed to the branch
  3. Autorized contact person (Estonian) is mandatory
  4. Legal address must be located in the Estonia
  5. Board of directors can reside out of Estonia
  6. Shareholder will be parent company (f.e keeping 100% shares in Estonian OU)

TAX RESIDENCY OF SUBSIDIARY

(2) A legal person is a resident if it is established pursuant to Estonian law.

Source: Income Tax Act, Estonia 

TAX INCENTIVES OF ESTONIAN SUBSIDIARY

Tax rates of subsidiary in Estonia:
1) Employment contracts – 20% of Income Tax  – natural persons
2) Corporation Tax – 14-20% (if the profits are distributed from the company to its shareholders – depending on ditribiuting policy)
3) Corporation Tax – 0% – tax shifting – when the profits are not paid from the company
4)  There are three VAT rates in Estonia – basic: 20% , reduced 9% and exempt – 0%.   The subsidiary is not treated as VAT payer automatically upon starting the company.   If the company does not exceed the thresold of 40,000 EUR turnover per calender year,  it has no legal obligation to register to VAT taxation.   The subsidiary can register to VAT voluntary upon company formation. EMTA (Revenue) ask the clients, who wish to be VAT registered about their connection with Estonian counterparties – clients, contractors, business partners.

CLIENT DUE DILLIGENCE PROCESS

SUBSIDIARY REGISTRATION

We need the following data for the purpose of subsidiary registration in Estonia. 

– Name and surname of directors
– Passpot or EEA card number
– Date of birth
– Full residental address
– Country of residence
– Phone number
– E-mail number
– Website address
– Company name
– Nature of business
– Capital – min. 2500 EUR
– Beneficial owenrs list

BRANCH REGISTRATION BY POWER OF ATTORNEY

We offer subsidiary registration based on a power of attorney (POA) with a notary public in Estonia. There are about 30 notaries in Tallinn and each one has a tight deadline. We will arrange a meeting with a notary for you and come to Estonia to register the company or we will do it completely remotely with a power of attorney. We will provide you with a power of attorney template. You can give it to us remotely – notary and Apostille are necessary.