General Knowledge

A beneficial owner is a natural person who owns the benefits of ownership even though right to some form of business is in another name. It also indicates any individual or group of individuals who, both directly or indirectly, has the ability to vote or control the transaction decisions regarding specific security, such as shares in a company

In the event of natural person holds at least 25 % shares in the company, he is treated as a beneficial owner.   Most of the companies have only 1 director and 1 shareholder with 100% shares.    In this scenario, the beneficial owner is the 100% shareholder, who are together the director of the company.

Look at the other example.    Company has 5 shareholders:

A keeps 20% shares, B – 30%, C-30%, D – 10% and E – 10% shares

in the share capital of the company.  Who is the beneficial owner of the company in this case?  Only B and C candidates because they have more than 25% shares in the company capital.  Persons called “B” and “C” should fullfill statutory duties and be appointed as “Beneficial Owners” to Commercial Registrar.

2.  WHICH ENTITIES ARE OBLIGED TO SUBMIT THEIR DATA TO REGISTRAR?

• Private limited companies (OU companies)
• Public limited companies
• General partnerships
• Limited partnerships
• Commercial associations
• Foundations
• Non-profit associations
• European company and European Economic Interest Grouping

3. BRANCH OF FOREIGN COMPANIES

As article no. 384 (2) of the Commercial Code stipulates:

“(2) A branch is not a legal person. The company shall be liable for the obligations arising from the activities of the branch.”

The legal entity registered under foreign law is responsible for its branch and receiving information concerning the beneficial owners, who control the company.    Branch of foreign companies is not obliged to appoint beneficial owners to Commercial Register.

SHAREHOLDERS, WHO ARE LISTED COMPANIES ON REGULATED MARKETS

Only subsidiaries belonging to companies listed on the stock market are obliged to appointing of beneficial owners.
Others – listed companies do not need to do it. If the not listed company has one shareholder – listed company
on the regulated market – you do not need to indicate the beneficial owner.

PENALTIES AND NOTIFYING OF RIK ABOUT UBO

The beneficial owner’s data needs are submitted within 60 days of 1 September. The entered data of beneficial owners in the RIK can be changed, confirmed or added. Needed details of beneficial owners in case of private limited companies:

1) The name of the person
2) The personal code from e-Residency card
3) Country of living
4) Place and date of birth in the event if e-ID is not issued
5) data of the manner in which the person exercises control

Max amount of penalty for a natural person is 32,000 EUR for the failure of submitting UBO to Commercial Register.

OUR ASSISTANCE

We can help you manage corporate records to indicate correctly the Ultimate Beneficial Owners of the company. We need to do with diffirent ways:

• as your Attorney ( on grounds of Power of Attorney ) – you will issue POA in your country of living in the form of notarial deed and post this POA to our estonian office)
• as your Attorney ( you will grant access via RIK with using e-ID e-Residency card)

OUR PRICING

APPOINTING OF BENEFICIAL OWNER for e-Residents

€ 100 ONE TIME FEE

APPOINTING OF BENEFICIAL OWNER by notary public (POA)

€ 300 ONE TIME FEE

Another reason to work and do business in Estonia is the fact that it has one of the most flexible taxation laws in the European Union as well as the rest of the world. The 0% tax on retained and reinvested profits alone has got local and foreign investors on a rat race trying to squeeze their way through immigration just so they can have a piece of that proverbial “pie” of the Estonian economy. But there are more tax benefits from Estonian company that any investor could enjoy if he decides to
start a business in Estonia that are just too good to ignore.

TAXES IN ESTONIA

1. Corporate Income Tax
2. Labour Tax
3. Value Added Tax (VAT)
4. Personal Income Tax

CORPORATE INCOME TAX – 0% TAX IN ESTONIA!

As stated above there is no more corporate income tax on retained and reinvested profits, which means that local and foreign companies alike no longer have to pay this kind of tax to the Estonian government. Only distributed profits will be taxed at the amount of 20% of the net
amount (both actual and deemed).

WHAT MEANS “DISTRIBUTED PROFITS” ?

• Distributed corporate profits during tax period
• Gifts, donations and representation expenses
• Payments and expenses that are not connected to the business
• Asset transfers of the business entity that has a permanent establishment in Estonia
• (local or foreign) to its head office or to different companies

LABOUR TAX

Labour taxes also called social taxes is 33% of the total the share of labour costs attributable to
income taxes and social-security contributions minus cash benefits. It is divided into 2 parts one
being the social security (20% of the labour tax goes here) and health benefits (13% of the
labour tax is allocated to this as well). Estonia also levies an unemployment tax to businesses at
0.8% is paid on the gross salary. The government also withholds an additional 1.6% tax from
the employee’s wages.

VALUE ADDED TAX

The standard VAT rate is 20% for a business or a taxable person (if
your business is just a sole proprietorship), then it can be reduced to 9% depending on the circumstances of your acquisition of goods.

E-TAX SYSTEM

The e-Tax System is not a form of tax law but just a means to easily and efficiently file your
taxes on an electronic platform on the internet. In fact, 95% of all taxes in Estonia are declared
online which makes government transactions from their agency that handles the taxes of
Estonia get processed smoothly.

There are 3 ways of setting up company in Estonia:

• FOR E-RESIDENCY CARD HOLDERS – This way is dedicated especially for e-Residency card holders. Company formation remotely from your home country.
• COME TO TALLINN AND GO TO THE LOCAL NOTARY – We will assist you if you come to Tallinn. Ask our staff about setting up of appointment in the notary office for company formation purpose.
• STAY AT HOME AND PROVIDE US WITH PROXY – Issue Power of Attorney in the form of notarial deed in your country of living. Arrange courier postage and let us act in your name for company registration in Estonia.

START

1. Collect basic information about the company. Decide how many shareholders and directors there will be in the company.  Select the subject of activity and decide if the share capital (2500 EUR minimum) will be paid or you will use a non-monetary contribution.

Here you can check if the company name is available – https://ariregister.rik.ee/lihtparing.py

Here you can check the classification of the subject of activity https://emtak.rik.ee/EMTAK/pages/klassifikaatorOtsing.jspx The company name must end with OU – known as osaühing or OÜ.

CHOOSE SERVICE PROVIDER

It is necessary to select a registration address in Estonia – a virtual office and a “contact person” – a legal person required if the board is outside of Estonia. The fee for the registration address and contact person is paid every year. We invite you to familiarize yourself with our packages.

Our company formation packages are visible here:

https://eesticonsulting.ee

VAT REGISTRATION

Registration to VAT taxation can be volountary in the event the custommer will decide to register to VAT from incorporation date. In the event when business transactions exceeds 40 000 euros from the begining of calender year, the OU company needs to be VAT registered obligatory.

The company director is required to submit an application for VAT registration to the EMTA. In the case of voluntary registration – the tax office may ask the client about his clients and the connection with Estonia. In order to issue an EE VAT number – the office sometimes asks for contracts with contractors, invoices or commercial correspondence.

There is no stamp duty for VAT registration. Here you can find VAT registration forms from EMTA directly:
https://www.emta.ee/eng/business-client/income-expenses-supply-profits/general-information-value-added-tax/vat-forms

BANK ACCOUNT OPENING

Opening an account in Estonia does not have to be difficult. We work with SWEDBANK and LHV banks – we represent our clients and help prepare for meetings with banquets.

The customer may wish to open a bank account outside of Estonia. In this situation, we have prepared an offer for countries such as Lithuania, Latvia, Estonia, Poland, Switzerland or Great Britain.

Many customers want to open an account on PSP – Payment Service Providers such as Transferwise or Revolut. Cryptocurrency companies (with issued license) do not have an easy way to open an account, which is why we have a specially prepared offer for high-risk businesses here.

Most of the e-Residents is looking for solutions for collecting payments from their customers. They consider highstreet banking vs fintech Payment Service Providers. The goal of this article is showing you the way of the opening bank account at LHV Pank – biggest domestic financial institution, employing over 400 people in Tallinn and Tartu cities, holding 177,000 clients.

If you are e-Resident card holder, please execute these steps
as follows:

1) Fill the application form for the business client – https://www.lhv.ee/assets/files/applications/Application_to_open_an_account_in_LHV_Pank_natural_person-EN.pdf
2) Fill the online application form with using your e-Resident card.
3) Attach your ID document (EEA card or passport) and send to the address info@lhv.ee.

Application need be signed electronically with e-ID software. Considering of application takes 7 business days. Then the bank will notify about the positive or negative decision. In the case of a positive decision of concluding the relationship, mandatory is visiting local LHV branch and present passport or EEA identity card for the purpose of signing the agreement.

HOW TO GET A POSITIVE DECISION FROM LHV?

Estonian banks treat KYC (Know Your Customer) and AML/CTS seriously.
Moreover, they want to check your connection with Estonia. If you are
non-resident and live out of Estonia and you won’t demonstrate that you have counterparties in Estonia, you can forget about setting up an account.

I will describe to you what is the method of explaining them your business presence in Tallinn.

1) Tax reasons for the opening company in Estonia and bank account is not indifferent.
2) Find your business partners on upwork.com or peopleperhour.com and outsource them your job. You can show the bank print-outs from upwork.com, quotes, invoices or cover letter.
3) Find your business clients in Estonia ( translate your website into Estonian language and show the bank that you have a business presence in Tallinn)
4) Use a trusted company formation partner (likes Eesticonsulting.ee). A trusted company will provide you legal address, that will be accepted by the bank.
5) Setup Estonian domain (.ee) and phone number (+372) for the purpose of contacting with counterparties.

There are 2 possibilities of authentication of Estonian documents grounds of international law rules:

1. Process of legalisation
2. Apostille stamp

The legalisation of a public document is performed on grounds on § 43 of the Consular Act and Regulation No 15 of the Minister of Foreign Affairs “Order of the legalisation of a public document and the application form”, (17.06.2019)

A public document may be used in another country if it is certified by local authorities in Estonia. Legalisation or Apostille procedure should be applied.

The list of countries, where Apostille is not needed:

• Belgium
• Denmark
• France
• Ireland
• Italy
• Latvia
• Lithuania
• Poland
• Russia
• Ukraine

Moreover, Estonian Parliament has concluded a legal agreement with Lithuania, Latvia, Poland, Ukraine and Russia, which means that documents from the above countries are recognised without additional certification likes Apostille or legalisation.

WHICH TYPES OF DOCUMENTS CAN BE LEGALISED?

• a paper, issued by a court or by an authority or person connected to the court, e.g copy of court judgment, extract from a registry (RIK)
• administrative document – e.g diploma, certificate, certified statement, acknowledgement);
• document from a notary public or sworn translation – e.g certified translations of purchase shares agreement or resolution)

The process of legalisation is performed only in the event of delivery of the original document, a notarized copy or a certified copy of an original document, a printout or an extract of the original document.

We can delivery apostilled and notarized documents by courier or post as soon as possible. Our clients usually wish to get the following documents::

1. Notarised and apostilled printout (extract) from Commercial Register (RIK) with a list of directors and shareholders
2. Notarised and apostilled Article of Association with certified translation from Estonian to English.

IMPORTANT CONSIDERATIONS 📌

When engaging in the transfer of shares in Estonia, it’s not just about following procedures, but also ensuring that you make informed decisions:

• Due Diligence: Always conduct a thorough investigation about the company’s financial health and any potential liabilities before a shares transfer. This can save you from unforeseen problems down the line.
• Seek Legal Counsel: It’s beneficial to have a legal expert guide you through the nuances of Estonian commercial law to ensure a smooth transition. A legal advisor can provide clarity on complex issues, ensuring that both parties are protected.
• Transfer Fees: There might be additional fees associated with the transfer process, not just at the notary’s office but also potential banking or transactional costs. Factor these into your decision-making.
• Timelines: Ensure that you are clear about the timeframes. From granting a Power of Attorney to the actual transfer, understanding the time required can help in planning better and avoiding last-minute rushes.

Before making any decisions, always keep the bigger picture in mind and prioritize the company’s long-term health and sustainability. Share transfer is a significant move, and being well-prepared can make all the difference! 🌟

The Ministry of Finance in Estonia changes the rules for issuing crypto licenses. The application is being reviewed from 30 to 90 days and the price from 345 EUR to 3300 EUR for one license – comments Paweł Krok – CEO at Eesticonsulting.ee.

[wpsm_quote author=”M. Helme from Ministry of Finance – Estonia” float=”left” width=”100%”]We have learned our lesson from the banking sector the hard way, and we must now deal with new international risks, with cryptocurrencies among the most urgent of these[/wpsm_quote]

The Ministry of Finance in Estonia changes the rules for issuing crypto licenses. The application is being reviewed from 30 to 90 days and the price from 345 EUR to 3300 EUR for one license – comments Paweł Krok – CEO at Eesticonsulting.ee.

The Estonian government introduced changes to the granting of cryptocurrency licenses. Minister of Finance – Martin Helme tells that this is only the first step in the field of prevention of money laundering. The bill

introduces numbered formal obligations. Application processing time will be extended from 30 to 90 days. Required will be company incorporation in Estonia or running a branch of a foreign company. Moreover, registered office address and board of directors need to be in Estonia. So far, the fee

stamp for the issuance of the license was 345EUR, and the amendment increases it 10 times to 3330 EUR from one license – adds Paweł Krok from Eesticonsulting.ee. Current license holders have a deadline until 31 December 2019 to fulfil statutory requirements under pain of withdrawal

license by the Estonian financial market regulator – Financial Intelligence Unit (FIU).

Goverment source:

https://www.rahandusministeerium.ee/en/news/granting-virtual-currency-activity-licences-set-become-tougher-under-new-bill

[quick_offer id=646]

HOW TO APPLY FOR E-RESIDENCY CARD?

GET E-RESIDENCY CARD FROM HOME
Ready this guide to know how to obtain e-Resident card smoothly from your home and run your business working worldwide borderless.

FACTS AND MYTHS

[wpsm_column size=”one-half”][wpsm_pros title=”PROS:”]

• With e resident card you can register Estonian company remotely from home
• With e-residency card you have to open remotely the bank account or PSP (Payment Service Provider)
• You can put your digital signature on business documents and the signature will be valid worldwide
• You can reserve .ee domain and approve all official documents -f.e file the VAT return, Income Tax return and financial statements to Commercial Register
• You are not obliged to travel to Estonia for the purpose of company registration or for the purpose of obtaining business licenses
• You can not travel to Tallinn for the purpose of the e-ID card. Receive the card from the local embassy located in your home country.

[/wpsm_pros][/wpsm_column][wpsm_column size=”one-half” position=”last”][wpsm_cons title=”CONS:”]

• E-Residency card has not any impact for your personal tax residency in your home country based on bilateral agreements tax regulations.
• e-ID is not a VISA
• e-ID has not influence for your temporary residence permitt in Estonia.
• You can not receive e residency card by post or by attorney , because the fingerprints are required.

[/wpsm_cons][/wpsm_column]

PLUG & PLAY

5 STEPS FROM COLLECTING E-ID CARD TO BANK ACCOUNT

[wpsm_numhead num=”1″ style=”2″ heading=”2″]APPLY FOR E-RESIDENCY CARD[/wpsm_numhead]
Go to website https://e-resident.gov.ee/become-an-e-resident/. You will need a copy of EEA card or Passport and motivation statement. Then you have to pay for the application fee €100. Then you will be patient because application review is made by Estonian Police & Border Guard Board in the timeframe of 6-8 weeks. The final step is receiving of e-Residency kit. You can collect it at the selected location, f.e in the nearest Estonian embassy in your country of living.
[wpsm_numhead num=”2″ style=”2″ heading=”2″]CHOOSE YOUR PROVIDER[/wpsm_numhead]
You can choose your “company & trust service provider”. Remember that you have to verify the provider on mtr.km.ee website. Every company that offers company registration services in Estonia needs be provided with license number by the Financial Intelligence Unit. Eesticonsulting.ee has issued license number: FIU000310.   More information you will find in About us website.
[wpsm_numhead num=”3″ style=”2″ heading=”2″]LEGAL ADDRESS[/wpsm_numhead]
Estonian legal address is required by law for the purpose of the company registration. Every company is treated as an Estonian legal resident. Eesticonsulting.ee offers the legal address for your Estonian corporation in the heart of Tallinn. We charge you grounds of the annual subscription. More about virtual office services here.
[wpsm_numhead num=”4″ style=”2″ heading=”2″]CONTACT PERSON[/wpsm_numhead]
Estonian Commercial Code § 63 stipulates that if the board of directors reside out of Estonia, “contact person” needs be appointed in this situation. We provide Contact person service, especially for nonresidents. If you won’t appoint a contact person, your firm won’t is registered.
[wpsm_numhead num=”5″ style=”2″ heading=”2″]BANKING[/wpsm_numhead]
Did you hear a story about opening a bank account in Estonia for nonresidents? A lot of advisories tell: It is not possible – really – don’t try. Believe us. We have documented the experience and positive track record. We will try to advise you how to open an Estonian bank account and PSP provider.

Have you ever though about applying for e-Residency card? Please read carrefully this posts and know advantages of Estonian e-ID card.

Imagine 2 scenarios:

[wpsm_quote author=”Martin” float=”left” width=”100%”]Martin has not e-Residency card. He needs travel to notary public , to Tallin in order to incorporate estonian company. He needs visit the SWEDBANK branch and spend a lot of money for flights and accomodation.[/wpsm_quote]

[wpsm_quote author=”Robert” float=”left” width=”100%”]Robert is e-Resident card holder. He cans incorporate the company wholly online remote from home and file statutory documents such as accounts, vat returns and others.[/wpsm_quote]

It is essential to apply for e-Residency card earlier due to waiting for approve by Police Border Guard. Statutory period for accepting your application is aprox. 30 business days.

STEP BY STEP

1. Fill the application form and include passport photo with correct format and consistent with specification
2. Wait for decision of Police Border Guard from Estonia
3. Receive e-mail confirmation about granting you e-ID card
4. Travel to local Estonian Embassy in your home country in order to pick up your document .
5. Purchase our services and start the business soon.

OPORTUNITIES OF E-ID CARD

1. Run estonian corporation directly from your home country paperless.
2. Conclude agreements between you and other counterparties.
3. Connect and log in to the e-banking services securely with e-ID – do not affraid about phising attacs – stop with take over bank accounts by hackers
4. Fullfill statutory duties with e-ID card – f.e submit Annual Accounts (Profit & Loss, Balance Sheet) to RIK or file VAT return to EMTA

E-RESIDENTS IN NUMBERS