The Ultimate Guide to Estonian E-residency, Banking, and Taxes

So you could build/invest your money in your Estonian company. Then after 10 years move to a country where they don’t tax on personal income. And then get all the money as a salary without paying anything because salary is a business cost? This would be better then paying yourself a dividend because then then the money will be taxed at 20% right?

What happens when you live in a country where CFC rules apply. A condition to be seen as a CFC is that the taxes are maximum the halve of the taxes of a similar parent company.
Belgium: 25% taxes (main country)
Estonia: 20% taxes
So every country below 12.5% taxes would be seen as a CFC and CFC rules will apply according ti the Belgium government. But what if it’s not seen as a CFC? like for example Belgium and Estonia? Then it would be OK for Belgium?

I was wondering, if i were to setup e-residency and then create a private limited company in estonia, move savings to that company and then buy index funds which i will not touch for a while would that cause any trouble?
I reside in Belgium.

Also would that mean that if i pay out dividends on e.g. 10000 Euros i would pay 2000 Euros to Estonia and then 25% dividend tax in Belgium?

BR,
Christoph

A word of caution: I have set up an e-company as an e-resident. The process was expensive (€ 700,-) and cumbersome. After it was set up, I found out that I actually will not use it due to changing circumstances. Cancellation costs: € 1200,- for a registered company without any transactions or a bank-account attached to it. My impression is, that the e-residency program is a modern layer over an ancient bureaucratic infrastructure, that not only drives you crazy by continuously trying to communicate with you in Estonian, but above all will spam you a lot - not only in Estonian, but in Finnish and/or Swedish as well. For me as a Dutch citizen, the benefits do not outweigh the cons.

I’m curious to hear which service provider you used who charged you this much? Opening a company should be about €200 (+€100 for the e-residency), and while I’m not sure about the costs of closing it down €1200 seems extremely excessive. Might have been better to just sell it off as a shelf company.

I’ve been an e-resident for more than 4 years now, and while the emails from the state often arrive in Estonian, you just need to scroll down to read the English version.

That being said, if you’re a full-time (tax) resident in another developed country, then opening a company abroad probably wouldn’t make sense.

EDIT: I just checked, and LeapIN is charging €200 for the liquidation of a company, which I’d say is very reasonable.

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Thanks for this informative guide!
I’m trying to put my head around the taxes again using some examples.

Please correct if I’m wrong in any part.

From what I understand so far, as non-resident Estonian company owner:

  1. You don’t pay any corporate taxes (20%) until you distribute the money. Awesome.
  2. Following other posts - you don’t obligated to pay board member salary to yourself and thus pay almost 40% taxes for this salary. Worst case you pay a really low salary. Awesome.
  3. Really depends on your situation, but in general you can “drain” the money by paying yourself a regular employee salary and pay taxes only in your country of residence for personal income. Awesome.

So far so good?
The only part I’m missing is regarding #3 - you as employee shouldn’t pay taxes to Estonia but your home country. However, should you-as-company pay extra taxes for this paid salary? As a company, paying for your employee a salary carry any additional expense? If so, how much? and what is the lowest salary you can pay to yourself to avoid that?

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You are right . 20 % Corporation Tax is paid in the event where the company pays dividend to its shareholder. A lot of companies take decisions to not distribution profits only re-invest

You need study double taxation agreement between Estonia and your country of residence and you will find opportunities of friendly and effective tax optimization.

F.e in most cases royalities are taxed in country of residence. Estonian company can pay non residents and f.e if work is performed out of Estonia, salary will be taxed out of Estonia. But remember you should avoid constitution of permament establishment (PE)

First of please accept gratitude :slight_smile: for writing such an elaborate and excellent article. Through this article many of my doubts are clear and I am a fan already. However :

I have a question. I am working on a website on which a particular kind of items will be sold. For which I am currently contacting companies. The buyer will be making a payment on my website. I will be taking payment on behalf of the companies that will be selling on my platform, after deducting my commission from the entire amount I will forward the entire amount to the companies. In that case, I will be generating an invoice on behalf of companies in my name for the buyer of the product, so will it still be part of my turnover or just the service that I am providing will be part of my turnover. Because I am not buying anything from the company, I will be just providing them a platform to sell. Kindly advice on the same, also how will VAT work, on the service or the entire Invoice of the good sold? I know it is a mind-boggling question but it will help me a lot

Thankful.

Is LeapIn could Manage a company for dropshipping

Thank you so much for this detailed article!

I’m just getting started on my digital nomad journey and I’m considering to become an e-resident of Estonia mainly to get access to Transferwise (I don’t have it in my country).

So I was wondering if:

a) I’d need to open up a bank account separately with Estonia.
b) If I’d need to pay any monthly fees for anything (if I want to be an e-resident + access Transferwise)

I know the questions were partly covered in the article, but I would just like to confirm and get advice.

Thank you!

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Hi @Prakhar and welcome to the community!

a) No, you don’t need any additional bank account.
b) You need at least a legal address and contact person, which often will cost you 300-500 EUR per year. The cheapest offer I’ve seen is from Nordic Consult, which charge 125 EUR per year.

In addition you need to do accounting for the company and submit an annual report. It’s possible to do both on your own, at least if you have some accounting background, but it’s not recommended. If you only have a few transactions per year, then it might not be so expensive to outsource. If you go over the VAT threshold it gets more complicated as you’ll have to submit monthly reports.

Finally, I’m not sure if you can open a TransferWise account if you don’t qualify personally. Normally you’ll open a personal TW account, and then from there open one for your business. Business accounts are always tied to your personal account. So before going ahead and opening an Estonian company, I’d recommend that you contact TransferWise to see if you would actually be able to open an account.

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Hi,

I am totally new to this topic, read quite a bit about the Estonian e-residency now, and have a simple question left.

I am from Austria, therefore my home residence is within the EU. I am looking for a way to live location-independent. What could be my motivation to go with the e-residency and registering a company in Estonia if I have the disadvantage of paying taxes on both countries then?

Thanks for taking the time to answer, Thomas. :slight_smile:

Hello everyone,

I am a new e-resident and I’m waiting for my card to arrive. It’s a great article, LeapIn was my first choice, but since I’m opening an online shop and they don’t provide this kind of services, can you recommend me someone else? It would be great to read an article about opening Estonian company that deal with physical goods and what to do next. I’m new to all this and beside building a websites and working as a web designer, I don’t have idea how to run a company, so any advice is welcome and useful. I wish you all a nice day :hugs:

Very good question, I would like to know a little bit more about that also?

Hi, I want to know if there is a minimum share capital requirement for opening a private LLC company in Estonia.

thanks.

Yes, assuming you’re referring to an Estonian OÜ (private corporation), the minimum capital is €2,500, although you don’t have to pay it upfront (it can be delayed for several years).

Several years? Are you sure?

Leapin says it’s one year.

Yes, it’s 10 years to be exact. See e.g. https://learn.e-resident.gov.ee/hc/en-us/articles/360000798017-Share-capital-contribution

It is possible to defer the payment of share capital up to 10 years. However, when doing so, all founders of the company will be held personally liable for the deferred amount.

You also cannot pay dividends until the capital in contributed (but you can pay yourself a salary).

Awesome

Can anybody tell me about starting a new construction company in Estonia.I am already running a construction company in Pakistan,with successful completion of various projects.E-Residency will be helpful in this regard?
Thanks