GİRİŞİMİNİZİ AVRUPA YA TAŞIYIN. ESTONYA DA ŞİRKET KURMAK

MOVE YOUR ENTREPRENEURSHIP TO EUROPE: ESTABILIZING A COMPANY IN ESTONIA

Advantages of Establishing a Company in Estonia

With its strong support for digital transformation, Estonia is a highly encouraging country for establishing a company. This location, which stands out in Europe for the various advantages it offers entrepreneurs, simplifies the business start-up process. The main advantages of establishing a company in Estonia can be listed as follows:

• EIC Accelerator Program

This program, part of the European Innovation Council (EIC), provides comprehensive support for innovative projects in the technology field. It increases entrepreneurs' chances of success with support programs in areas such as product development, matching with major investors, applied research, and digital transformation. Substantial grant support is available upon application and approval.

• Estonia Entrepreneurship Visa

Designed specifically for innovative projects with high scalability, the Estonian entrepreneurship visa provides significant convenience for international entrepreneurs. This visa program offers entrepreneurs with globally relevant business ideas the opportunity to operate in Estonia and, consequently, in the European market.

• Strong Economy

Estonia stands out for its developed commercial infrastructure and business-friendly environment. Strategic investments in human capital and an effective R&D system provide significant advantages to entrepreneurs. Many globally successful companies, such as TransferWise (now Wise) and Starship Technologies, originated in Estonia. Furthermore, lower office rental and other operating costs compared to other European countries provide significant cost advantages during the company's establishment and operation process.

• Easy and Fast Setup

Thanks to Estonia's modern and efficient company formation system, the entire process is extremely fast. With traditional bureaucracy minimized, company formation can be completed much quicker than in most countries.

• Digitalization

Estonia is a global leader in digital government applications. Thanks to the country's advanced technological infrastructure, almost all company formation and management processes can be conducted online. Government-provided services such as digital ID, e-tax, e-business registration, and e-residency significantly simplify the process of doing business.

• e-Citizenship System

Estonia's innovative e-citizenship program allows entrepreneurs from anywhere in the world to establish and manage companies without being physically present in the country. Tax payments, invoicing and other official transactions can be easily carried out through this system, thus greatly simplifying the process of doing business across borders.

• Global Market Participation

Estonia's membership in the European Union provides companies established here with direct access to the EU market, which has over 500 million consumers. This allows companies established in Estonia to easily sell products on international trading platforms and benefit from business development opportunities across Europe.

• Advanced Banking Services

Estonia has one of the fastest-growing digital banking ecosystems in Europe. This modern financial infrastructure allows companies to manage their financial processes effectively and efficiently. Advanced electronic banking solutions accelerate and streamline all financial transactions, from cash flow management to international payments.

• Investment Equality

The equal treatment of domestic and foreign entrepreneurs in Estonia is one of the key advantages of the country's business environment. Foreign investors can operate on a completely equal footing, enjoying the same rights, incentives, and opportunities as local investors.

• Advantageous Tax System

Estonia's unique tax system offers significant advantages to companies. Corporate income tax is only applied when profits are distributed, making it easier for companies to accumulate resources for reinvestment. This system is particularly advantageous for early-stage businesses, as it allows them to retain profits within the company to finance growth. This allows new entrepreneurs to establish a more resilient structure against economic fluctuations and implement growth strategies with less risk.

Estonia's Innovative Business Areas

Estonia, with its innovative business areas, is one of the most attractive locations in Europe for entrepreneurs. Estonia, which stands out with its digital infrastructure and innovation ecosystem, has the following most developed sectors:

1. IT R&D and Software:

   Estonia offers comprehensive training programs that provide expertise in information technology, and the country's IT R&D system is developed to world standards. Global success stories such as Estonia-based Wise (formerly TransferWise) and Bolt demonstrate the strength of the country's software and technology ecosystem. Continuous innovation in the IT sector has also paved the way for significant breakthroughs in software development.

2. e-Commerce:

   Estonia is considered one of Europe's leading centers for e-commerce activity. Thanks to its advanced digital infrastructure, the ability to complete financial transactions entirely online significantly contributes to the efficiency and profitability of e-commerce initiatives.

3. Logistics:

   With its strategic geographical location, Estonia, with its strong transportation and logistics infrastructure, is a key supply chain hub for the Scandinavian and Baltic regions. Its proximity to key Northern European markets such as Finland, Latvia, and Sweden provides a significant advantage for logistics-focused startups.

4. Electronics and Engineering:

   With its highly qualified workforce and advanced education system, Estonia facilitates the development of innovative projects in the engineering and electronics sectors. World-class educational programs in science, mathematics, and informatics support the sustainable development of the sector.

5. Food Technologies:

   Estonia has significant experience in developing and exporting food products for international markets. With its modern production facilities and sustainable agricultural practices, it is home to innovative startups in the food technology sector.

6. Advanced Technology and DeepTech:

   Estonia is a leading global leader in digitalization and technological innovation. Research in advanced technology fields such as artificial intelligence, blockchain, cybersecurity, and biotechnology offers a wide range of opportunities for entrepreneurs.

7. Web Development and Digital Design:

   The constantly growing and evolving web technologies sector provides the foundation for many innovative startups in Estonia. The country offers an ideal ecosystem for companies operating in user experience design, interface development, and creative digital content production, and is creating international success stories, particularly in graphic design.

8. Telecommunications and Communication Technologies:

   Estonia's advanced digital infrastructure provides an excellent foundation for companies operating in telecommunications and communication technologies. Supporting all forms of voice, data, and media transmission, this ecosystem offers an ideal environment for entrepreneurs seeking to develop innovative solutions in the telecommunications field.

Requirements for Establishing a Company in Estonia

Company formation in Estonia can be completed either physically in the country or entirely online. This flexibility allows you to establish a business in Estonia from anywhere in the world. The steps and requirements for establishing a company in Estonia are detailed below:

• A unique, unused name should be chosen for the company. It is recommended that you check the name with the Estonian Trade Registry before selecting a name.
• A comprehensive business plan should be prepared, determining the company's objectives, vision, and initial capital. This plan should include the company's financial projections and market strategy.
• The members of the board of directors should be determined. It is preferable for at least one board member to reside in a European Economic Area (EEA) country in Estonia, but individuals with e-Residency can also serve on the board.
• The main field of activity should be clearly defined. The EMTAK (Estonian Economic Activities Classification) code is the primary source of information for determining the field of activity. Choosing the correct EMTAK code determines your tax obligations and legal requirements.
• A bank account should be opened for the company at an Estonian bank or fintech platform (e.g., Wise, Revolut Business). Digital banking options can speed up the company formation process.
• A legal business address must be obtained in Estonia. This address can be a physical office or provided through a company that provides virtual office services. The business address, website, and the code number identifying the vehicle to be used, along with the business's address, must be submitted to government agencies.
• Registration must be completed online at the Company Registration Portal. The Estonian e-Residency ID card or other digital identity verification methods can be used for this process.
• Notification must be submitted to the relevant registrar before commencing economic activity. This notification should result in the acquisition of an operating license. This document proves that your company can operate legally.
• General information regarding the company's activities (sector, estimated number of employees, expected turnover, etc.) must be fully submitted to government agencies.
• The legal entity's name, registration code, phone number, email address, and postal address must be provided for official records. Keeping this information up-to-date is a legal requirement.
• If you intend to operate in certain sectors, you must submit a declaration of the profession, professional level, professional certification, and qualification number. This is especially important in fields such as financial services, healthcare, and education.
• After submitting the application, the company formation fee must be paid through the government portal. Payment can be made electronically and typically ranges from €190-265.
• If the company has employees, they must register their employment through the Estonian Tax and Customs Board's website. This process is essential for employees to meet their social security and tax obligations.
• Special licenses or permits may be required depending on the company's field of activity. Additional licenses are particularly required in the finance, tourism, construction, and food sectors.
• The company must be registered as a VAT payer in the Estonian Tax and Customs Board system. VAT registration becomes mandatory when your annual turnover exceeds €40,000, but you can also register voluntarily for lower turnover.

Additionally, if you operate in certain sectors, you may be required to submit an accreditation certificate or similar document proving that a product, service, system, or process complies with the requirements. Where proof is required, the following information regarding economic activity is also required:

• Name and number of the document,
• Start and end dates of validity,
• Institution or organization issuing the document,
• Field of activity covered by the document.

If liability insurance or similar coverage is required in certain business lines, the information that must be provided regarding the economic activity is as follows:

• The amount, currency, and validity area of the liability insurance premium or other coverage,
• The start and end dates of the insurance premium,
• The name, registration code, registration name, address, and other contact information of the insurer or the person providing the coverage.

While the company formation process in Estonia is quite efficient thanks to the digital infrastructure, it can present some challenges, especially for foreign entrepreneurs. To handle all these complex processes flawlessly and completely, you can seek support from law firms or professional service providers that offer company formation consultancy. This way, you can complete the company formation process in Estonia smoothly and quickly. These experts, familiar with local legislation, can guide you through every stage of the process and prevent potential errors.

Types of Companies You Can Establish in Estonia

Estonia's economic structure allows for a variety of company types. The amount of capital and your goals are important factors in choosing a company type. The type of business you choose will directly impact shareholder liability, management bodies, decision-making processes, and representation rights. The types of companies you can establish in Estonia are detailed below:

• Joint Stock Company (Aktsiaselts - AS): This type of company requires a minimum capital of €25,000 at the initial stage, and a single founder is sufficient. The board of directors is the governing body, and founders can be both individuals and legal entities. Since shareholders of joint stock companies are not responsible for the company's responsibilities, a supervisory board is essential. This type of company offers significant advantages, including the ability to be listed on the stock exchange, the ability to host a large number of shareholders, and a structure suitable for large-scale projects. Shares must be registered with the Estonian Central Securities Register or other depository institutions. Additionally, joint stock companies are required to submit regular annual financial reports.


• Private Limited Company (Osaühing - OÜ): The most common type of company in Estonia, a private limited company can be established with a single founder. This type of company structure allows the partners to protect their personal assets from company debts. However, if the share capital contribution is not paid, the shareholder becomes liable for the company's financial obligations in proportion to the amount of the unpaid contribution. The management body is a board, and an optional supervisory board may be established depending on the company's bylaws. The articles of association and articles of association required for incorporation can be replaced with a standard articles of association during the incorporation process in the e-commerce registry.


• Public Limited Company (Avalik Osaühing): In this type of company, shareholders are not liable for the company's legal obligations. The supervisory board generally consists of three members, and these members are not required to be shareholders. A public limited company must maintain an official share ledger recording the principal capital shares. The person or persons responsible for the company's management must be clearly specified in the articles of association.


• General Partnership Company (Täisühing): This type of company requires at least two founders, and the founders' contributions must be clearly stated in the agreement. The company's liabilities are shared equally among the partners. The shareholder or director agreed upon in the partnership agreement has a say in the company's management. This type of company requires a strong relationship of trust between the partners.


• Limited Partnership Company (Usaldusühing): In this type of company, the contribution amount is specified in detail in the company's founding agreement. Limited partnerships, which require a minimum of two founders, do not have a mandatory management body. There must be at least one partner (limited partnership) who assumes full responsibility for the company. The other partner(s) (limited partnership) are liable only to the extent of the capital they contribute.


• Trade Association (Tulundusühistu - Ühistu): There must be at least two founders, who can be individuals or legal entities. The founders must draw up comprehensive corporate bylaws to establish the association. Activities related to trade associations may be regulated by the provisions of the Non-Profit Associations Law. Association members are not personally liable for the association's obligations, unless otherwise specified in the bylaws. This structure is particularly suitable for cooperative-style businesses.


• Sole Proprietorships (Füüsilisest isikust ettevõtja - FIE): This structure, which allows individuals to conduct business in their own name, can be established without capital requirements. Sole proprietorships are not required to draw up any articles of association and are not required to submit annual reports. However, according to the Estonian Commercial Code, FIEs are required to be physically present in Estonia. Due to this legal regulation, foreigners wishing to establish a business using e-residency do not have the right to establish a sole proprietorship.


• Branch of a Foreign Company (Välismaa äriühingu filiaal): This structure allows a foreign company to permanently offer goods and services in Estonia under its own name. The parent foreign company is responsible for all activities and legal obligations of the branch. A director is required to manage the branch and maintain its accounting. Because the branch is considered an extension of the parent company, it does not have a separate legal personality.

What are the documents required to establish a company in Estonia?

To establish a company in Estonia, you must first submit a formal application. During the application process, you will be asked to answer detailed questions about your business activity and motivation for establishing the company. The basic documents required for the application are:

• Up-to-date resume or professional online profile link (LinkedIn, etc.),
• A valid credit/debit card (Visa or Mastercard - for payment of transaction fees),
• High-quality facial photograph (photo quality must be clear, in focus, directly at face level, and meet appropriate standards for use in official documents),
• A color digital copy of a valid travel document (passport) or EU (European Union) ID card.

In the process of establishing a company in Estonia, the following documents are also requested in addition to the documents above:

• Company Articles of Association: This is a comprehensive document containing basic information about the company, such as its field of activity, trade name, capital structure, and governing bodies. This document establishes the company's legal framework.


• Identity Document: Certified copies of valid ID cards or passports of all company founders must be submitted. Apostille certification may be required for foreign ID documents.


• Tax Office Application Form and Document: This is a comprehensive form that must be completed to complete tax liability procedures. This document will assign a tax number to your company.


• Residency and Tax Number: The company representative's current residence document and tax number must be officially submitted. This document verifies the identity of the company's legal representative.


• Office Address Registration: An official document showing the company's physical address. The company's registered address must be verified with documents such as a copy of the title deed, a notarized lease agreement, or official invoices. Virtual office services are also available in Estonia.


• Trade Registry Certificate: This is the official document that demonstrates the completion of company registration. This document contains comprehensive information about the company owner and the business, and proves the company's legal existence.


• Company Bank Account Document: This document contains detailed information about the corporate bank account opened in the company's name. The bank account document must also include a receipt showing the company's capital deposit. Online banking services are well-developed in Estonia.


• License Certificate: A special permit or license document required depending on the industry the company will operate in. This document proves that the company is legally authorized to operate in the relevant industry. Additional permits may be required in some industries.

What is the Tax System Like in Estonia?

The Estonian tax system has a modern structure that offers significant advantages in establishing a company and conducting business. Estonia is a highly attractive economic country with competitive tax rates that encourage entrepreneurs and investors. Thanks to the country's advanced e-tax system, all tax transactions can be completed quickly and easily online. Non-resident foreign entrepreneurs can seamlessly pay their taxes and fulfill their legal obligations by appointing a tax representative. Estonia's transparent and predictable tax systems and the rates applied are explained in detail below:

1. Corporate Tax

One of Estonia's most attractive tax advantages is that companies don't have to pay taxes if they reinvest their profits. Estonian-based companies and foreign permanent establishments are subject to 0% income tax on profits they reinvest or retain. This is a significant advantage that encourages company growth and strengthens cash flow.

However, a 22% income tax rate applies when profits are distributed. According to tax legislation, the following items are considered "distributed profits":

• Corporate profits distributed to partners or shareholders during the tax period,
• Gifts, donations, and representation expenses made by the company,
• Expenses and payments not directly related to the company's main field of activity,
• Profits resulting from the transfer of assets of a permanent establishment to the headquarters or other affiliated companies.

2. Labor Taxes

All employers registered in Estonia are required to pay social security taxes on payments made to their employees. The social security tax rate is set at 33%. This tax is used to contribute to employees' health insurance and retirement funds. In addition to the social security tax, an unemployment insurance tax of 0.8% is also deducted from gross wages. These taxes are a key source of financing for Estonia's comprehensive social security system and are among the significant costs employers must consider.

3. Value Added Tax (VAT)

Estonia's general VAT rate is 22%; however, it will increase by 2% to 24% as of July 1, 2025. VAT is collected on all supplies of goods and services within the scope of commercial activities. Within the tax system, the VAT registration threshold is set at €10,000 for taxpayers with limited liability. VAT becomes mandatory for businesses with an annual turnover exceeding €40,000. In this case, businesses must complete the VAT registration process by applying to the Estonian Tax and Customs Authority.

4. Personal Income Tax

Personal income tax is deducted monthly from employees' gross salaries at a rate of 22% and paid to the government by the employer. Non-resident taxpayers are taxed only on income derived from Estonian sources; their earnings from other countries are not subject to tax in Estonia. Taxable income for foreign entrepreneurs establishing a company in Estonia is divided into the following categories:

• Commercial profits and business income derived directly from business activities conducted in Estonia,
• Fees, bonuses, and other financial incentives paid by companies in Estonia to members of the board of directors or other executives,
• Income earned from any commercial, professional, or personal activity conducted in Estonia (such as consulting, freelance work, etc.).

Cost of Establishing a Company in Estonia

Thanks to its advanced digital infrastructure, Estonia allows all payments required for company formation to be made easily online. As part of the application process for company formation, a specific administrative fee must be paid to the government. All rules and regulations regarding these fees are governed by the Government Fees Act.

Especially for joint-stock companies, registration procedures must be carried out through a notary. Notary fees for joint-stock companies vary depending on the number of founding partners and the total amount of capital. Furthermore, if notarial transactions performed using the remote approval method specified in Article 1, Paragraph 3 of the Notary Law fall within the scope of transactions defined in Paragraph 8 of the same law, a fee of €20 is charged in addition to the standard notary fee.

The fees for company establishment in Estonia vary depending on the type of company desired. These fees are determined in accordance with the legal obligations and procedures required by the company type. The main costs required for various company types in Estonia are listed in detail below:

e-Residence (Residency) Application Fees

e-Residence Application	€150
e-Residence Transportation	€0-20
Ordering a New PIN Code for Digital ID	€20

Company Establishment Registration Fees

Private Limited Company	€265
Branch of a Foreign Company	€200
Sole Proprietor	€20
Joint Stock Company	€200
Non-Profit Organization	€30

License and Notification Fees

Operating License Granting	Fees vary depending on the company's sector.
Economic Activity Declaration	€10

Digital Nomad Visa Fees

Short-Term Visa (Type C)	€80
Long-Term Visa (Type D)	€100

To summarize;

•   Thanks to its e-Residency system, Estonia offers entrepreneurs the opportunity to establish a company without being physically present in the country.
•   The advantageous tax system, easy company formation and access to the EU market make Estonia an attractive place to start a business.
•   IT, software, e-commerce and high-technology are among Estonia's leading innovative sectors.

  Make Your Dream of Starting a Business in Estonia Come True!

If you're looking to launch the company project you've been dreaming of for a long time, İfastürk is here to help. We offer comprehensive support at every stage, from company establishment to management. Our professional team simplifies your business journey with consulting services available anytime.

By quickly registering with İfastürk, you can take advantage of benefits like obtaining a company address, preparing tax returns, and accounting services. To establish a company in Estonia, fill out the contact form on our website to receive personalized incorporation offers tailored to your needs. You can confidently launch your business idea by selecting the most suitable option.

For detailed information and consultancy contact us!

Mesut SENEL | Ifasturk CEO

Certified Public Accountant