1. Structure of the standard Estonian company (OÜ=LLC)
Standard Estonian company has the legal form of limited liability company - OÜ (Osaühing), equivalent of LLC. The activity of an OÜ-company (AS as well) is governed by the Commercial Code of Estonia. The minimum share capital for registration is 2,500 Euro. If the founder of OÜ is a natural person, the authorized share capital may be paid later (in general in 3 years from the registration).
Corporate structure of OÜ:
1. Shareholder / and (owner (s) - one or more persons, legal entities and individuals. Shareholder is not personally liable for the obligations of OÜ.
2. The Management Board - one or more persons, only capable individuals.
(3. The Supervisory Board - 3 and more natural person. A rare case)
(4.Prokurist. very rare).
The Management Board represents and directs the company. The responsibility for the activities of OÜ take the Board Members. The Board Members are elected and recalled by shareholders (if there is no Supervisory Board). The size and way of payment of fees payable to the Members of the Board are deteremined by the decision of shareholders. 2. Taxation of Estonian companies
Estonian tax system consists of state taxes imposed by the laws on taxes and local taxes imposed by law rural municipality or city assemblies in their administrative territory.
State taxes are:
- corporate tax for non-distributed profit 0%;
- tax on distributed profit - 20/80 (25%)
- income tax - 20%;
- social tax - 33% , unemployment fee 2,4%, pension fee 2-3%
- VAT - 20% (9% and 0%)
- Land tax - paying only the owner of the land. The amount of tax is calculated by multiplying the price of the land tax on the land tax rate.
- Customs duty
- Excise tax on heavy vehicles - cars and trains are subject to the maximum authorized weight of 12 tonnes or more, provided for the transportation of goods; taxable, depending on the register or the total weight, number of axles and type of suspension drive axle.
- Tax on gambling
If an Estonian company runs standard business activities, does not grant special privileges to employees, Members of the Board, Partners, is not a sponsor of some third person, and does not make any payments not related to business activities, the taxation of the Estonian company looks like:
1. Taxes related to wages of employees and board member of the board (33% social tax, income tax 20%, the unemployment taxes 1.6+ 08% + pension contributions 2-3%);
2. VAT (if the company is obligated to VAT);
* 3. Income tax on profit in the event of distribution of profits.
* 4. Once a year, paid the land tax (if the company is the owner of real estate in Estonia).
3. Accountancy and Reporting
Basic requirements on accounting set forth in the Accounting Act of Estonia. Accounting reports and statements should be submitted to the following government authorities:
1) Annual Financial Report - to the Commercial register in Estonia. Every year by the 30th of June every Estonian company must submit annual financial report with an indication of its financial activity for the past fiscal year (from 01.01 to 31.12).
2) Monthly tax declarations - to the Tax Department of Estonia.
If an Estonian company is registered for VAT and/or a company has employees, the tax declarations are to be submitted on a monthly basis:
- by the 10th day of each month - on income and social taxes, and
- by the 20th day of each month - for VAT.
3) The Department of Statistics
Statistics Department selectivily sends a request to the Estonian companies to provide quarterly statistical reports - to provide information on ongoing activities of the company, wage workers and members of the board, on non-residents. This information is statistical in nature and it should be submitted obligatory.
4) The Central Bank of Estonia (CBE)
If the company is engaged in foreign trade, the CBE may submit a request for more information about the company.
4. Requirements for Audit of Estonian companies
Estonian company should be audited
when the company emerges as at least two of the three
- sales or income of EUR 2 000 000;
- balance volume of EUR 1 000 000;
- number of employees - 30 people or more.
or one of three criteria:
- sales or income of EUR 6 000 000;
- balance volume of EUR 3 000 000 and above;
- number of employees from 90 and above.