Tag: company in Estonia

Every registered company in Estonia is required to fulfill a number of accounting obligations by a certain date. Despite the fact that the Estonian tax system is one of the most favorable in all of Europe, it requires reliable record-keeping, timeliness and correctness of submitted declarations. 

VAT declaration of a company in Estonia

It is the obligation of a company in Estonia that exceeds the limit of sales revenue equivalent to 40,000 euros during the year to register for VAT settlements.

A company in Estonia also has the option to voluntarily register for VAT when it begins operations. In both cases, after applying for VAT registration in Estonia, a decision is received within a maximum of 3 working days, most often an individual VAT number is assigned the same day.

>>YOU CAN READ MORE ABOUT VAT REGISTRATION OF A COMPANY IN ESTONIA AT THIS LINK <<.

A company in Estonia that has been registered for VAT is required to settle VAT on a monthly basis, keep records of purchases and sales. Consequently, it is obliged to submit a value-added tax return by the 20th of the month for the previous month.

VAT OSS declaration of a company in Estonia

Companies registered in Estonia that make mail order sales to other countries in the European Union, the value of which exceeds EUR 10,000 (per country) are required to join the VAT OSS system. By registering for this system, the taxpayer is able to file a single quarterly return that captures all sales to individuals, facilitating the transfer of VAT to individual countries, which is performed by the Estonian tax authority.

TSD declaration of a company in Estonia

It is the accounting obligation of a company in Estonia that makes profit distributions in the form of dividends, as well as the payment of a board member’s salary, to file a TSD declaration on a monthly basis, by the 10th of the month following the month in which the payment was made.

>> YOU CAN READ ABOUT WHAT VD AND TSD DECLARATIONS ARE HERE <<

Intrastat declaration of an Estonian company

In the case of trade in goods between a company registered in Estonia and other European Union countries, the company may be required to report data for statistical purposes.

It is mandatory to include all export or import transactions of goods in the Intrastat declaration. The statistical statement must be compulsorily submitted by the 14th day of the month following the month declared.

Annual report for a company in Estonia

It is the accounting obligation of a company in Estonia, after the end of the fiscal year, to prepare and then submit an annual report to the Estonian Registry Court.

>> READ MORE ABOUT THE ANNUAL REPORT FOR A COMPANY IN ESTONIA HERE <<

This is an annual report on the company’s activities, which provides a comprehensive picture of the entity’s financial performance. The annual report must be filed within 6 months of the end of the fiscal year. Submission of the report is mandatory, even if there is no operating activity. In special cases, the annual report must also be accompanied by a summary of the auditor’s examination.

More and more Polish entrepreneurs are looking for new solutions for their business abroad. This is especially true for those entrepreneurs who operate internationally. In search of optimization, they are setting up new companies in countries that have a business-friendly approach, such as Estonia.

As more and more people look to register car fleets abroad, including passenger cars, more companies are being established there. While it may not be financially attractive to set up a company overseas just to obtain a passenger car, setting up a company to run a business is already a viable option. Entrepreneurs are increasingly choosing Estonia, which has an attractive tax system and a developed e-government system. It should be noted that Estonia, has a signed double taxation treaty with Poland.

Below you will find everything you need to know about registering a car in Estonia and what documents you need to provide when registering at the office.

How to register a car in Estonia?

There are different ways to register a car in Estonia, depending on who will own and use it. A car in Estonia can be registered to an individual or to a company. Individuals and company representatives should go to the Estonian Road Administration office with all the required documents to complete the registration procedure. Each of these types of registration has its own characteristics and a list of the necessary documents, actions needed to be carried out. So it is worth taking some time to properly prepare the documents before proceeding. Here we will discuss the various steps involved in registering a car in Estonia.

Residency requirements for car registration in Estonia

All persons with residence permits are required to register their vehicles in Estonia. The only exceptions are for diplomats and military personnel serving abroad. If you are working in Estonia but have a residence permit in another country, you will have to register your vehicles with the authority.

Documents required to register a car in Estonia

To register a car in Estonia you will need documents such as:

• A valid vehicle registration certificate from your country of origin
• Proof of private/company registration in the country of origin or other registration documents
• A valid insurance policy (if you are registering a car in Estonia for a company, you will need a statement that the vehicle is insured)
• Valid driver’s license or a photocopy of it (translation and international driving permit are also accepted)
• A completed application form
• A valid identity card or passport
• A passport-size photo

Company in Estonia vs. car purchase

An Estonian company can also purchase a car in another EU country, including Poland. This purchase is often more financially advantageous than buying from a dealer in Estonia. The car is purchased at a net price, as an Intra-Community Delivery of Goods (ITA). If it will be used for business purposes, Estonian VAT is charged and deducted in the same VAT return in Estonia. Thus, it is economically neutral and not subject to payment to the Tax Authority. There is no excise tax on passenger cars in Estonia. Thus, there is no excise tax on cars in Estonia. If the car was not subject to registration in Poland (first registration in Estonia) – the company may apply for a refund of the excise tax collected in Poland (depending on the car model – up to 18.6%).

Fees for car registration in Estonia

There are two sets of fees that you will have to pay to register a car in Estonia – an administrative fee and an insurance fee. The administrative fee is a one-time fee for the administrative steps involved in registering a vehicle. This fee is usually payable at the time of application. The insurance fee is a regular payment for motor insurance. The insurance fee must be paid annually. Details on registration fees can be found on the Road Administration’s website.

Taxes and car registration in Estonia

When you buy a vehicle in Poland before registration, you can deduct the excise tax included in the price of the vehicle, which is included in the price of those destined for the Polish market. If you buy a car with a capacity of less than 2,000 cc, the excise tax is not a big expense, as it amounts to 3.1% of the net value of the vehicle. The excise tax rate rises to 18.6% on the value of the vehicle if its capacity exceeds 2000 cc.

Transporting and registering the vehicle in Estonia is an expensive procedure that the dealer must arrange on his own behalf. The country’s capital, Tallinn, is more than 900 kilometers from Warsaw. If we are an EU VAT payer and our company buys the car in Poland and has it delivered to Estonia, VAT will be charged on a reverse charge basis. Since we will buy the car at the net price, we will be able to make a full charge and deduction. In Estonia, you can deduct 100 percent of the VAT on the purchase and use of the car, so the company will make a full accrual and deduction.

For a company with no history, controlled by a foreigner, it is virtually impossible to obtain financing in Estonia (and many other European countries) in the form of a lease or loan. A cash purchase is therefore the optimal solution. A technical inspection of the car, which must take place in the country of registration, is also crucial. First registration in Estonia is somewhat more difficult than in Poland, but in practice it takes no more than seven days. The first technical inspection is required within three years of the vehicle’s first registration, and subsequent inspections are conducted annually. The choice of insurers in Estonia is limited due to the country’s size, while policy prices are comparable to those in Poland.

Private vs. company car registration in Estonia – which to choose?

The best way to figure out which option is best is to look at the various application procedures. Private registration – this is the most popular option for registering a car in Estonia. It is suitable for those with a valid driver’s license, a clean driving record and a vehicle that has not been registered before. Corporate registration – This option is suitable for those who have a valid registration from their home country and wish to transfer it to Estonia.

How can we help you?

Thompson&Stein law firm specialists offer assistance in:

• Organization of the vehicle registration test (a mandatory part of the registration)
• Registration of the vehicle in Estonia – also with the help of our attorney. We also assist in obtaining special and individual plates.
• Purchase of appropriate liability and AC insurance
• Application for reimbursement of excise tax directed to Polish tax authorities.
• Correct settlement of the purchase and use of the vehicle in your Estonian company.

Remember that the registration process can take some time, especially if you are applying for private registration. So it’s better to start as soon as possible to avoid unnecessary delays. Remember to gather the required documents and make an appointment at the Road Administration office. The sooner you start, the sooner you will be able to drive your car freely on Estonia’s roads!

A power of attorney is a special type of power of attorney that gives a person (proxy) the right to perform activities related to the operation of a business. It is extremely popular in Poland. It is worth taking a look at what rules it operates under in companies under Estonian law.

Powers of a proxy in a company in Estonia

As a rule, the company is represented by the Board of Directors according to the representation indicated in the Articles of Incorporation. However, a proxy consists in delegating the right of representation to a person who is not part of the Board of Directors. A proxy is authorized to perform judicial and extrajudicial acts related to the operation of the company. Under Estonian law, an exemption applies to real estate – a special power of attorney, which must be disclosed in the commercial register, is needed to sell or pledge it.

It should be remembered that a power of attorney can only be granted to an individual, who does not have the right to grant it to subsequent persons. However, there are no obstacles to appointing several proxies and establishing rules for their interaction.  A solution is permissible in which the proxies will be authorized to represent the company jointly or jointly with a member of the management board. Each time the signature of a proxy must bear the notation “procurist” (est. proxy) or “p.p” (per procura).

Proxy regulations in an Estonian company

The granting of a proxy is regulated in detail by the Estonian Civil Code. Upon incorporation of a general or limited partnership, the proxy is granted by all managing partners, and upon incorporation of a limited liability company or a joint stock company, it is granted by the partners, respectively. The proxy can be terminated at any time. Also, a proxy may demand its termination if the legal relationship that is the basis of the proxy ceases. It is worth noting that the power of attorney does not terminate in the event of the death of the sole shareholder of the company.

>> MORE ABOUT THE COMPANY IN ESTONIA YOU CAN READ HERE <<

A proxy must be mandatorily registered in the Estonian Commercial Register. This entry includes the name and surname, as well as a number identifying the individual (for example, the PESEL number). An appropriate resolution must be presented in order for the entry to be made.

A power of attorney is the broadest power of attorney that can be granted. This makes it necessary to carefully analyze the advantages and disadvantages of granting it each time. Certainly, a proxy, (whether in Poland or Estonia) due to the broad catalog of powers, must be a person of special trust. However, the institution of a proxy carries a number of benefits and can be an extremely useful support for the day-to-day work of the company’s management.

SEE MORE ABOUT THE COMPANY IN ESTONIA:

On April 13, 2022, the Estonian Parliament adopted a new Business Register Act that removes the minimum share capital requirement for Estonian limited liability companies (OÜ).

Since the first Estonian Commercial Code was issued in 1995, the required share capital was 40,000 Estonian crowns, which was converted to 2,556 euros when Estonia adopted the euro in 2011. It was later rounded up to €2,500.

How much is the share capital of a company in Estonia now?

According to the current Commercial Code, the share capital of a limited liability company in Estonia must be, at a minimum, 2,500 euros. The amount of minimum capital has been the same for 24 years, but given the purchasing power of the crown in 1995, this was a huge hurdle for any aspiring entrepreneur who did not have spare cash. This created a market for scammers who sold ready-made companies in Estonia (riiulifirma in Estonian) that already had a registered share capital of 40,000 Estonian crowns. In reality, it was paid only for the purpose of registering the company in Estonia, and then withdrawn from the company’s bank account to show that it existed in cash. The buyer would then buy the Estonian company with a balance of 40,000 crowns in cash and confirm it at the notary’s office.

Amendments to the Commercial Code in 2011 allowed individuals to establish an Estonian limited liability company without having to contribute to the share capital during its formation. Thus, as of January 1, 2011, it was possible to set up a company in Estonia even if you did not have €2500 to contribute.

This option is often used by Estonian e-residents.

Registration of the share capital of a company in Estonia

Company share capital registration in Estonia has been problematic in the past for some e-residents who were unable to open a company account with an EEA-licensed credit or payment institution to obtain the share capital deposit certificate required by the Estonian Business Register. Before January 1, 2019, this had to be a credit institution in Estonia – which meant that if no credit institution (bank) was willing to accept a person as a client, they could not even register the company’s share capital to legally pay dividends.

Fortunately, the Estonian Parliament passed an amendment supporting e-Residence, amending the Estonian Commercial Code to allow Estonian companies to use the company accounts of any credit or payment institution in any EEA country to deposit share capital. This opened the way for fintech companies to become the first financial institutions outside Estonia to start accepting e-residents established by Estonian companies.

How much will the required share capital be for a company in Estonia?

Starting from February 1, 2023, founders, and subsequently shareholders, must estimate the amount of share capital that is required to establish and operate a given limited liability company. Since according to § 148 para. 1 of the Commercial Code, the minimum nominal value of a share is 1 eurocent, the share capital of an Estonian limited liability company may be 1 eurocent if it has one founder and shareholder. Each additional shareholder would therefore mean at least 1 eurocent more.

Special provision added to the Bankruptcy Law Act

The Bankruptcy Law Act added a new provision, § 29 para. 91, under which a shareholder of an Estonian limited liability company with a share capital of less than €2,500 is liable for the fees and expenses of the provisional trustee in bankruptcy proceedings. For example, if the share capital of a limited liability company is €1 and the company does not have sufficient assets to cover the receiver’s fees and expenses, the shareholder’s potential liability is €2499.

The new Business Registration Act will come into force on February 1, 2023.

If you are interested in establishing a company in Estonia, please contact us and our specialists will help you with all the formalities.

Watch the video on our YouTube channel to learn more about a company in Estonia: