- 29 August 2018
- Posted by: Staff
- Category: Brief consultancy, Europe
With a population of just over 1.3 million, what makes this small European country such an ideal place to successfully launch or run a business?
From new regulations taking effect in 2018 to various other economic factors, Estonia is fast becoming an extremely popular place to do business in.
And if that wasn’t enough reasons to spark your interest, here are three more which might make you seriously reconsider.
Lower tax rate
As of 1st January 2018, Estonia’s stance on the corporate income tax rate on regular profit distributions has been lowered from 20% to 14%. However, this is only in cases where dividends are paid to legal entities and applies to Estonian-based businesses who have paid regular dividends.
In detail, if the profit distributed as dividends in a tax year is equal to or less than the average over the last three years, you’ll only have to pay a 14% income tax rate. Whereas, if you exceed this average, you’ll have to pay the normal 20%.
Although it’s worth thinking about as a future investment if you’re in the process of launching a new business.
It’s also worth noting that there’s no corporate income tax on retained and reinvested profits, plus you can declare your taxes online in its entirety.
Better transparency and protection
From 1st September 2018, businesses in Estonia will have to declare the ultimate beneficial owners (UBO) to the commercial register. This includes company details such as address, name etc.
In turn, this should offer greater transparency to the public and other businesses. It should also have a positive impact on verifying whether a business is legitimate or not and counter against money laundering and terrorist acts. This is particularly important if you’re planning on capitalising on the vast benefits of cryptocurrency as these have been ongoing issues in the past couple of years.
Just be aware that you need to obtain a cryptocurrency exchange license before trading. Get in touch with our specialist EBA Crypto team here for more information.
Higher VAT threshold
Another financial consideration to take into account is Estonia’s increased VAT threshold. Introduced on 1st January 2018, businesses will only have to register for VAT if their taxable turnover exceeds 40,000 Euros – having previously been just 16,000 Euros.
This rule solely applies to companies based in Estonia, whereas those who wish to only trade/manufacture there must register before proceeding.
The new 2018 regulations certainly open up a window of opportunity for both new and existing companies to carry out business in Estonia.
One of the brightest points to consider for Estonian companies who manage their businesses abroad is that you only have to appoint a contact person who lives in the native country to capitalise on the benefits. This contact doesn’t have the right to make any declarations for the company, they just act as a presence and/or a delivery address.
To find out more about doing business in Estonia, get in touch with our dedicated team today.