Doing Business in Estonia: A Complete Guide for Entrepreneurs and E-Residents
- Taaniel Hanniste
- Dec 1, 2024
- 18 min read
Updated: Aug 27
Doing business in Estonia means more than just registering a company — you need to know the rules. Entrepreneurs and e-residents must handle VAT registration, submit annual reports, pay the right taxes, and keep proper accounting records.
This guide walks you through the key steps: setting up your company, opening a bank or fintech account, managing VAT obligations, understanding Estonia’s unique corporate income tax system, and meeting reporting deadlines. Whether you’re launching a new venture or already running a business, you’ll find clear, practical advice to stay compliant and operate confidently in Estonia.
Table of Contents
Official Company Data in Estonia
The official source for company information is the Estonian Commercial Register. There you can:
Check your company’s registered details
Download official documents (Articles of Association, registry extracts, annual reports)
Update company information when needed
In Estonia, an OÜ (Osaühing) is the equivalent of a Private Limited Company—similar to an LLC, SRL, SARL, BV, or GmbH in other countries. Even if you are the only shareholder, it is still a separate legal entity and not a sole proprietorship.
Basic Plan: Legal address & Contact person service + Accounting software
You are subscribed to our Basic plan, which includes the essential services to get your business moving:
Legal address and Contact Person
We provide your company with a legal address in Estonia and act as your licensed Contact Person.
All company mail is received, digitized, and forwarded to your specified email.
As required by Estonian law, a Contact Person must be appointed for companies managed from abroad. Our company, Sunio OÜ, serves in this role as a licensed legal body (not an individual).
We are the authorized recipient of your company’s official correspondence from authorities such as the Commercial Register, Tax Office, and courts. Any documents delivered to us are considered legally delivered to your company.
Your Estonian legal address (our office) is used for all official documentation and correspondence. This is separate from your day-to-day place of business operations.
Read more here: Contact person & legal address
SmartAccounts (on request)
SmartAccounts is our primary software for managing your sales invoices in accounting.
Within the Basic plan, the customer can request access to start invoicing with their company.
Please notify us when you require access, and we will set up the account accordingly.
Document Reporting App – Envoice or CostPocket (on request)
Envoice is used for our active accounting clients. CostPocket is prepared on a request basis for submitting your business documents.
These apps allow you to scan and send purchase invoices, receipts, contracts, and other financial documents directly to us.
Please notify us when you require access to CostPocket, and we will set up the account accordingly.
Submitting documents through the app ensures they are properly accounted for and deductible in your company’s financial records.
Subscription & Compliance Reminder
Your Business Basic subscription is billed monthly at €19.00 + VAT.
Failure to pay on time will automatically pause our services the day after the due date.
Continued non-payment or non-compliance will result in the removal of our Contact Person from your company records, which can lead to penalties and eventually, deletion of your company by the Commercial Register.
Banking options
When running an Estonian company, you have several options for business banking depending on your needs, location, and company profile. Access is not guaranteed, as all banks and payment institutions are private companies that apply their own onboarding criteria while following international regulations.
Payment Institutions & Fintechs (Most Popular)
For most e-residents and early-stage businesses, fintech providers in the EU/EEA are the best solution.
Accounts can be opened entirely online.
Fast and convenient for international transactions.
Suitable for building a transaction history in the first 1–2 years.
Popular options: Wise, Revolut, and other EEA-based fintechs.
⚠️ Not ideal for holding large balances. Fintechs are usually not credit institutions, meaning they cannot issue business loans.
👉 Recommended starting point for new e-residents. Once you establish a financial history, you’ll have stronger chances with traditional banks.
Estonian Commercial Banks (Hard to Qualify)
Traditional banks in Estonia (e.g., LHV, Swedbank, SEB Pank) are selective. To qualify, you must demonstrate a real connection to Estonia, such as:
Team members based in Estonia
Business partners, contracts, or suppliers in Estonia
A strong and detailed business plan with predictable cash flow
A history of paying Estonian VAT or taxes
Additional notes:
Applications may receive a pre-decision online, but final approval requires a face-to-face meeting in Estonia.
An Estonian IBAN allows access to business loans and credit facilities.
Early-stage, location-independent companies often do not qualify.
Banks in Other EU/EEA Countries
Estonian companies are not legally required to have an Estonian bank account. You can also open an account in another EU/EEA country if you:
Already have a strong banking relationship abroad, or
Reside in another EEA country.
📌 Important: IBAN discrimination is not allowed — EU business partners cannot demand that your IBAN must be from a specific country.
Why Start with a Fintech?
E-residency was designed to support online company management, making fintechs a natural fit.
They offer fast onboarding, digital tools, and global reach.
They tend to have a higher risk appetite for non-resident founders compared to banks.
Innovation is faster than in traditional banks, which still rely on legacy systems.
If your long-term goal is to open a bank account in Estonia, the best strategy is:
Start with a fintech account.
Build a consistent transaction history and revenue stream.
Use this track record to strengthen your case with a traditional bank later.
Special Considerations
Companies or founders linked to countries on the FATF high-risk list can face major difficulties accessing banking.
E-Residency status cannot be used to open a personal bank account in Estonia.
Read more here: Banking basics
Company Documents
When applying for a bank account, payment service provider (PSP) account, or merchant account, you may be asked to provide notarized company documents. These can be conveniently ordered online here.
Notarized company documents are also frequently required for other official procedures, such as buying real estate, registering certain contracts, or completing transactions that must be certified before a notary.
VAT: Estonian VAT Number
By default, your company is registered without a VAT number. If required, this must be applied for separately with the Estonian Tax and Customs Board, which issues VAT numbers based on your company’s trading activity.
In some cases, a foreign VAT number may also be necessary—for example, if your goods or services are supplied from another country, or if you are engaged in B2C sales. We can assist in determining your company’s specific VAT obligations.
Once an Estonian VAT number is granted, you must submit a monthly VAT return and pay any VAT due by the 20th of each month. Estonia does not allow quarterly VAT reporting.
VAT: Estonian VAT on EU Purchases
If your company buys SaaS, goods, or services from other EU countries but does not hold an Estonian VAT number (because of your business model, client base, or the location of goods/services), you are still required to pay Estonian VAT on these purchases.
This VAT is non-reclaimable and non-refundable. It must be declared and paid to the Estonian Tax Authority by the 20th of the following month.
Your business partners can verify your VAT registration status at any time using the European VIES system.
VAT: Registration in Other Countries
If your company sells goods or services outside Estonia, the VAT rules of those countries apply. This often requires you to register for VAT (or Sales Tax / GST) and handle compliance in each relevant jurisdiction. Your trading profile and client base (B2B or B2C) may mean your company must register in multiple countries.
This also extends beyond the EU:
Sales Tax may apply in the USA
GST may apply in Canada or other jurisdictions
If you sell digital goods (such as SaaS, online content, or digital media), special VAT rules apply — read more here.
⚠️ Any VAT registrations and ongoing administration outside Estonia must be arranged and covered by the Client.
Our Recommended VAT Partners
To help with multi-country VAT compliance, we work with trusted partners:
EU VAT support (Austria, Belgium, Czech Republic, France, Germany, Italy, Netherlands, Poland, Slovakia, Spain, Sweden, United Kingdom): We recommend our affiliate partner, Hellotax.👉 Use our dedicated partner link to receive a 10% discount on their services.
Global VAT, GST, and Sales Tax (countries not listed above): We recommend Sovos. If you already subscribe to our accounting service, our team will connect you directly with Sovos for seamless onboarding.
Read more here: Cross-border VAT
OSS / IOSS
The EU One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) schemes simplify VAT compliance for businesses selling to customers across multiple EU countries. Instead of registering for VAT separately in each country, you can declare and pay the VAT through the Estonian Tax Authority’s system.
Read more here: Special schemes of e-commerce and services
Merchant Accounts
After registering your company, you can apply for merchant accounts with platforms such as Amazon or Shopify, in line with your business plan. Most platforms require certified company documents, and in some cases, an Estonian VAT number.
Read more here: Amazon: All you need to know about VAT in one place
Share Capital
When registering your company, you must define a share capital amount:
The minimum you can set is €0.01.
Up to €50,000 can be registered without needing supporting documents from your financial provider.
It is recommended to set your share capital based on your expected startup expenses until the business becomes self-sustainable.
Keep in mind that the minimum liability for the shareholder(s) is €2,500, and with a larger share capital, the liability and risk increase accordingly. If the share capital is less than €2,500, the shareholder(s) liability towards the company will still be €2,500.
How is Share Capital Registered?
At incorporation, we declare that the share capital has been contributed outside the Business Register portal (the fastest and most convenient way). This means the funds exist either in the company's cash or in a shareholder’s personal account at the time of registration.
Once the company has an operational business bank or PSP account, the share capital should be transferred there. The company’s management board confirms the contribution during incorporation.
How Can Share Capital Be Used?
Share capital funds can be used for all business-related expenses, including:
Payments and purchases
Investments
Loans
Or simply kept in the company’s bank account
There is no requirement to keep the share capital untouched in the account.
Can Share Capital Be Covered by Future Profits?
No. Share capital must be contributed by the shareholder(s) directly. The company itself cannot use profits to fulfill this obligation. This is why it is called a “limited liability” company: the shareholders’ liability is limited to the amount they have personally contributed.
Principal and Multiple Activities
When your company was established, a principal activity code was registered based on the details you provided. This code reflects your company’s main line of business.
However, Estonian companies may engage in multiple activities without restriction, regardless of the registered principal activity. If your main business focus changes, the principal activity can be updated when submitting your next annual report. This gives your company flexibility while remaining compliant with regulations.
Activity Licences
Most business activities in Estonia do not require a license. However, license requirements can apply depending on your business sector and may also differ in the countries where your customers are located.
Common activities that often require licensing include:
Training and education
Medicine and healthcare services
Investment and financial activities
Transport and logistics services
Sale of food, supplements, or dietary products
For example, if your company offers online training, transport services, or sells food and dietary products online, a license from the Estonian authorities will be required.
Since licensing rules can vary widely, we strongly recommend verifying requirements before starting operations.
Tax Reporting & Monthly Accounting Requirements
Estonian companies are required to submit monthly tax reports under certain conditions.
These include:
VAT reporting: If your company has an Estonian VAT number, a monthly VAT return must be filed, and any VAT payable must be submitted to the Tax Authority by the 20th of each month.
Income and social tax reporting: If your company incurs non-business expenses (e.g., meals, catering, entertainment), pays salaries, director’s fees, or dividends, a monthly income and social tax report must be submitted. The related taxes must be paid by the 10th of the following month.
Because reporting obligations start as soon as you make purchases or sales, monthly accounting services are essential to ensure compliance from the outset.
View our accounting plans here: https://www.e-resident.store/pricing
Annual Tax Reporting
All Estonian companies are required to submit an annual report after the end of each financial year, even if the company had no activity or income during that period.
The report must be filed within six months of the financial year’s end.
Late submission can result in penalties for the company, its directors, and shareholders, which continue until the report is filed.
To avoid penalties, we strongly recommend submitting the annual report on time.
👉 If you are subscribed to one of our monthly accounting plans, preparation and submission of the annual report is already included.
Financial Year
By default, an Estonian company’s financial year begins in the month of incorporation and runs for 12 months.
For example, if your company was registered in May, the financial year covers May 1 – April 30, and the annual report must be filed by October 30.
To confirm your company’s exact financial year, please check your registry extract.
Corporate Income Tax (CIT) in Estonia
Estonia is not a tax haven. Companies registered in Estonia are subject to taxes like businesses elsewhere. However, Estonia operates a unique CIT system that differs from traditional models.
No tax on retained earnings: Profits that are reinvested in the business or used for justified business expenses are not taxed.
Tax on distributed profits: Corporate income tax becomes payable only when dividends or profits are distributed to shareholders.
Tax rate: Dividend distributions are taxed at 22% on the gross amount, which equals 28.2% of the net distribution. This rate is officially expressed as 22/78.
Unlike traditional CIT systems, where expenses reduce the taxable base annually, Estonia’s model defers taxation until profits are distributed. This allows businesses to reinvest and grow without an immediate tax burden.
Corporate Income Tax (CIT) in Estonia – Taxable Expenses
In Estonia, non-business expenses are taxed immediately. If your company makes a payment that cannot be justified as a business-related cost, it triggers a corporate income tax (CIT) charge.
The tax is calculated at 22/78 of the net amount of the expense.
It must be declared and paid in the following month.
Examples of expenses treated as taxable:
Meals, catering, or restaurant costs not directly tied to business activities
Personal expenses of shareholders or employees
Gifts or benefits provided without a clear business purpose
Private use of company funds or assets
In traditional CIT systems, these would be treated as non-deductible expenses. In Estonia’s model, they are simply taxed right away.
Corporate Income Tax (CIT) in Estonia – Dividends
When distributing dividends in Estonia, the following requirements must be met:
Share capital must be fully paid and registered.
The latest annual report must be approved by shareholders with a digitally signed resolution.
Dividend amounts cannot exceed the retained or undistributed earnings shown in the annual report.
After distribution, the company’s net assets must remain at least:
Half of the registered share capital, or
The statutory minimum share capital requirement, whichever is higher.
Shareholders must prepare and sign a dividend distribution decision.
Proper accounting entries must be recorded.
Dividend payments must be declared in the tax return, and the applicable tax must be paid by the 10th of the month following the distribution.
Corporate Income Tax (CIT) Abroad – Permanent Establishment
A Permanent Establishment (PE) is generally defined, following the OECD Model Tax Convention, as “a fixed place of business through which the business of an enterprise is wholly or partly carried on.” Each element of this definition must be met for a PE to exist, and most countries base their domestic rules on this standard, as do many international tax treaties.
A PE can also be created through individuals acting on behalf of a company — known as a “dependent agent PE”. In this case, no fixed location is required. Instead, the threshold is met if a person regularly acts on behalf of the enterprise and has authority to conclude contracts in the company’s name in that country.
⚠️ Importantly, each jurisdiction applies its own definition of a PE, so the domestic law of the country in question must always be reviewed first. In addition, any tax treaty between Estonia and that country should be checked, as treaties often restrict when a PE is deemed to exist compared to domestic rules.
Understanding the nuances of PE is critical for ensuring compliance with international tax rules and avoiding the risk of double taxation.
Avoidance of Double Taxation – CIT & PIT
Estonia has signed tax treaties with more than 60 countries to prevent double taxation on both Corporate Income Tax (CIT) and Personal Income Tax (PIT). These agreements ensure that the same income is not taxed twice — once in Estonia and again abroad.
To make use of treaty benefits, specific documentation must be prepared in both countries involved. Our accounting team can assist you with this process as part of your accounting service.
Copies of all bilateral treaties are available here.
Taxes for Digital Nomads
For digital nomads, tax obligations depend on several factors, including:
Country of citizenship
Frequency and duration of travel
Level of income
Whether a permanent residence exists
Location of personal, social, or economic ties
It’s important to distinguish between personal income tax and corporate taxes, as the rules and obligations may differ.
As a general rule, digital nomads are subject to income tax. The key question is in which jurisdiction(s) the tax is payable and how much is due.
Read more here: Understanding cross-border taxes
Salary for Employees and Entrepreneurs
Taxation of Salaries
For work physically performed in Estonia, an Estonian company must:
Withhold 22% Personal Income Tax (PIT)
Pay 33% social tax
Withhold an unemployment insurance contribution of 1.6%
Pay an employer’s unemployment contribution of 0.8%
If the work is not physically performed in Estonia, Estonian PIT, social tax, and unemployment contributions do not apply. Instead, the salary is taxed in the employee’s country of residence.
For non-resident employees working outside Estonia, you do not need to register them in the Estonian employment register.
However, all payments to non-residents must still be declared in the monthly tax return.
It is the employee’s responsibility to declare this income to the tax authorities in their country of residence. Failure to do so may lead to penalties or legal action abroad.
Employee vs. Entrepreneur Work
Work is generally classified as employee work when it involves operational duties such as:
Providing services to clients
Managing sales or deliveries
Developing software
Handling other day-to-day business tasks
If you, as an entrepreneur, carry out these duties yourself and wish to pay yourself a salary, you may formally appoint yourself as an employee.
To do this, you must:
Draft an employment agreement (with job description, terms, and conditions).
Define the scope of duties and responsibilities.
Register the employment according to requirements.
👉 We can provide the necessary templates and guide you through this process to ensure a clear, compliant, and professional employment arrangement.
Directors’ Fees
A director is a member of the company’s management board. Estonian law requires that directors’ fees paid by an Estonian company to a non-resident director are taxed in Estonia at 22% Personal Income Tax (PIT). This rule is consistent with international tax treaties, which generally assign taxing rights to the country where the company is domiciled.
Social Tax on Directors’ Fees
The application of the 33% Estonian social tax depends on the director’s country of residence and social security coverage:
EU/EEA or Switzerland: An A1 certificate from local authorities must be obtained and submitted to the Estonian Tax Authority to exempt the company from social tax.
Canada, Ukraine, Australia: Social security agreements with Estonia apply. A certificate from local authorities confirming coverage exempts the company from Estonian social tax.
Other countries (third countries): No exemption is available — the 33% Estonian social tax must be applied.
All payments to non-residents must be declared and taxes remitted by the 10th of the following month.
What Counts as Director’s Work?
Director’s work typically includes managerial and strategic duties, such as:
Negotiating contracts
Hiring staff
Business development
Securing financing or banking arrangements
If you, as an entrepreneur, perform these duties yourself and wish to pay a director’s fee, you should draft a Director’s Agreement outlining:
Terms and conditions of service
Management responsibilities and duties
👉 We can provide templates and guidance to help you set up a proper agreement. This ensures a clear professional relationship between you and your company while staying compliant with legal requirements.
Members of Your Company
Your Estonian company has three main levels of members:
Director (Management Board Member)
A director is a signatory who legally represents the company before authorities and in contracts.
A company may appoint one or several directors.
Shareholder
A shareholder (either a natural or legal person) owns all or part of the company’s shares.
Shareholders are entitled to receive dividends when they are distributed.
Ultimate Beneficial Owner (UBO)
The UBO is the natural person who ultimately controls the company, holding at least 25% of direct or indirect voting rights.
In micro-companies, it is common for the same individual to act as Director, Shareholder, and UBO.
In more complex structures, these roles can differ. For example, if a shareholder is another company, the UBO is the individual who controls that holding company.
Entertaining Business Guests and Partners
Certain expenses for hosting or entertaining business partners and cooperation partners may be partially tax-exempt. These can include costs for:
Catering and meals
Accommodation
Transportation
Entertainment related to business activities
Under Estonian law, the exempt amount is:
€32 per month, plus
2% of the company’s gross salary fund (payments subject to social tax) for that month.
Any amount exceeding this limit is treated as a Corporate Income Tax (CIT) liability.
⚠️ If employees or management board members take part in the event, their share of the costs is treated as a fringe benefit and must be taxed accordingly.
Gifts and Donations
For tax purposes, a gift must have a real monetary value for the recipient. Items such as advertising printouts, product samples, or small presents worth less than €10 (net of VAT) are not treated as gifts, since they have minimal consumable value.
If the value of a gift exceeds €10, the entire amount becomes taxable, subject to Corporate Income Tax (CIT) at 22/78 of the net value.
Negative Equity
If a company’s expenses exceed its earnings in a financial year, it creates negative equity. This is a common situation for start-ups in their early stages.
However, under Estonian commercial law, shareholders are required to restore equity to at least 50% of the company’s registered share capital. This can be done by:
Generating sufficient profits in the following financial year, or
Injecting additional funds (monetary reserves) into the company.
Financing Your Company
Most start-ups require funding during the early stages. There are several ways to finance your Estonian company:
Shareholder loan – The simplest option. Shareholders may lend money to the company without restrictions, as long as a formal loan agreement with repayment terms and interest is signed and properly recorded.
Loans from others – Friends, family, or other companies can also provide loans. Repayment of the principal amount is tax-free, while any interest paid is taxable income for the lender.
New shareholders or investors – Bringing in additional shareholders or investors who commit capital to the business is another option. Proper legal documentation is crucial to protect both parties.
👉 A detailed overview of external funding opportunities and grants is available here.
Public Information
In Estonia, company data is made publicly available to ensure trust and transparency within the e-Residency ecosystem and the wider business environment.
The following information can be accessed online through the Commercial Register:
Company details (including legal address and contact e-mail)
Annual reports, including sales and returns
Names and dates of birth of board members, shareholders, and ultimate beneficial owners (UBOs)
In some cases, personal identification or social security numbers
This openness is a cornerstone of Estonia’s digital business system, helping to maintain credibility and accountability.
Changes in Board Members, Shareholders, or UBOs
If there are any changes to your company’s board members, shareholders, or ultimate beneficial owners (UBOs), please inform us. We will guide you through the process and assist with the necessary updates in the Commercial Register.
Differences for Non-Profit Organisations (NPOs)
Most rules that apply to private limited companies (OÜ) also apply to non-profit organisations (MTÜs) — including VAT, salaries, expenses, taxes, and payouts. The main differences are:
Profit distribution:
- An OÜ can distribute profits to its shareholders.
- An NPO cannot distribute profits to its members. Earnings must be used for support, donations, or expenses that serve the organisation’s goals.
Salaries:
- NPOs may pay salaries to contributors.
- All payments are taxed in the same way as in OÜs, either by the organisation or the recipient.
Donations and grants:
- NPOs can receive donations and grants from individuals, organisations, and supporters.
- Directors must comply with Anti-Money Laundering (AML) requirements:
Identify all donors (name, tax ID, address, contact details).
For larger donations, verify the source of funds.
In short, the key distinction is that NPO members cannot personally profit — all earnings must go back into achieving the organisation’s mission.
Know Your Customer (KYC) Updates
To comply with Anti-Money Laundering (AML) regulations, we are required to keep your information accurate and up to date. Periodically, we will ask you to update your KYC details and provide supporting documents where necessary.
In some cases, we may also request additional information about your transactions, source of funds, or business partners. Supplying this information is both a legal requirement and part of your commitment to maintaining compliance.
Smart-ID – Convenient Alternative to e-Residency Card
The e-Residency card with its card reader and PIN codes remains the most secure tool for identification and digital signing. However, we also recommend setting up SmartID as a convenient alternative.
SmartID is a mobile app that works much like your e-Residency card but does not require a physical card or reader, making it faster and easier to use.
Summary
We encourage you to carefully review the information above and ensure your business operations remain in line with all requirements. Your cooperation and diligence are essential for maintaining compliance and securing your company’s success.
Our team is committed to supporting you and is available to answer any questions or provide clarification whenever needed.
Please note that this information is accurate as of the date of publication, but may change over time. For the latest guidance, we recommend consulting with us directly.
Disclaimer
The information in this article is provided for general informational purposes only and reflects our understanding as of December 2024. While we strive for accuracy, we make no guarantees regarding the completeness, reliability, or timeliness of the content, and errors or omissions may occur.
This article does not constitute professional advice. Readers should seek guidance from a qualified professional regarding their specific circumstances. We accept no liability for any actions taken, or not taken, based on this content.
All information is subject to change without notice, and we are under no obligation to update it.
Sunio OÜ – Member of Sunio Group
Licence # FIU000124 – Financial Services, Trust & Company Service Provider
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