From nomad to entrepreneur: How a company in Estonia can benefit you
As a digital nomad, you probably have experienced the freedom of working from anywhere in the world. You probably also learned that running a remote business can be challenging, especially when it comes to legal and financial matters. But even choosing a place to open a company online may be challenging. In this article, we are going to cover opening a company in Estonia online for a digital nomad.
Introduction to the Digital Nomad Lifestyle
Digital nomads are people who use technology to work remotely while traveling the world. They are usually freelancers, entrepreneurs, or employees of remote companies. They can work from anywhere with an internet connection, which means they can travel and live in different countries without losing their income.
The digital nomad lifestyle is attractive for many reasons. It allows people to explore new cultures, learn new languages, and meet new people while working on their own terms. However, running a remote business also comes with challenges, such as legal and financial issues.
Benefits of Opening a Company in Estonia for Digital Nomads
Opening a company in Estonia has become increasingly popular among digital nomads and remote entrepreneurs. Estonia is a small country in Northern Europe, known for its advanced digital infrastructure and business-friendly environment.
With a population of over 1.3 million people, the country has managed to attract over 25 000 foreign entrepreneurs to open companies and has over 1300 active startups. The numbers are truly remarkable but how Estonia managed to achieve this? Let’s go over the main factors that attract digital nomads:
e-Residency Program — lets entrepreneurs open companies online;
Digital infrastructure — Estonia has invested heavily in its digital infrastructure, making it one of the most technologically advanced countries in the world. Almost all government services are available online, with 95% of tax declarations filed online;
Low taxes — Estonia has a liberal economic policy and a low corporate income tax rate of 20%. Estonia also offers an absolute 0% corporate tax on retained or reinvested profits.
Access to the EU market — being a member of the European Union provides companies registered in the country with access to the EU's single market and the opportunity to do business with the rest of the EU.
Why E-Residency Program is So Cool
Estonia offers an e-residency program, which allows non-Estonian residents to establish and manage an Estonian company online. With e-residency, you can sign documents electronically, access Estonian government services, and manage your business from anywhere in the world.
Launched in 2014, the program became highly successful. Up to that moment, over 100,000 people from 140+ countries became e-Residents.
With e-Residency on hand, you'll be able to incorporate a company in a matter of 1 business day. Apart from the incorporation, e-Residency will ease up the process of obtaining VAT, OSS, EORI, filling accounting and tax reports, and other processes.
But it's important to note that e-Residency gives you no right to travel to Estonia or any other country and gives no benefits in getting a visa or permanent residency. Another drawback of the program is that a person must receive the card in of the pick-up points in person in order to complete identity verification.
Advanced Digital Infrastructure of Estonia
Estonia is one of the most digitally advanced countries in the world, with a fast and reliable internet connection, a secure digital identity system, and a paperless government. This makes it easier for digital nomads to manage their business from anywhere in the world, without the need for physical presence in Estonia.
Estonia has been called the Silicon Valley of Europe, and for a good reason. The country has a thriving startup ecosystem, with many successful digital companies such as Skype, TransferWise, and Bolt. The government actively supports startups and innovation, and there are many co-working spaces, accelerators, and incubators available for entrepreneurs.
Estonia is also a great place for digital companies because of its talented and multilingual workforce. The country has a high level of education, with many people speaking English and other European languages. This makes it easier to recruit employees from different countries and to operate in a global market.
How to Open a Company in Estonia
Opening a company in Estonia is a relatively straightforward process, especially with the e-Residency program. Here are the steps you need to follow:
Step 1: Apply for E-Residency
The first step is to apply for e-residency on the Estonian government's website. You will need to fill out an application form and pay a fee of €120. The application process usually takes around 4-6 weeks.
Step 2: Choose a Business Structure
Once you have received your e-residency card, you can start the process of setting up your company. You will need to choose a business structure, such as a private limited company (OÜ).
Step 3: Register your Company
You will need to register your company with the Estonian Business Register. You can do this online, and it often takes around 1-2 days. Furthermore, you will need to provide information about your company, such as its name, address, and business activities.
Step 4: Open a Bank Account
To operate your company, you will need to open a bank account in Estonia. This can be done online, and there are several banks that offer services to e-residents. You will need to provide your e-residency card and other documents to open the account.
Step 5: Start Doing Business
Once you have completed these steps, you can start doing business as an Estonian company. You will need to comply with Estonian laws and regulations, such as paying taxes and submitting annual reports.
The Legal Requirements for Opening a Company in Estonia
To open a company in Estonia, you will need to comply with certain legal requirements. Here are some of the most important ones:
Company Name
Your company name must be unique and not already registered in Estonia. It must also comply with Estonian naming rules, which require that the name is in Estonian, has a legal form (such as OÜ), and does not contain offensive or misleading words.
Management Board
Every Estonian company must have a management board, which is responsible for managing the company's activities. The board must have at least one member, who can be a resident or non-resident of Estonia.
Accounting Requirements in Estonia
According to the Accounting Act, an accounting entity must prepare an annual report for the fiscal year at the end of each financial year (January, 1 – December, 31).
If your company was incorporated after June, 30th, the report for the first 6 months will be included in the next year’s report.
The annual report should be filed at the Commercial Register within six months after the end of the financial year and consists of:
Balance sheet
Income statement
Management report
Please notice that all companies must submit the annual report, even if there was no activity during the financial year.
The accounting process is a bit different for VAT-liable companies. The taxable period is one month, and VAT returns must be submitted to the tax authority (even for the months when there could be nothing to declare) by the 20th day of the month following the taxable period.
The Tax Benefits of Opening a Company in Estonia
One of the main reasons why digital nomads and remote entrepreneurs choose to open a company in Estonia is because of its simple and low-tax system. Here are some of the tax benefits of being an Estonian company:
Corporate Income Tax
Estonia has a unique tax system, which allows companies to reinvest their profits tax-free. This means that you will only pay corporate income tax when you distribute profits as dividends. The corporate income tax rate is 20%.
Value-Added Tax
The value-added tax (VAT) rate in Estonia is 20%. However, if your company's turnover does not exceed €40,000 per year, you can register as a small business and pay a reduced VAT rate of 0%.
Personal Income Tax
As an e-resident of Estonia, you will not be subject to personal income tax unless you receive income from an Estonian source. This means that you can pay yourself a salary or dividends from your Estonian company without paying personal income tax in Estonia.
The Future of Digital Companies in Estonia
Estonia has a bright future when it comes to digital companies. The government is actively promoting innovation and entrepreneurship, and there are many opportunities for startups and investors. The country's advanced digital infrastructure and business-friendly environment make it an attractive destination for digital nomads and remote entrepreneurs.
The country's e-residency program, business-friendly environment, and advanced digital infrastructure make it easy to set up and manage a company from anywhere in the world. The tax benefits, modern banking system, and talented workforce are also advantages of operating a digital company in Estonia. If you are a digital nomad or remote entrepreneur looking for a place to start a company, Estonia is definitely worth considering.
Enty Can Cover You During the Whole Journey
Even with all benefits of Estonia, it's better to have professional taking care of your routine, while you can focus on business and travelling the world!
Enty can easily incorporate a company, automate your company's accounting, lead your legal issues and invoicing — all in one place. Manage your business by yourself from a single interface without any interference, mediators, or third parties.
Company maintenance with Enty is quite simple: incorporate a company and choose a suitable subscription. After that, you can manage your back-office processes from a single company profile. Easy as that!
