Establishing a Foreign-Owned Company in Estonia

Strong Reasons for a Foreign-Owned Company in Estonia

Digital state, fast establishment, EU access

Estonia offers the possibility to complete company establishment within hours with its fully digital business infrastructure. Foreign partners and managers can establish an OÜ (private limited company) with 100% ownership, manage it remotely, and gain direct access to the EU Single Market. This structure accelerates global expansion and reduces costs.

• You complete the establishment online; approval usually takes 1–3 business days.
• There is no residency requirement for appointing foreign partners and managers.
• Modern tax model: You do not pay corporate tax on profits that you do not distribute.
• Compliance steps progress transparently and predictably.

You can review the official summary of the establishment process on the Estonian Investment Agency’s “Business in Estonia” page: Company establishment process in Estonia.

Which profiles benefit the most?

Estonia stands out for technology-focused startups, SaaS and e-commerce companies, businesses scaling with remote teams, SMEs seeking quick entry to the EU, and investors wanting to establish a holding/IP structure. If you have a lightly regulated, digital business model, the ground is ready.

• If you are making global sales with a small team, digital accounting and VAT processes will not burden you.
• If you are doing R&D and software development, you can retain profits internally and invest in growth.
• If you want to test a new market, you can operate more flexibly with an OÜ instead of a branch.

Choose the Right Structure: OÜ, Branch, Subsidiary

Why does OÜ (Private Limited Company) stand out?

OÜ is the most practical model for foreign partners. You can establish management with a single person, the shareholder/manager can be foreign, you can flexibly determine the minimum capital amount, and you can complete the establishment entirely online. It limits liability to the company’s assets, reducing your personal risk.

• Capital: After the 2023 reform, you can flexibly determine nominal values; a reasonable capital (e.g., €1,000–€2,500) creates trust for banks and suppliers.
• Address and contact person: You maintain a registered address in Estonia and a local contact person (mandatory if management is outside Estonia).
• Management: You appoint at least one board member; there is no residency requirement.

When do you establish a branch or subsidiary?

If you already have a strong parent company and want to consolidate the brand under one roof, you open a branch. If you are planning independent risk and local financing, a subsidiary is more flexible.

• Branch: The parent company bears full responsibility; simple setup, but risk is consolidated.
• Subsidiary: Risk is separated with a distinct legal entity; it provides advantages in investment, incentives, and exit plans.
• Freelancer (FIE): Suitable for freelance work; provides limited benefits for those wanting to establish a foreign-owned structure.

Establishment Steps and Timeline

Preparation: name, address, e-Residency, and documents

You start by clarifying the business name, address, and core documents. You quickly check name availability; you determine a registered address in Estonia and a contact person if necessary. With the e-Residency card, you digitally sign all documents.

• Documents: Articles of association, list of partners and management, activity codes (NACE), ultimate beneficial owner (UBO) information.
• Address: You use a virtual office or shared office; official notices come here.
• Contact person: Mandatory if the board is outside Estonia; this person receives official notifications.

Application through e‑Business Register

You fill out the application online, pay the state fee, and all parties digitally sign. If the documents are complete, you usually receive approval within 1–3 business days. With approval, you receive your company registration number.

• State fee: Reasonable level for OÜ; you pay online during the application.
• UBO notification: You declare the ultimate beneficial owner immediately.
• Field of activity: If it is a regulated sector, you plan the licensing requirement together with the establishment.

Banking and tax registrations

After establishment, you establish banking relationships. Local banks and EU licensed fintech options are available. You evaluate the VAT threshold and optional VAT registration.

• Bank/fintech: You pass KYC and AML checks; you clearly explain your activity and source of funds.
• VAT threshold: If your annual turnover exceeds €40,000, you register for VAT; you explore OSS/IOSS solutions for intra-EU transactions.
• e‑Commerce and payment: You establish quick integration with European payment gateways.

Tax, accounting, and payroll compliance

Corporate tax and dividends

The Estonian model works clearly: You do not pay corporate tax on profits that you do not distribute. When you distribute profits, you pay corporate tax; you benefit from reduced rates for regular distributions. This model strengthens cash flow for businesses financing growth.

• Undistributed profits: 0% corporate tax; you direct cash towards growth.
• Distributed profits: You pay tax according to the standard regime; effective rate varies based on distribution frequency.
• Withholding and DTT: You consider agreements based on the shareholder’s country of residence.

Accounting, UBO, VAT, and transfer pricing

At the end of the year, you electronically submit financial statements. You keep the UBO notification up to date. You apply EU rules for VAT, triangular transactions, and digital services. If you are dealing with related companies, you prepare a transfer pricing file.

• Financials: Simplified reporting provides advantages for micro and small businesses.
• UBO: You update the UBO record immediately when the partnership structure changes.
• VAT: You integrate e-invoicing, OSS/IOSS, and distance selling rules into your processes.

Payroll, remote workers, and posted workers

If you employ staff, you declare payroll taxes monthly. If you assign remote workers in different countries, you follow social security (A1), host country notifications, and minimum wage rules.

• Remote team: You manage employer obligations on a country-by-country basis.
• Posted worker: You make notifications on time; you apply host country working conditions.
• Outsourcing: You reduce corporate burden with payroll and EOR.

Corpenza manages international accounting, payroll, EOR, and posted worker processes end-to-end in Estonia and across the EU. Companies can expense the salaries of their contracted and remote workers thanks to our payroll structure; they can track multi-country compliance on a single panel.

Residency, work permits, and building international teams

EU/EEA citizens and third-country nationals

EU/EEA citizens work in Estonia with free movement. For third-country nationals, you design a residency and work permit plan alongside your company strategy. You choose the appropriate visa type for the project and link the application timeline to your recruitment plan.

• Role-based permit: You select the appropriate permit for engineers, product managers, or sales.
• Duration plan: You align the recruitment and onboarding timeline with the immigration process.
• Compliance: You complete insurance, address registration, and tax number on the first day.

Remote employment, EOR, and temporary assignments

If you need to build a team without establishing a local legal entity, you can quickly work with EOR. For short-term projects within the EU, you assign workers using the posted worker model. In both models, you manage payroll, social security, and notifications from a single source.

• EOR: You outsource the employer registration burden; you reduce hiring time from weeks to days.
• Posted worker: You fully comply with A1, host country notifications, and wage standards.
• Hybrid model: You establish an OÜ for the core team and create a flexible setup with EOR for project-based roles.

Corpenza integrates residency/work permit applications, personnel leasing, and EOR solutions while establishing your OÜ in Estonia. This way, you manage workforce flow and compliance with a single contract.

Risks, common mistakes, and 2025 updates

Bank account and AML expectations

Banks and fintechs want to see a clear view of your business model, source of funds, and partner profile. You prepare documents thoroughly; if you are dealing with high-risk countries, you plan for additional scrutiny in advance.

• Business model summary: You transparently explain the product, customer segment, supply, and billing cycle.
• UBO and KYC: You complete identity and address verification for partners early.
• Payments: You share forecasts based on transaction volume and countries for the first 3 months.

Licenses and regulated sectors

There are licensing requirements in areas such as finance, health, education, energy, and transportation. Before starting operations, you clarify the licensing duration, collateral, and audit cycle.

• Fintech: You plan additional licenses for payment institutions, virtual asset services, or credit products.
• Health/EdTech: You include data protection and professional standards in contracts.
• Market entry: You make pre-contracts “subject to approval”; you protect cash flow.

2025 trends and opportunities

In 2025, digital VAT, artificial intelligence regulations, and data transfer standards will tighten in the EU. Estonia adapts quickly to these changes. Opportunities arise in cybersecurity, climate technologies, B2B SaaS, and fintech.

• EU data and AI rules: You design product development with a “privacy by design” approach.
• Green transition: You follow public supports in energy efficiency and climate technologies.
• Access to funding: You target early-stage funds with Baltic/Scandinavian investment networks.

You can review the current country note from the U.S. Department of State for the overall investment environment and risks: 2025 Investment Climate Statements – Estonia.

Corpenza coordinates the establishment of OÜ in Estonia, provision of registered address and contact person, international accounting, payroll, EOR/posted worker, tax optimization, and residency/work permit processes across the EU under a single roof. It also evaluates suitable EU/comparative programs (e.g., golden visa alternatives) for residency or citizenship goals not focused on Estonia; it creates a country basket suitable for your strategy.