Estonian Company Set-up - Onshore or Offshore location?
About economic environment of Estonia
Estonia is the most integrated country in Northern Europe. Integration means the country’s membership in various international organizations.
– Member of the European Union
– Part of the Eurozone
– A full member of the Organization for Economic Cooperation and Development since December 2010
– And, of course, a member of NATO.
The World Economic Fund annually makes a rating of global competitiveness, in 2012 Estonia ranks 34th in this rating. To calculate this rating, various indicators were used, relating to the economic situation in the country, the ease of creating and doing business, as well as social factors.
About taxes in Estonia
3/4 of the entire revenue of the Estonian budget is formed by taxes. Social taxes in Estonia are almost highest taxes in the EU. At the same time, land tax is one of the lowest. The main income of the country comes from indirect taxes – VAT, etc. The tax on personal income is 21%.
BUT, Taxation system in Estonia is quite unique. Corporate tax is paid only at the time of its distribution. Companies who are not distributing profits do not pay taxes from it. The company pays the profit tax when distributing dividends at the rate of 21% of the distributed amount. Further, the dividends are not taxed more in Estonia. Besides, one of the peculiar features of the Estonian tax system is that the tax must be paid from the source of income only once.
Latest tax news of the region
Now Estonia is looking for new ways to improve the investment climate in the country while stimulating the flow of the private capital. Starting from January 2018, local authorities plan to reduce the tax rate to 14% for dividends distributed, in case the amount dividend’s total amount does not exceed the average amount of distributed dividends for 3 consecutive years.
In fact, such a tax policy will deprive other countries of any competitive advantage. On the one hand, there is no obligation to pay taxes on profits in case of reinvesting the funds into business. On the other hand, one of the lowest rates of dividends taxation in Europe will be available in Estonia. This option does seem to be a win-win situation in the way of anti-offshore trends and finding new strategies for doing business.
How Can Margarita Skavronska Help?
Margarita is Head of International Business Practice in ADAM GLOBAL. Margarita gained 13 years of experience in international corporate law, such as international holding structuring and company’s set-up (over 43 jurisdictions), business’s global tax profile development, VAT, ST advising and general tax planning, e-commerce payment solutions. As an experienced business consultant, she can provide cost-effective, practical and tailor-made advice and full assistance in registering of companies in respectful European location as well as Asian, American, Caribbean tax heavens.
She has assisted many prominent European companies in establishing their presence all over the globe. To get in touch for more information or requesting a proposal, Margarita can be reached on the below details anytime!