Estonia Oü or UK Ltd/LLC? which is the easiest to manage?

[Bofferding]

Hi all,

Where I'm residing, an EU country, we still follow a traditional way of doing business where it's really hard for a new entrepreneur to have a current state of your company.

From what I read so far, an Estonian Oü solves this. All is done online and all steps are pretty straightforward, from accounting, to tax fillings, to payrolls. UK on the other hand also makes it easy and is business friendly too.

Which entity would you recommend from your experience in terms of easiness in managing the company, monitoring the balance sheet, accounting and filling taxes? (UK or Estonia)

Mousel

 

[neweraoffshore]

I have an estonian company and I really like it. Accounting, payrolls, filling taxes is very easy with the e-residency card. However, getting a real bank account which is not TW requires you to visit estonia once. You also may travel once to pick up your e-residency card. Keep in mind, that the e-residency card takes aprox 2-6 months, but after this forming a new company is very quick. Like 1-2 days. Also, after you once visitited your estonian bank of choice (i recommend LHV) you can then open new account for new companies without visiting. They just want to see you once.
I personally prefer estonia over UK as I really like the virtual infrastructure with the e-residence card.

 

[Bofferding]

Thanks a lot neweraoffshore. I appreciate your feedback.

However, getting a real bank account which is not TW requires you to visit estonia once.

Does that mean, they do open for EU nationals which have no links to Estonia? I heard and read banks such as LHV are reluctant if you don't move to Estonia.

You also may travel once to pick up your e-residency card. Keep in mind, that the e-residency card takes aprox 2-6 months, but after this forming a new company is very quick.

Wow 2-6 months is not what they promote on their website. Does being a EU citizen + picking up the card in Estonia help to reduce the timeframe?

 

[Ibus]

For Estonian OÜ keep in mind that changes in your company such as shareholders or directors must be notarized in your country and then in Estonia. You cannot do everything with the e-resident card.

 

[Bofferding]

Anyone else got experience with Estonian Oü?

 

[spacely]

Anyone else got experience with Estonian Oü?

You can go ahead with the Estonian OÜ, a very simple and as you said straightforward jurisdiction. 0% corporate tax is a huge advantage as well.
E-residency card indeed will give you many advantages in managing your company online from the incorporation part to changing the data of your company and signing documents online.

The banking sector is purely for residents, especially if you are not able to provide any substance and connection to Estonia. LHV is becoming more friendly, but no one knows if it is for a long time. I have decent connections in TBB (Tallinn Business Bank), but still, you will need to find an office (just a cheap one) and hire yourself or another employee for a minimal salary.
If you need any assistance, you can write me a message, I can assist you with pretty much each and every request connected to Estonia

 

[ilpablo]

Hi guys, for those who has chosen the Estonian company, where did you settle for personal residence and tax optimization?

Also how can you avoid the 20% on distributed dividends?

thanks!

 

[spacely]

Hi guys, for those who has chosen the Estonian company, where did you settle for personal residence and tax optimization?

Also how can you avoid the 20% on distributed dividends?

thanks!

you can re-invest your profit into assets by buying a car or real estate
transferring the funds into the tax-friendly jurisdiction also could be a solution

 

[ilpablo]

you can re-invest your profit into assets by buying a car or real estate
transferring the funds into the tax-friendly jurisdiction also could be a solution

How would you transfer that money into a tax-friendly jurisdiction?

 

[yolem55820]

Hi guys, for those who has chosen the Estonian company, where did you settle for personal residence and tax optimization?

Also how can you avoid the 20% on distributed dividends?

thanks!

You cannot avoid the 20% company tax on distributed dividends... This is company tax not personal tax.
For you personal tax the best if you have an Estonian company would be Estonia obviously (no personal income tax on dividends received).

 

[ilpablo]

You cannot avoid the 20% company tax on distributed dividends... This is company tax not personal tax.
For you personal tax the best if you have an Estonian company would be Estonia obviously (no personal income tax on dividends received).

So bad

 

[Premistis]

Giving away 20% of your profits to a random country while there are much better options out there, I feel like that's really bad!

 

[spacely]

Giving away 20% of your profits to a random country while there are much better options out there, I feel like that's really bad!

it really all depends on your business model. Many businesses want reliable and yet friendly jurisdiction.
Hard to find a similar country with a similar taxation approach in the EU.
Come on, there are plenty of ways to even avoid paying 20% tax on dividends. You can just not pay out the dividends and re-invest the profits. Just a matter of your plan

 

[ilpablo]

it really all depends on your business model. Many businesses want reliable and yet friendly jurisdiction.
Hard to find a similar country with a similar taxation approach in the EU.
Come on, there are plenty of ways to even avoid paying 20% tax on dividends. You can just not pay out the dividends and re-invest the profits. Just a matter of your plan

Hi @spacely

Can you please tell us why do you think Estonia is better than Romania, Bulgaria or Malta for example?

And in practice, what would be in your opinion the ideal strategy to avoid or at least reduce the 20% tax?

Because it seems you have to pay taxes on dividends, salary and also director's fees.

https://learn.e-resident.gov.ee/hc/...s mentioned in Estonian tax,14/86) may apply.
"Normally an Estonian company is liable to withhold 20% personal income tax (PIT) and apply 33% social tax on salary payments for work performed physically in Estonia. Unemployment contribution of 1.6% is withheld and 0.8% applied to the gross salary."

thanks!

 

[spacely]

Hi man! Will try my best to explain.

Can you please tell us why do you think Estonia is better than Romania, Bulgaria or Malta for example?

This one is easy for me:

Romania - 16% CIT
Bulgaria - 10% CIT
Malta - 35% CIT
Estonia - 0% CIT

numbers are on the surface. Corporate tax means that you pay tax for retained earnings, meaning the tax from your profit. By having it at 0 rate, you simply have more options. You can buy stuff on your company name and/or re-invest profit easier. Or simply use your Estonian corporate account as your savings account until you fully decide what you want to do with your money.

As I mentioned previously in this thread, you can transfer the funds to the offshore companies or invent similar structures to avoid tax on the dividends and withdraw the profit somewhere else. You will need to have the supporting documents for the transaction for sure (invoices, contracts, etc)

I cannot give you the ready solutions for that because simply I do not know your business and many other details and usually when structure is built there are many aspects we need to consider, so this takes time. If you are looking for more info, feel free to DM me, we can continue there.

"Normally an Estonian company is liable to withhold 20% personal income tax (PIT) and apply 33% social tax on salary payments for work performed physically in Estonia. Unemployment contribution of 1.6% is withheld and 0.8% applied to the gross salary."

please do not put all eggs in one basket, If you are intended to pay out the salary to yourself - you pay extreme amount of different taxes even in Estonia, which are around 50-60% all combined.
If you are going to only withdraw the profit as the dividends it is only 25% and that is it.

Hope this helps and somehow structure the information for you

 

[sujoe]

Romania is hugely underrated, there's a 3% tax on revenue (1% if you have one full-time employee), very suitable for businesses that have high margins, such as affiliate marketing, consultancy, software development, software distribution etc. Even if you pay the 16% tax, it is still lower than Estonia's 20%. For Estonia, you can't just simply shift the profits elsewhere, if you want to do it legally, you would have to pay 20% when you declare the dividends. On top of that, if you are a natural person, you have a 7% withholding tax (if you opt for the 14% tax on distribution instead of 20%)

 

[i888]

Those companies have those taxes only if they have less than 1 million eur revenue per year.

 

[Lucius]

I have an old friend(Russian citizen) who would like to open an IT company in Estonia.
Is it possible to open a bank account for an Estonian company without visiting the bank personally?
It is kinda difficult to travel to Europe during the times of COVID.

 

[spacely]

I have an old friend(Russian citizen) who would like to open an IT company in Estonia.
Is it possible to open a bank account for an Estonian company without visiting the bank personally?
It is kinda difficult to travel to Europe during the times of COVID.

EMI will be possible, Banks want physical presence and local substance

 

[Lucius]

EMI will be possible, Banks want physical presence and local substance

Any EMI besides Payoneer available for Estonian companies?