None resident Estonian company

[nobrainer]

Hello,

1. Does Estonian company owned by none resident that make online sales to none Estonian customers owe any taxes or is it like UK LLP?

2. what are the cons compared to UK LLP?

Thanks

 

[Marzio]

The biggest difference is that Estonian OU is a company while UK LLP is a partnership.

Estonian OU is always estonian resident while a LLK is resident where partners are resident.

Estonian companies are taxed on their worldwide income so it doesn't matter if you don't sell to estonian customers and you aren't resident in Estonia, you will have to pay Estonian taxes.

 

[Don]

Hello,

1. Does Estonian company owned by none resident that make online sales to none Estonian customers owe any taxes or is it like UK LLP?

2. what are the cons compared to UK LLP?

Thanks

Better is to compare apples to apples, e.g., Estonian LLP to UK LLP.
Estonia has 3 type of partnerships. General, Limited, and Contract for partnership.
(GP and LLP are separate legal entities and Estonian tax residents, the contract for partnership is not).

The benefit of Estonian LLP is that it's a separate legal entity, and you don't need to submit annual reports under certain circumstances, and you can easily convert it to LLC.

 

[nobrainer]

The biggest difference is that Estonian OU is a company while UK LLP is a partnership.

Estonian OU is always estonian resident while a LLK is resident where partners are resident.

Estonian companies are taxed on their worldwide income so it doesn't matter if you don't sell to estonian customers and you aren't resident in Estonia, you will have to pay Estonian taxes.

Thanks for the reply.
But is it true that you are only taxed when when send dividends to yourself? If you don't take out funds or re invest them no tax will be paid?

Better is to compare apples to apples, e.g., Estonian LLP to UK LLP.
Estonia has 3 type of partnerships. General, Limited, and Contract for partnership.
(GP and LLP are separate legal entities and Estonian tax residents, the contract for partnership is not).

The benefit of Estonian LLP is that it's a separate legal entity, and you don't need to submit annual reports under certain circumstances, and you can easily convert it to LLC.

Thanks as well for your reply.
Anyone on this forum can be recommended with UK LLP formation + annual submitting / reporting of whatever is required?

 

[Marzio]

But is it true that you are only taxed when when send dividends to yourself? If you don't take out funds or re invest them no tax will be paid?

Correct. Also salaries are tax exempt for non resident individuals so depending on your tax residency Estonian OU could used as tax free vehicle.

 

[Jerry1911]

Also salaries are tax exempt for non resident individuals so depending on your tax residency Estonian OU could used as tax free vehicle.

Can salaries be paid out to non-residents in the form of cryptocurrency/stablecoins (e.g. USDC)?

What is the procedure for paying out a salary the regular way (in EUR, via SEPA bank transfer) to a non-resident? Is it necessary to "register" the employee first in some government database (social security system?) or can one simply transfer the funds to the employee's bank account?

 

[DunningKruger]

Can salaries be paid out to non-residents in the form of cryptocurrency/stablecoins (e.g. USDC)?

What is the procedure for paying out a salary the regular way (in EUR, via SEPA bank transfer) to a non-resident? Is it necessary to "register" the employee first in some government database (social security system?) or can one simply transfer the funds to the employee's bank account?

If you want to pay your-shelf as a Self-employed. Nothing to do. Just send the money with "Salary" description. For the other payments for the your workers, just create a Freelancer/contractor agreement and get an invoice from them and payout.

Can salaries be paid out to non-residents in the form of cryptocurrency/stablecoins (e.g. USDC)?

I think you can, but I did not use it. But the best way is payout via a bank transfer.

 

[Don]

Can salaries be paid out to non-residents in the form of cryptocurrency/stablecoins (e.g. USDC)?

What is the procedure for paying out a salary the regular way (in EUR, via SEPA bank transfer) to a non-resident? Is it necessary to "register" the employee first in some government database (social security system?) or can one simply transfer the funds to the employee's bank account?

yes, it's a common practice by the likes of Binance, etc.
Nonresident employees don't need to be registered.

 

[Jerry1911]

yes, it's a common practice by the likes of Binance, etc.
Nonresident employees don't need to be registered.

Even if they are EU residents (and citizens)?

 

[JohnnyDoe]

Anyone is already doing this?
I would like to pay myself a salary from my Estonian company’s account with Revolut and not have it closed.
Also, what papers should I produce for the Estonian accountant? She needs to file accounts monthly for vat purposes.

 

[Marzio]

I think you can

I think you have the best nickname ever!

 

[Don]

Anyone is already doing this?
I would like to pay myself a salary from my Estonian company’s account with Revolut and not have it closed.
Also, what papers should I produce for the Estonian accountant? She needs to file accounts monthly for vat purposes.

yes, an estimation of around ~20k+ companies are doing this
you will need an employment contract. Please note that it is likely that your Estonian company would have to register as a foreign employer and start paying payroll taxes in the country where you are based.

 

[spacely]

If you want to pay your-shelf as a Self-employed. Nothing to do. Just send the money with "Salary" description. For the other payments for the your workers, just create a Freelancer/contractor agreement and get an invoice from them and payout.

sounds like a dream.. Any links on an Estonian law that makes those exemptions to non-residents? If one is paying a salary then it is official and the one who is getting paid should be indicated with the EMTA ( Tax and Customs Board). You make a transfer from the corporate account with a description "salary" and the tax should be paid for that amount on a later stages

Also, what papers should I produce for the Estonian accountant? She needs to file accounts monthly for vat purposes.

it is like everywhere else: all invoices for incoming transactions and all invoices for outgoing transactions + monthly statements from the bank accounts

 

[JohnnyDoe]

it is like everywhere else: all invoices for incoming transactions and all invoices for outgoing transactions + monthly statements from the bank accounts

a “salary” is different from a payment to a freelancer.
I was thinking of paying myself a salary as a director of the company.

 

[Marzio]

I was thinking of paying myself a salary as a director of the company.

Johnny "directors’ fees paid by an Estonian company to a non-resident director are always subject to 20% personal income tax"

https://learn.e-resident.gov.ee/hc/en-us/articles/360001761658-Dividends-salary-and-directors-fee

 

[Jerry1911]

Please note that it is likely that your Estonian company would have to register as a foreign employer and start paying payroll taxes in the country where you are based.

Is anyone checking this from the Estonian side?

Johnny "directors’ fees paid by an Estonian company to a non-resident director are always subject to 20% personal income tax"

Of course there's a catch Can this be avoided somehow? Can we decide not to pay out any dividends/directors' fees and pay out a salary instead?

 

[Marzio]

Can this be avoided somehow? Can we decide not to pay out any dividends/directors' fees and pay out a salary instead?

This!

 

[Don]

Is anyone checking this from the Estonian side?


Of course there's a catch Can this be avoided somehow? Can we decide not to pay out any dividends/directors' fees and pay out a salary instead?

If you pay only salary to yourself as an employee (1 man company) you have the exposure that salary could be requalified from Estonian side + your fully exposed to PE based on PoEM in your residency country.
You can outsource the management to a lawyer/csp for a small fee to mitigate this.
Its also about how exactly you structure the agreement.

 

[Jerry1911]

If you pay only salary to yourself as an employee (1 man company) you have the exposure that salary could be requalified from Estonian side + your fully exposed to PE based on PoEM in your residency country.

There's no case law regarding place of effective management in my home country (EU) and a ton of people (incl. those linked to the government) operate companies abroad without substance so I'm not worried about it at the moment. It's basically like Cyprus.

In my case, the Estonian OU would simply serve as a personal holding company for investing into ETFs and publicly listed stocks, via IBKR or some other brokerage.

I'd also like to reinvest all dividends except in some very rare cases where I'd like to pay them out via salary, in USDC, without reporting them to my home country if possible.

You can outsource the management to a lawyer/csp for a small fee to mitigate this.
Its also about how exactly you structure the agreement.

I could do that I guess. How much would this cost approximately? How risky would all this be (from the Estonian side)?

 

[nobrainer]

If you pay only salary to yourself as an employee (1 man company) you have the exposure that salary could be requalified from Estonian side + your fully exposed to PE based on PoEM in your residency country.
You can outsource the management to a lawyer/csp for a small fee to mitigate this.
Its also about how exactly you structure the agreement.

"have the exposure that salary could be requalified from Estonian side"

Didn't get this part... so its taxable in Estonia to receive such salary?