Estonia has a highly educated population, low corruption and sits at the forefront at the development and delivery of both private and, in particular public, services by digital means. Of late it has stolen a jump on rival jurisdictions by offering a specific licensing regime for Cryptocurrency related businesses.
According to the Commercial Code, there are five forms of business entities:
private limited company (OÜ)
public limited company (AS)
general partnership (TÜ)
limited partnership (UÜ)
commercial association (ühistu)
The Estonian private limited liability company (Osaühing or OÜ) is the most common form of business as its shareholders have no personal proprietary liability for the company’s obligations.
Tax Efficiency: Zero tax is payable in Estonia if profits are reinvested
Clean Name: Estonia isn’t known as a tax haven yet can deliver the same results
Stability: Estonia is very stable economically and ranks as highly as the US for non-corruption
Easy 2 set up: To set up you just need 1 Director/shareholder + a legal address/rep in Estonia
Speedy set up available: You can own an Estonian Company within as little as 24 hours
Easy to administer: Estonian Companies only require 1 Director and 1 Shareholder
Access to Europe: A Euro VAT number can be obtained enabling you to trade on the Continent
VAT Free: No VAT is payable on transactions within Europe (outside Estonia)
Crypto friendly: Cryptocurrency related businesses are welcome to incorporate in Estonia
Estonia has one of the most progressive tax regimes in the world in that:
- The tax rate on reinvested profit is 0%
- Income tax is charged only at a rate of 20% on gross dividends.
- The general VAT rate is 20%.
Corporate profits are not taxed ie (tax rate 0%) unless or until the profits are distributed as dividends; In short, all undistributed corporate profits are tax-exempt. This 100% exemption covers both active income (e.g. trading) and passive income (e.g. dividends, interest, royalties etc) as well as capital gains from sales of all types of assets, including shares, securities, and immovable property.
Estonia levies a corporate withholding tax only on profits that are distributed as dividends, share buybacks, capital reductions, liquidation proceeds or deemed profit distributions. Income tax at a rate of 20% is charged on gross dividends (calculated as 20/80 of the net dividend).
The standard VAT rate (in Estonian käibemaks, KM) is 20% and applies to all supplies of goods and services inside Estonia. The 9% reduced rate applies to accommodation, books, listed pharmaceutical products and medical devices. The VAT rate on the export of goods, intra-Community supply of goods and certain services is 0% (i.e. exemption with credit). If the annual taxable turnover exceeds 40 000 EUR you will need to register with the Tax and Customs Board as a VAT payer.
Crypto Business Licenses in Estonia
Estonia has a favourable tax and legal environment for cryptocurrency exchange companies. This small European Union country of just 1.3m people is regarded as one of the world’s most advanced digital nations and is fast becoming a viable alternative to the behemoth Financial Services Jurisdictions such as Singapore and Switzerland – its competitive advantage being it offers less red tape and lower establishment/operating costs.
Companies aiming to do business in the Crypto sphere can apply for 2 different activity licenses in Estonia:
(a) A Cryptocurrency Exchange License
(b) A Virtual Currency Wallet Service License