How to Set Up an Entity in Estonia

Estonia stands out as one of the most digitally advanced and business-friendly jurisdictions in Europe. For companies looking to expand, forming a local entity in Estonia offers access to the EU market, a transparent regulatory environment, and an entirely online setup process through the e‑Residency program. That said, while the registration steps are streamlined, foreign investors must still navigate employee compliance, local bank account requirements, and tax-substance considerations.

Opening an entity in Estonia is generally straightforward thanks to the online system, but businesses must still address considerations such as choosing the correct entity type, maintaining a registered address and contact person, and fulfilling ongoing reporting and shareholder obligations. The main benefits include limited liability, low barriers to foreign ownership, and a unique tax model that defers corporate tax until profits are distributed. The main challenges lie in ensuring substance for tax-treaty access, managing remote directorship, and handling local payroll and social tax obligations.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Estonia?

Opening an entity in Estonia means incorporating a locally-registered legal entity (commonly a private limited company, “osaühing” or OÜ) under Estonian law. Alternatively, one may establish a branch of a foreign company or register other legal forms. The entity gains its own legal personality, registration number, and may commence operations in Estonia under local governance and tax rules.

Entity overview in Estonia

The table below summarises the key parameters of entity setup in Estonia. The private limited liability company (OÜ) is the most commonly used structure for foreign investors.

Step-by-step guide: How to open an entity in Estonia

Step 1: Choose the right structure

For Estonian citizens and residents, the private limited company (OÜ) is also the most common and practical business structure, favored for its ease of setup, limited liability, and suitability for both small enterprises and startups. The same structure is equally popular among foreign investors, offering flexibility, separate legal personality, and minimal share capital requirements.

A public limited company (AS) is typically chosen by larger businesses planning to raise capital, issue shares, or list publicly. Alternatively, a branch of a foreign company allows an overseas parent to operate in Estonia without forming a separate legal entity—though the foreign parent remains fully liable for the branch’s obligations, and the branch does not have independent legal personality.

Step 2: Verify business name availability

You can search existing business names online, using the government's search tool. The e-Business Register portal allows name reservation online upon login.

Step 3: Prepare incorporation documents

You will need to prepare and submit:

• The Articles of Association / Memorandum for an OÜ.
• A shareholder resolution or application form (if one founder).
• Proof of registered address in Estonia (legal address).
• Appointment of board member(s) and, if management is abroad, appointment of a licensed contact person in Estonia.
• For e-Residency holders: the e-Residency digital ID to sign documents online.

Step 4: Register with the Estonian Business Register

Registration electronically via the Business Register (or through a notary if required). Once approved, you receive a company registration number and your company becomes legally incorporated. If you rely on deferred share capital, you must state that in the application. Registration fee applies.

Step 5: Register for tax and social security

Register the company with the Estonian Tax and Customs Board (EMTA). Even though corporate tax on retained profits is deferred, you need to register to fulfill VAT and payroll obligations. You also register as an employer for paying social taxes once you hire staff.

Step 6: Open a corporate bank account

Open a business bank account in Estonia (or an EU bank with Estonian company access). KYC requirements include a company registration certificate, articles, proof of address, and identity of board members or owners. Some banks may require physical presence or a visit. While local banking is highly recommended for operational ease, remote banking may be available for e-Residency.

Step 7: Set up payroll and employment compliance

If you wish to hire employees, you will need to register as an employer with EMTA, set up payroll systems, and deduct social taxes and personal income tax where applicable. You must submit monthly payroll returns and pay employer contributions (social tax, unemployment) by the 10th of the following month. Also, comply with the Employment Contracts Act (writing employment contracts, setting working time, leave, termination rules).

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Post-registration obligations

After incorporation in Estonia, companies must stay compliant with several ongoing obligations:

• Tax and financial reporting: Although retained profits are not taxed until distributed, you must keep annual accounts according to Estonian GAAP, IFRS, or EU-adopted standards and file the annual report within six months after year-end. Dividends trigger corporate income tax (22% of distributed profits), which must be filed and paid via EMTA.
• Corporate registers: Maintain up-to-date records of shareholders, board members, and beneficial owners, and report changes to the Business Register in accordance with requirements.
• Compliance tracking: Use a compliance calendar or automated reminder system to track monthly VAT returns (20th of the following month), monthly payroll/social filings, and annual reporting deadlines.
• Licenses and renewals: If your business requires specific licenses (e.g., fintech, regulated activities), renew and comply with those via the relevant ministry or regulator.
• Recordkeeping: Retain accounting, payroll, HR, and transaction records for at least 7 years (common in Estonia).
• Employment law compliance: Ensure employment contracts, benefits, social taxes, and data-protection regulations are compliant with Estonian labor law and that you maintain records accordingly.

Taxes and financial considerations

Here are the key tax and financial obligations for an entity in Estonia:

• Corporate income tax: Retained and reinvested profits are subject to 0% corporate income tax. Distributed profits are taxed at 22% of the gross amount (22/78 of net) when dividends are paid.
• VAT: The standard VAT rate is 24% (from July 2024), with a mandatory registration threshold for turnover generated in Estonia is €40,000.
• Payroll/social contributions: Employer social tax is 33% of gross salary (which covers pension and health) plus 0.8% employer unemployment insurance; employee personal income tax is 20% and social tax is 33% on salary for resident employees.
• Accounting standards: Companies may prepare accounts under Estonian GAAP, EU-adopted IFRS, or full IFRS (mandatory for certain entities); annual reports must be filed electronically via the Business Register.

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into Estonia—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Estonia?
Typically, 1-2 weeks for full online registration if documents are prepared and you use the e-Business Register. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required?
Minimum share capital for a private limited company (OÜ) can be as low as €0.01 (≈ $0.01 USD) if deferred; many set a modest capital to enhance credibility.

Can foreign companies own 100 % of an entity in Estonia?
Yes. Estonia allows full foreign ownership with no requirement for a local shareholder.

Do I need a local director or representative?
There is no mandatory resident director; however, if the board is non-resident, you must appoint a local licensed contact person and have a local registered address.

How much does it cost to register an entity?
Government fee is approximately €190–€265 (≈ USD $210–$290), plus possible notary, translation, or legal fees. Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered?
Typically, no—you should have the company registered, employer registration with EMTA, and payroll systems in place. For immediate hiring, Deel’s Employer of Record (EOR) lets you hire and pay talent while your entity is being set up.

Can Deel help me open an entity in Estonia?
Yes. Deel Entity Setup manages the end-to-end process—from registration to payroll compliance—in over 100 countries, including Estonia.

Does Deel offer ongoing compliance and payroll support?
Yes. Deel offers both managed services and self-service tools to help you stay compliant.

If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.

Can I switch from Deel EOR to my own entity later?
Yes. Deel supports seamless transitions when you’re ready.