Opening a UK limited company is at least as straightforward. Registering takes a couple of hours, it can be done entirely online and the fee is £12 ($15). You don't need to be a UK resident. You do need a registered office in the UK, but a company formation agent will provide one for about £20 ($26) per year. All your tax returns can be filed entirely online and HMRC provide a very helpful tax advice service. It really is fantastically simple.
The obvious advantage to registering in Estonia would be the certainty of continued access to the European Single Market. We're still not entirely sure how Brexit will pan out.
Another option well worth considering is Stripe Atlas. It's not the cheapest way to start a corporation, but Stripe provide a huge amount of added value.
Corporation tax in the UK is currently at 19%. If you are a UK tax resident, you also have to pay dividend tax which starts at 7.5% (over your allowance).
After looking into it for a while, i decided not to do it. Context: I live in Germany for roughly 2/3 of the year, rest is traveling.
Not sure where you are located, but if you spend the majority of your time in a other EU country (e.g. Germany) you will have a very hard time explaining to the local tax authorities that the company entity is not effectively being managed from Germany. And when you fail to explain this, the company entity becomes a german tax resident and you have to deal with all sorts of paperwork and expensive tax consultants. This is especially true when you have no local employees in Estonia.
This comment should be higher up. If you are a freelancer thinking you could save on taxes by setting up a remote company in Estonia, be aware that your tax authority can (and will) demand that your company be taxed in your home country.
Through a US company, I employed a US citizen residing in Germany, as a contractor. It was terrible! Every German accountant we talked to acted like he was a unicorn and wanted to charge us tens of thousands of dollars to figure it out. We muddled through, no doubt doing it wrong... but it didn’t seem like there’d be any way that’d be right.
While I'm not a tax expert, our startup is currently building a platform to help with payouts and tax rules. As I understand it, all you need is to get a W9 from the US resident and then file a 1099-MISC annually for him. He may be subject to tax withholding -- but that's all in the instructions on the IRS forms.
Same kind of thing here in India. As per Indian tax authorities, if your "effective place of business" is India, you will be taxed as per Indian laws.
I believe many countries would have DTAA with Estonia.
Tax-wise Estonia may not be right for you, but starting a company is a lot easier depending upon where you live. In India, it takes about 30+ days to open a company, not to mention stupid, useless forms and KYC-terrorism.
Is it ok to operate an Estonian company from Germany though?
Not for tax reasons (assuming you would pay the same tax for either a German or Estonian company as others said in the thread) but for bureaucracy reasons. Skipping the whole German procedure.
It is "okay", but you will end up with more bureaucracy. If, as mentioned, you are living in Germany 99% of the time and spend close to zero time in Estonia, the german tax authorities will (sooner or later) argue that the company is effectively being managed from Germany. Then you have to deal with tax nonsense in two countries and finding a tax consultant who will deal with this is rather expensive. Some basics (if you understand German), are explained here: https://www.ihk-berlin.de/blob/bihk24/Service-und-Beratung/r...
Seriously guys, consult an accountant, a tax lawyer or just someone who could have at least a clue what you are trying to do. There are reasons to incorporate companies that are not in your place of residence, for example: vat registration and to have a "front-door" in that country for selling to the public, for procurement, for legal reasons (e.g. if you sell products in the EU, you need to have an EU contact address listed on the product) etc.
International taxation is not easy and nobody will explain to you the problems here but there will be for sure problems. If you want to do it right, you usually pay what you saved in registration to the accountant instead. And no, you won't save any tax. Let me be clear, you won't save any tax! If you do, it's either called tax avoidance (punishable in many countries!) or you are an international company that already has a tax accountant/lawyer to structure things properly, has substance in those countries and will for sure not ask questions here.
I considered it for my SaaS business. But at the moment my business is based in Poland, so moving to Estonia doesn't change things much (I still can't economically sell to individuals within the EU because of idiotic VAT regulations). I chose to remain in Poland for the time being. On the plus side: low taxes, EU law, first patent troll doesn't bankrupt my business. On the minus side: Stripe continues to ignore Poland, so I have to deal with Braintree and this is a pain in oh so many ways, VAT MOSS is a disaster, and we have the Cult of the Invoice.
I'm not the OP, but a company I worked for once had reason to set up a US presence, but decided against it because once you have a US entity, patent trolls have someone to sue in their jurisdiction.
It's not being in Poland that helps, it's being outside the US that matters. USA is the only country I know where you can successfully run small companies into the ground just by suing them (for pretty much anything, but patents are a good vehicle for this). The legal system is such that small companies are at a distinct disadvantage (because of complex precedent-based law and legal fees).
Recently VAT collection was changed for electronic services. Before you simply charged your countries applicable tax rate, unless a VAT ID was provided. Now you have to charge the VAT rate applicable to your customers country of residence, forcing every vendor to care for and implement correct VAT rates and regulations for all your products and every of the 28 countries in the EU - possibly even more due to bilateral free market agreements with Norway, Switzerland and the like.
This is way more complicated than you might think, as improper tax collection may constitute felony charges and fines, leaving small businesses and startups in an awkward spot where not selling to other eu countries is easier than selling to them in a compliant way, putting the idea of a single market ad absurdum. The last thing you would want is pointless market entry barriers affecting every entity offering cross border sales.
The need to keep track of all VAT rates across the EU, charge all individual customers their respective VAT, gather everything into VAT MOSS reports, pay everything with appropriate conversion rates chosen. It's not impossible, just complex, and in general not worth the effort if you're charging several dollars a month.
If you think this is easy, tell me how much VAT (and in which currency) you will charge a customer from AX today, and what you'll do about a customer from GB in March. None of this is obvious, and it all changes quickly.
As others have pointed out, there are services that supposedly help with this. I looked at everything that was available a couple of years ago and none of the available solutions did this easily and correctly. It's not an easily outsourceable problem, either, as it has to integrate closely with your billing.
For B2B customers this is not an issue: you don't charge VAT (reverse charge) and you're done.
I am an e-resident and I used it to establish a business entity for my startup. It works really well for my particular use case.
I am a Canadian resident, my co-founder is an Estonian resident (physical). Both of these may change in the future and the intended market for our startup is global. Estonia was chosen as a common ground with a minimal overhead - it's easy and costs almost nothing.
Using government services with an ID-card was a breeze. For banking we use a "physical" Estonian bank, once set up I have no problem accessing it online either.
We didn't have any revenue the previous year, so cannot say much about taxation story here. It gets more or less complicated depending on your country of residence, but I don't think that having a business entity in Estonia is fundamentally different from other EU countries here.
Corporate taxation is generally based on where the management and control of the business is, not where it is incorporated, although the incorporation jurisdiction is considered. If you had incorporated the Estonian company by yourself without a partner and had been running it from Canada, the Estonian company will be considered a Canadian company for tax purposes and required for file a T2 corporate income tax return.
If you are still a Canadian resident, do remember to file T1134. If you own 50/50 in the business, you can perhaps argue that this is a foreign affiliate only, and not a controlled foreign affiliate.
In my experience a lot of freelancers are using it (especially when they like to work in different countries). Personally I’m quite happy using it and it’s a way better experience in comparison with the chamber of commerce in the Netherlands when you start freelancing (had some bad experiences unfortunately when they sold my data to shady companies which will target you with fake invoices/bad deals/spamming). Another great feature is that you are in full control how to pay yourself (salary/board member fee/dividends) which can have serious tax advantages depending on your country’s tax system.
There are limitations like I cannot rent an office for longer than six months and my company is registered in Estonia with an Estonian address (I use leapin.eu which takes care of the accounting part). I get your point and when you are selling physical products I cannot see how that would be possible. However if you are doing location independent work like coding or designing it is almost effortless to not become a tax resident.
Also the Dutch tax laws don’t care about the company as long as you pay the personal income tax plus some employee insurance tax.
It depends on the size and the structure of the company/business you want to start. Imho I think it is excellent for freelancers, but I would seriously think about another option when you want to start a company with other people and give out stocks to employees in the future.
You can register a company with it in 1 hour. Then open a bank account with Revolut Business and run it from anywhere in the world. It really depends on what you want to use it for.
Getting an Estonian bank account is nigh impossible. If you want to do anything AdSense related, go with an Armenian account instead. Less hype, same rules (~), totally worth it.
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The obvious advantage to registering in Estonia would be the certainty of continued access to the European Single Market. We're still not entirely sure how Brexit will pan out.
https://www.gov.uk/limited-company-formation
https://www.gov.uk/corporation-tax
Another option well worth considering is Stripe Atlas. It's not the cheapest way to start a corporation, but Stripe provide a huge amount of added value.
https://stripe.com/atlas
How about the banking system for companies opened by non-residents? Can one get a multi-currency bank account easily?
Alternatives likes Transferwise or Revolut would be the norm for operating across different currencies.
You can't sell equity in an LLP being a big, obvious, one, so basically you can't raise money.
Not sure where you are located, but if you spend the majority of your time in a other EU country (e.g. Germany) you will have a very hard time explaining to the local tax authorities that the company entity is not effectively being managed from Germany. And when you fail to explain this, the company entity becomes a german tax resident and you have to deal with all sorts of paperwork and expensive tax consultants. This is especially true when you have no local employees in Estonia.
I believe many countries would have DTAA with Estonia.
Tax-wise Estonia may not be right for you, but starting a company is a lot easier depending upon where you live. In India, it takes about 30+ days to open a company, not to mention stupid, useless forms and KYC-terrorism.
Not for tax reasons (assuming you would pay the same tax for either a German or Estonian company as others said in the thread) but for bureaucracy reasons. Skipping the whole German procedure.
This is way more complicated than you might think, as improper tax collection may constitute felony charges and fines, leaving small businesses and startups in an awkward spot where not selling to other eu countries is easier than selling to them in a compliant way, putting the idea of a single market ad absurdum. The last thing you would want is pointless market entry barriers affecting every entity offering cross border sales.
If you think this is easy, tell me how much VAT (and in which currency) you will charge a customer from AX today, and what you'll do about a customer from GB in March. None of this is obvious, and it all changes quickly.
As others have pointed out, there are services that supposedly help with this. I looked at everything that was available a couple of years ago and none of the available solutions did this easily and correctly. It's not an easily outsourceable problem, either, as it has to integrate closely with your billing.
For B2B customers this is not an issue: you don't charge VAT (reverse charge) and you're done.
I am a Canadian resident, my co-founder is an Estonian resident (physical). Both of these may change in the future and the intended market for our startup is global. Estonia was chosen as a common ground with a minimal overhead - it's easy and costs almost nothing.
Using government services with an ID-card was a breeze. For banking we use a "physical" Estonian bank, once set up I have no problem accessing it online either.
We didn't have any revenue the previous year, so cannot say much about taxation story here. It gets more or less complicated depending on your country of residence, but I don't think that having a business entity in Estonia is fundamentally different from other EU countries here.
Slightly more personal and readable story, written by me: https://medium.com/e-residency-blog/how-to-launch-an-estonia...
If you are still a Canadian resident, do remember to file T1134. If you own 50/50 in the business, you can perhaps argue that this is a foreign affiliate only, and not a controlled foreign affiliate.
Also the Dutch tax laws don’t care about the company as long as you pay the personal income tax plus some employee insurance tax.