German e-residents can register and run an Estonian company online with e-Residency in 3 easy steps
One of the best things about Estonian e-Residency (and one of the top reasons why there are over 5,000 German e-residents) is the ease of doing business in Estonia (and the EU). Once you have applied for e-Residency and collected your digital ID, you’re ready to start a company 100% online with all the benefits of an EU entity.
But this is just the start. By plugging into a digital and almost paperless society, you can focus on growing your company, serving your clients and increasing your profits. Forget paperwork and bureaucracy. And while German e-residents manage their e-Residency-powered businesses remotely, Estonia should be at the top of their travel list for its beauty, nature and new experiences.
Starting a company in Germany can be kompliziert. Estonian e-Residency makes it easy, safe, and accessible to be a founder. Read this guide and watch the video tutorials (in German) to find out the benefits of doing business in Estonia for German e-residents.
Company formation for German e-residents
Once you have your digital ID, there are three steps to register and manage your company online:
1. Determine which type of company suits your business
In Estonia, there are different types of companies, like private or public limited companies, sole proprietorships and non-profit organizations.
Most e-residents choose to form a private limited company (OÜ or “osaühing” in Estonian), because it is quick and easy to set up, limits shareholder liability, and has a low share capital requirement of €2,500. This requirement can be deferred and paid in instalments. Depending on the area of activity of your business, you may need certain licenses to operate. However, Estonia prides itself in having a relatively low-regulation business environment, so licenses are generally an exception rather than the rule.
2. Choose a service provider and register your company
In order to manage your company from Germany, or elsewhere, Estonia’s commercial code requires your company to have a legal address and a designated contact person in Estonia. There are several such service providers on the e-Residency Marketplace, which have the necessary expertise to help you with this service. You will also find business banking and payment providers, accountants, lawyers, tax consultants, and many more specialists to help you run your business.
Watch the following video to find out more about the Marketplace and how to find the right service providers for your business:
Once you find a service provider in our Marketplace to serve as an Estonian contact person and legal address for your business, register your company through the Company Registration Portal. The registration is simple and takes minutes — including the payment processing time of the €265 private limited company registration fee.
Next up, you’ll need business banking and payment services, which are offered by several e-Residency service providers. The three main categories of business banking providers are: EU/EEA payment institutions (fintechs) such as Wise, Wamo, Payhawk and Intergiro, Estonian banks, such as LHV and Coop Pank, and banks in other EU/EEA countries
3. Hit the easy button with clear, automated accounting & simple VAT
Running a business with e-Residency allows German e-residents to submit their company’s annual report, declare and pay taxes in Estonia (if applicable – see explanation below), and make board decisions and more from the comfort of their own home office or coworking hub.
By law, an Estonian company must submit an annual report (even if doesn’t have any activities during the financial year). The annual report is normally due within six months after the end of the financial year. The standard financial year in Estonia starts on 1 January and ends on 31 December (although it is possible to change it to any 12 month period). This means that annual reports are due by 30 June each year for companies following the standard financial calendar year.
If your company has a turnover of more than €40,000 in a year, Estonian laws require your company to be VAT-registered. If your company earns less than €40,000, registration is optional. Depending on the area in which your company operates, in particular e-commerce, applying for OSS or IOSS eliminates the need to register for VAT in each other EU member state.
While your service provider will help you with your monthly accounting, including submitting monthly VAT returns and annual reports, it’s also important to understand your company’s other tax obligations.
The first thing to think about is where your company should pay tax. It may be Estonia but could be in another country if you reside and actively manage your company there. This is due to the tax concept of permanent establishment (PE). A PE may create a taxable presence for your company outside of Estonia and categorize the company under corporate tax criteria in another country. Every country has a slightly different approach to PEs. Germany, for example, regards a company as a tax resident if it is incorporated in Germany or the company is actively managed in Germany. E-Residency does not exempt your company from foreign tax liabilities in Germany.
There are ways to structure your business to avoid this, including by hiring employees or setting up an office in Estonia, conducting management meetings and making board decisions here. However, given that this is a highly complex area of international tax law, we always recommend obtaining advice from a tax expert in both Estonia and Germany.
In most cases, e-Residency does not affect your own individual tax residency. This remains in the country in which you are tax resident. One exception is if you choose to pay yourself a Director’s Fee from your Estonian company – this will result in personal tax liabilities in Estonia. You will also continue to pay social taxes (such as pension, superannuation or unemployment contributions) in your country of individual tax residence.
The good news is that Estonia has signed a double tax treaty with Germany, so be sure to check the treaty to see how you and your company can avoid being double taxed.
Of course, service providers from the e-Residency Marketplace can help you with taxes, offer legal services, bookkeeping, and more in Estonia, the EU or worldwide.
Watch the following video (in German) for more information:
Join the 5,000+ German e-residents who have already joined Estonia’s digital nation
Registering your company in Estonia thanks to e-Residency will connect you with a community enabling you to learn from other entrepreneurs. The Estonian e-Residency team is always there to answer questions and offer practical advice on everything from becoming an e-resident to starting your own company online.
Ready to uncouple business and bureaucracy? Apply for e-Residency today!