how to create an estonian holding company for your investments

Create an Estonian holding company to manage and grow your investments in a tax-efficient, digital way

What is a holding company?

There’s a saying in Estonian that a good child has many names. When talking about creating a company to manage your investments, it is sometimes referred to as a “holding company”.

In reality, there is no special legal form called a "holding company", but instead a regular private limited company structure is being used to hold and organise your shareholdings. In short, a holding company owns shares in other companies.

Key benefits of an Estonian holding company

Estonia has become a popular destination for international entrepreneurs and investors, particularly through its innovative e-Residency programme. One of the key advantages is the ability to establish a company as an investment vehicle, most commonly in the form of a private limited company (osaühing or OÜ) to hold your investments in a tax-efficient and business-friendly environment.

The biggest advantage of creating such a holding company in Estonia is the ability to reinvest profits repeatedly without paying corporate income tax each time a specific investment is liquidated. This makes it particularly attractive for active investors who want to compound their returns without immediate tax consequences.

Low barriers to entry

1. Minimum share capital of just €0.01 per shareholder;
2. No special business licences required for simple investment holding;
3. Can be established entirely online through e-⁠Residency

Advantages

1. No corporate income tax on retained profits;
2. Tax is only paid when profits are distributed to shareholders;
3. Ability to reinvest and compound without taxation as the income tax is deferred.

How to establish your Estonian holding company

Step 1: Choose your structure

Although there are other business forms to choose from, a private limited company (osaühing) is by far the most preferred option due to low opening and operating costs as well as a low €0.01 per shareholder minimum share capital contribution. It's the structure chosen by most e-⁠residents (and also locals) for their businesses.

Step 2: Prepare required documents and relevant information

Along with the relevant information about your company (business name, location, contact information, management board members, share capital, financial year, etc.), you'll need to prepare articles of association. The e-Business register offers a fast-track procedure using standard articles of association, which can streamline the establishment process. 

It is always possible to supplement your company’s information and documents in the future if necessary. All founding documents must be digitally signed by the founder(s), and in some cases, such as amending your company’s articles, may require a small state fee. Your e-⁠Residency status makes it possible for you. 

Step 3: Banking services

Starting a business in Estonia does not require an Estonian bank account, with most e-residents rather using fintech services. You can read more about different banking solutions and browse banking service providers. 

However, it must be noted that being an e-⁠resident or owning a company in Estonia does not guarantee automatic access to financial services or institutions. As private entities, financial institutions have the right to choose their clients based on their policies, licences, KYC and risk-management policies.

Specific requirements may vary depending upon the regulatory obligations and internal policies of individual financial service providers. For example, due to licensing limitations, some investment services may limit the availability of their services based on factors such as physical or tax residency. 

It is advisable to consult with your chosen service provider in advance to ensure that all requisite documentation is prepared and current prior to commencing business operations.

Tax considerations

Creating your investment vehicle in Estonia gives you the ability to reinvest your profits time and again without the obligation to pay corporate income tax until you keep your profit in the company.

Retaining your profit and/or reinvesting it is not taxed. Taxation time of profits is delayed until the moment you take your profit out of the company, for example, by paying yourself a salary or dividends, or liquidating the company in Estonia. 

This is a huge difference and gives you an opportunity to grow your investments at a quicker pace, as there is no tax cost in the middle. That said, you should still be mindful of permanent establishment rules in the country from where you run your business digitally. When permanent establishment and therefore profit taxation are needed in your home country, you can avoid double taxation of such profit in Estonia. 

Tax advisor Kaisa Borštšik from Fondia, an e-⁠Residency Marketplace service provider, stresses:

In summary

Estonia's e-⁠Residency programme, combined with the advantages of the OÜ as a form of business, provides an accessible way to establish an investment holding company in a modern, digital-first jurisdiction. The combination of low costs, tax efficiency, and regulatory clarity makes it an attractive option for international investors looking to structure their shareholdings.

The process is designed to be straightforward, particularly for those comfortable with digital processes, and can typically be completed entirely online once you have your e-⁠Residency digital identity.

For detailed guidance on your specific situation, consider consulting with Estonian legal and tax professionals who can help tailor the structure to your investment objectives and ensure compliance with both Estonian law and your home country tax obligations.

The e-Residency team thanks Fondia full-service business law firm for assisting in composing and reviewing the content of this article.