2023 can be a great time to start your own business, especially if you can take advantage of the tax benefits of setting up a company in Estonia.
Estonia, a country located on the Baltic coast of Northern Europe, is known for its favorable business environment and tax policies. Setting up a company in Estonia is easy, and the country offers a wide range of benefits for entrepreneurs, such as lower corporate taxes, simpler accounting rules, and a freer digital marketplace.
Lower taxes
Estonia’s tax system is renowned for its low rates and attractiveness to foreign investors. Currently, the country maintains a flat tax rate of 20% and there is a reduced dividend tax rate of 14% for companies consistently paying dividends over three years, but this provision is set to be abolished.
From January 1, 2024, Estonia has planned to increase the value-added tax (VAT) rate from the current 20% to 22%. Even so, Estonia is considered competitive in fiscal matters and its favorable tax environment has contributed to its reputation as an entrepreneur and innovation-friendly economy.
No profit tax on earnings reinvestment
Another tax advantage for entrepreneurs in Estonia is the absence of profit tax on reinvested earnings. This means that if you are reinvesting the earnings generated by your business, you will not have to pay any tax on that amount. As a result, you can focus on growing and expanding your business without worrying about paying additional taxes.
Simplified accounting rules
Estonia’s accounting system is very simple and straightforward, making it easy for entrepreneurs to keep track of their finances. The country’s accounting framework follows the International Financial Reporting Standards (IFRS), which is widely used worldwide. This means that your company’s financial statements will be internationally recognized, making it easier for you to do business with foreign entities.
Access to the EU market
Since Estonia is a member of the European Union, companies registered in Estonia can easily do business in the EU without restrictions. This is a significant advantage, as the EU offers a large and lucrative market with more than 500 million consumers. By starting a company in Estonia, you can take advantage of the country’s favorable business environment and, at the same time, access the wider EU market.
Digital business environment
Estonia is known for its advanced digital infrastructure, making it easy for businesses to establish their online presence. The country has a highly developed e-government system, and most business registration, licensing, and administrative procedures are available online. This means that you can start your business in Estonia without even leaving your home country.
In conclusion, if you are an entrepreneur looking for a favorable fiscal and commercial climate, setting up a company in Estonia is an excellent choice to make. With lower corporate taxes, no profit tax on reinvested earnings, simplified accounting rules, easy access to the EU market, and a digital business environment, Estonia offers many advantages to companies.
As the world becomes increasingly digitized and globalized, Estonia’s entrepreneur-friendly policies and digital infrastructure make it an ideal place to launch and grow your business in 2023.
Tutorial Video: What are the Tax Benefits when Setting up a Company in Estonia?
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