A liaison office in Estonia is a legal and economic entity performing intermediary functions between the main company and its external partners.
As in other European countries, a liaison office is not a distinct legal entity, does not have legal personality and it is economic dependent on the company from which it has been set up.
Below, our company formation agents in Estonia explain how to establish a representative office in this country.
| Quick Facts | |
|---|---|
| Applicable legislation | Local Company Law |
|
Status |
The representative office is not considered a corporate entity. |
|
Uses of a liaison office |
– market and feasibility studies; – contact point for clients and associates; – representation of the parent company. |
| Restrictions of a representative office (if any) | Yes, such an office cannot undertake commercial operations. |
| Minimum share capital (YES/NO) |
No, there are no share capital requirements for a representative office in Estonia. |
| Local representative required (YES/NO) |
Yes, a local agent must be appointed. |
| Documents to be filed by parent company |
– copies of the Certificate of Registration; – proof of local registered address; – details of the local agent. |
| Local address requirement (YES/NO) |
Yes, the Estonian liaison office must have a registered address. |
| Authority to be enrolled with |
Companies Registrar |
| Liability of the parent company | The parent company is responsible for the operations of the Estonian representative office |
| Taxation of a liaison office in Estonia |
The liaison office is not subject to taxes in Estonia. |
| Possibility of hiring local staff (YES/NO) |
Yes, such an office can have a few employees. |
| Travel requirements for setting up a representative office (YES/NO) |
No, there are no travel requirements for the establishment of a liaison office in Estonia. |
| Advantages of a liaison office |
– quick setup procedure; – it can be used to test the market; – it can be used for promoting the parent company’s goods/services. |
| Support in opening a representative office | Yes, we offer support in opening a representative office in Estonia. |
Registration steps for a representative office in Estonia
The procedures for establishing a liaison office are as follows:
- choosing the right premises for the office (a commercial space will usually suffice, however, the virtual office is not suitable for such activities);
- appointing a local representative,
- submitting the required documents with the Company Register.
Also, when having employees, these must be registered for social security benefits. This also applies to the representatives if he or she is a natural person.
Compared to setting up a company in Estonia, the process for opening a liaison office is substantially simpler.
What is a liaison office and how does it work?
A liaison office in Estonia is a type of structure which is not independent from the parent-company and its status provides several limitations which can be seen in the fact that it cannot produce goods or provide services. In most cases, an investor chooses to set up a liaison office in Estonia for the purpose of to create a business connection (intermediate) between the parent-company and its Estonian clients. As a liaison office have few economic features, this type of structure is mainly used for marketing services.
A liaison office in Estonia must not be understood as a subsidiary or branch, as these structures have separate features and economic status. For example, a subsidiary in Estonia has its own legal personality, is created under the status of a limited liability company and it is also a company in which another company (parent company) has a partner or shareholder agreement, with or without a dominant influence. A subsidiary is common used type of structure in Estonia as it is easier to conduct businesses through this legal entity.
An Estonian branch is also a type of structure independent from the liaison office. A branch is not a legal entity. The parent-company is responsible for the obligations arising from the activities of the branch and the procedure of registering a branch is more complex, requires more time and it can be considered expensive.
Here is also our infographic on the liaison office:
Documents required to opening an Estonian representative office
In order to set up a liaison office in Estonia, there are several documents required by the state authorities, but the procedure is not complicated. To open the liaison office there must be obtained a license and the structure must be registered as a tax payer. In this sense, the following documents are needed: the standard application available at the registration office or online, legalized copies of the articles of incorporation, a legalized copy of the incorporation certificate, the chief of the liaison office must provide a legalized letter, the memorandum of association in which are included the reasons for opening a representative office must also be attached to the registration file. The procedure also provides that the applicant must specify the office’s structure and the means by which it can be dissolved. Moreover, the proof that the registration fee was paid is also necessary.
In order to set up a liaison office in Estonia, no minimum share capital is required, but the registration fees must be paid and these costs are similar to the expenses involved in any company formation in Estonia.
What to consider before opening an Estonian representative office
Since a liaison office does not have its own legal personality, it is not distinguished from the parent company’s history, has no unique name or trade name, and has no property of its own. The parent enterprise will be responsible for paying the office’s debts when it encounters financial difficulties.
The process of opening a liaison office in Estonia is less complicated because it dependents on the business opening it.
The representative office relies on the parent corporation and lacks both legal and financial independence. It cannot sign contracts or enter into any other activities that implies creating legal obligations for the foreign company.
The main reason for setting up such offices is that foreign companies usually want to test the market before committing to registering a company here.
Should you need more information on the representative office, you can address our Estonian company formation officers for complete details. They can also explain the main reasons behind creating such an entity.
Activities that can be undertaken through a liaison office in Estonia
An Estonian representative office is not permitted to engage in any business, or better said in any commercial operation. However, it is permitted to complete some particular activities, including the following:
- – gathering knowledge about the Estonian market and its products;
- – conducting marketing activities;
- – taking part in exhibits, trade shows, and fairs;
- – serving as a point of contact between the parent firm and its local clients.
The parent firm must nominate a representative for the Estonian liaison office. This can be an Estonian citizen or resident.
If you want to set up a business and need accounting services in Estonia, you can rely on our local accountants.
The liaison office from a taxation point of view
The founding company should be aware that a liaison office established in Estonia is not subject to income tax as long as it doesn’t close any sales and doesn’t directly serve the clients of the foreign company. Additionally, it is exempt from the Estonian VAT because it makes no sales and only performs services for the foreign office.
If you require assistance, you may also rely on our accounting company in Estonia. If you want to expand your business in this country, we can provide consulting or tax-related services.
We are also at your service if you are interested in setting up crypto business and applying for an Estonian crypto license here.
Here is also our video on this topic:
Business statistics in Estonia
According to the National Statistics Office in Estonia, the number of companies has grown in the past few years. The most recent data for 2021 shows that:
- – at the time, there were 127,357 companies in Estonia, 27.2% more than the previous year;
- – they employed 516,724 people, 7.3% more than in 2020.
Also, the total turnover of Estonian companies in the last quarter of 2022 was 23.64 billion euros.
Our Estonian company formation specialists are able to provide you complete information and services for setting up a liaison office in Estonia. Please contact us for customized advice.