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.
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.
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