Sole Proprietorship in Estonia

Requirements for foreign investors setting up Estonian sole traders

There are several aspects which need to be considered when opening a sole proprietorship as a foreign citizen in Estonia. This business form is governed by the Company Law in Estonia, and the following requirements must be met when registering it:

• -          the foreign citizen must first obtain a residence permit in Estonia, this can be obtained remotely now;
• -          the foreigner must relocate to Estonia prior to starting the business and registering with the Trade Register;
• -          the registration of this business form implies submitting an application form with the Companies Register in Estonia;
• -          the sole trader must also register for taxation and social security reasons, while VAT registration is necessary only under certain conditions.

Opening a company in Estonia is not complicated, no matter the chosen business form, however, the sole proprietorship takes only a few days to register, which is one of its greatest advantages.

Documents required to register an Estonian sole proprietorship

The list of documents related to the registration of a sole proprietorship in Estonia is not extensive, as the future business owner will only need their ID or passport and the application form released by the Trade Register. The sole trader will also need to submit proof of their registered address in Estonia. Also, before registering the sole trader, a foreign investor must obtain a personal identification number.

It is useful to know that since Estonia has introduced e-residency, the personal identification number is issued together with the residence permit.

Our Estonian company formation advisors can help foreign investors who want to register as sole traders here. They will explain the requirements related to the documents they need to prepare before going to the Trade Registrar.

Accounting requirements for sole traders in Estonia

Once the sole proprietorship is taken into evidence by the Companies Register, it no longer needs to register with the Tax and Customs Department, as the information will be forwarded electronically. However, there are other accounting requirements which need to be respected by the Estonian sole trader.

These requirements are:

• -          the sole proprietor is required to maintain the accounting books of the business;
• -          VAT registration is mandatory only if the annual turnover of the business is 40,000 euros;
• -          if registered for VAT, the business owner must file VAT returns with the Tax Department;
• -          personal income tax returns must also be filed by the sole proprietorship in Estonia.

Our local agents can assist with the registration for taxation of sole traders and other types of companies in Estonia. We also offer accounting services to those who need help in bookkeeping matters in Estonia.

Licensing requirements for sole traders in Estonia

It is important to know that there is no specific business license issued to sole proprietorships in Estonia, however, for certain activities, it is possible for an authorization to be required. For example, those who open small catering businesses as sole traders are required to obtain a food processing license.

The advantages of a sole proprietor in Estonia

FAQ on sole proprietorships in Estonia

1.Does a sole trader need a share capital?

No, there are no share capital requirements when opening a sole proprietorship in Estonia.

2. How much does it cost to register a sole trader in Estonia?

The business start-up costs of a sole trader in Estonia are not high, and the investor only needs to consider the registration fee which needs to be paid with the Trade Register and the notary fees when drafting and authenticating the application and the signature.

3. How long does it take to register a sole trader in Estonia?

The company formation process of a sole trader in Estonia takes 2 or 3 days.

4. Can I hire employees if I am a sole trader in Estonia?

Yes, it is possible for a sole trader to have employees.