Changes to the Estonian Commercial Code, Business Register Act, and taxes in 2023

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2023 just started and it brings along a couple of changes that will directly affect all Estonian businesses but some more than others. Significant changes are happening to the Commercial Code, Business Register Act, and taxes. Follow along as we give a brief overview of these changes.

Changes in the Estonian Commercial Code and Business Register Act which result from the amendments developed by the Ministry of Justice

Cross-border movement of companies

From the 1st of February, amendments to the law regulating the cross-border movement of companies within the European Union will enter into force. Until now, cross-border mergers of companies have been possible, but from the 1st of February cross-border divisions and cross-border transformations will be also possible. This expands the possibilities of the company’s operation in the EU. In addition, it promotes economic growth and competition.

Minimum share capital abolished

Along with the change to cross-border movement, the new Commercial Code dictates that share capital of an Estonian company can be as low as 1 cent. This means that the current minimum share capital of €2,500 will be abolished, lowering the entry barriers and set-up costs even further. In addition to the possibility of using a deposit account and a start-up account, in the e-business register portal, there will also be a third option in the incorporation application. The third option simply means that the founder confirms the transfer of the deposit to the private limited company.

Stricter control over annual reports

The third important change to the Commercial Code and the Business Registers Act is the fact that the Estonian government will take annual report compliance checking more seriously. The amendments aim to improve the discipline of submitting annual reports by giving the registrar new tools, which can be used in cases where an annual report or several annual reports are not submitted by a company.

We have also written a more extensive article about this change. Please click here to read the full overview.

Legal address

The last important change to the Commercial Code is the clarification of the legal address. Prior to this, the contact person’s address was automatically also the business’ legal address. After the amendments, it will be possible to use two separate addresses in case the business’ management wishes to do so. By changing the legal address, the company will start receiving all procedural documents to the new address, however, it is not mandatory to change the address if you wish to continue using your current service provider, who already provides this service to you.

Changes in taxes and taxation as a result from the amendments developed by the Ministry of Finance

Tax-free income minimum obligation of social tax increased

Since the beginning of 2023, the tax-free income in Estonia increased from €500 to €654 per month, or from €6,000 to €7,848 per year. This will directly impact your business’ accounting in case you have employees or pay a salary to yourself.

This means that there is a need to calculate the allowed tax-free income which is based on the income of the calendar year. For example, employees earning up to €14,400 per year can deduct €7,848 of tax-free income from their taxable income in a year. As income increases, tax-free income decreases. High earners, people earning more than €25,200 per year are not able to deduct tax-free income from their taxable income.

Furthermore, the minimum obligation of social tax increased to €215,82 per month, while the tax rate stayed the same (33%).

Please click here to see the full overview of taxes in Estonia.

Platforms must start collecting data

Platform operators must start collecting data about sellers and service providers, both natural and legal persons, acting through their platform and the income they earn via their platform.

If the seller refuses to share the data necessary for the platform manager to fulfil the necessary reporting duties, the platform manager has the right to close the account and prevent them from registering on the platform again in the future, as well as the right to refrain from transferring the fee to the seller, if the reminders are ignored.

Need further information about these changes or other aspects regarding your business in Estonia?

As we described above, these changes to the Estonian Commercial Register, Business Register Act, and taxes are the ones that directly influence business owners in Estonia. However, there is also an extensive list of variables that determine which obligations a business must fulfil to be in compliance. We at Incorporate have over 10 years of operating experience and work with businesses from various sectors – if you would like us to help you with running your Estonian business, please feel free to reach out to us!

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Incorporate Team