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Opening a Branch vs a Subsidiary in Estonia

Opening a Branch vs a Subsidiary in Estonia

Updated on Wednesday 27th May 2015

Estonian companies

Open-a-Branch-vs-a-Subsidiary-in-EstoniaForeign companies are encouraged to open branch offices or  subsidiaries in Estonia due to  the Estonian government  pro-  investment legislation and constant economic growth.  Foreign  companies will be treated like any Estonian company   and  benefit from the same tax facilities.

 Branch offices (filials) in Estonia

 A foreign company may establish a branch office in Estonia. In case of the Estonian branch  office the liability will fall onto the parent company, as the branch office cannot be considered  an independent legal entity. An Estonian branch office must submit the parent company’s  financial statements with the Companies Registry in Estonia. The branch office has the  same obligations as the parent company.

The Branch office must register with the Commercial Register even if it acts as an extension of the parent company. The registration process of a branch takes about one month and must be done in front of a notary public

When registering a company with the Commercial Register the parent company must submit an application form, the memorandum and articles of association, and a bank payment as evidence of the full payment of the share capital.

Subsidiaries in Estonia

Companies may set up subsidiaries in Estonia. Estonian subsidiaries will be treated as independent legal entities that have their own accounting system thus being subject to the Estonian taxation system. The most common types of Estonian subsidiaries are the public limited liability company and private limited liability company. The liability of the company will be limited to the capital contribution of each shareholder.

Subsidiaries must be registered with the Commercial Registry in Estonia and the registration process will take no longer than one week.

Comparison between a branch office and a subsidiary in Estonia

The main difference between a branch office and a subsidiary in Estonia lies in the independency of conducting business operations. While the subsidiary is regarded as an independent entity, the branch office totally depends on the parent company and must undertake the same type of operations. In terms of registration, the process for registering a subsidiary will take about one week compared to the registration process of a branch office that can take up to a month. However, both types of companies must register with the Commercial Register.

In case of taxation, both types of companies are subject to the same taxes, but the subsidiary may benefit from better taxation plans when it comes to earnings repatriated with the parent company. In case of the branch office, it will not be subject to the audit requirement; it will only submit an annual report of the parent company.

For details on how to register a company in Estonia you can contact our law firm.

 

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