FAQ

What is e-Residency?

Digital document issued by the Estonian government that allows entrepreneurs to establish and manage an online company from anywhere in the world, giving them access to the European Union market and benefit from Estonian digital services

You can start your application for e-Residency, on the official site: HERE.

If you want more information about the e-Residency program, please get in touch with us at: info@sunnylatam.com, where one of our consultants will support and guide you through the process (applicable service fees during the consultancy).

About the company

What does OÜ stands for?

Osaühing (abbreviated OÜ), represents the legal figure of Limited Liability Company (SL / LLC) in Estonia. The company (OÜ) has its share capital divided into shares of a private limited company and has a board of directors (one or more members), which means a governing body that represents and directs the company. The minimum share capital of an OÜ without immediate contribution is € 2,500. The shareholders have up to ten (10) years to make the share capital contribution.

If more than half or none of the board members do not reside in Estonia, the company must provide an authorized agent and legal address in Estonia (Virtual Office and Contact Person services), as well as the address of the country of residence as a place of administration

You can start you company registration process, HERE!

If you want more information about the company registration and benefits of having your company in Estonia, please get in touch with us at: info@sunnylatam.com, where one of our consultants will support and guide you through the process (applicable service fees during the consultancy).

What economic activities can I carry out with my company?

The e-residency program allows and facilitates many activities remotely and with access to the European Union market. The main ones and with which Sunny Latam can support you, are:

• Professional Services: Freelancers (autónomos) who work as Web Designers and / or Programmers, Marketing and Business Consultants (Business Coachs), Travel Agencies, Traders -imports / exports-, among others.
• E-commerce & Dropshipping: If you want to start an e-commerce (Amazon, Ebay, or your own online store), even a drop shipping model.
• Digital Services: those services that do not require your direct intervention and are provided only digitally (Ex: SaaS and SaaP).
• And several more!

How to choose the right economic activity code for my company? Can I change it later?

At the moment of registering a company, you can only choose one economic activity code. When filling out the “Entrepreneur Plan” registration form, we will ask you about the activity of your company or business model; This will help us to know under which code to register your company. This code must represent the main activity of the company and with which it will generate most of the income.

The code will be adjusted if necessary, at the time of each fiscal year closing with annual report. The activity code is based on the EMTAK (NACE) Code system.

Can my company carry out more than one activity?

Sure! With the same company you can carry out several economic activities simultaneously with different activity codes. At the time of company registration, only one activity code is reported, the one expected to have the highest percentage of total activity or revenue. All activities with the respective codes will be reported at the time of each fiscal year closing in the annual report.

When does my company’s fiscal year begins?

Your business’s fiscal year generally begins from the next month immediately after your business was established. However, the fiscal year can be registered with a different 12-month period, in ordero to match the calendar year (optional).

Example: Company incorporation date: December 18, 2021. Fiscal year: January 1 to December 31.

Keep in mind that at the end of each fiscal year, your company must file an annual report, this is the annual tax return.

About the Share Capital

According to the law, the share capital of the Estonian company (OÜ) must be at least €2,500. However, you do not have to deposit it immediately, if the founder (s) of the company are natural persons; You can deposit it later (up to 10 years) to the business bank or payment service institution within the European Economic Area. Until the full sum has been paid, the shareholders / founders are personally liable for the missing contribution and must deposit it when the tax situation of the company requires so.

Share Capital Payment / Contribution

Once your company has an account with an European IBAN, either with a bank or payment institution within the European Economic Community, shareholders must transfer their share or shares from their personal accounts to the company’s bank account. Such payment(s) must bear the legend or transfer detail: “Osakapitali sissemakse”or “Share Capital Contribution”. When all the shareholders have paid their share, they must request a digital confirmation from the bank or payment institution about the contribution. This document should be in Estonian language and digitally signed. Called “Share Capital Contribution Certificate”.

Registration of the Share Capital

Once you have the digital confirmation of the payment of share capital, Sunny Latam will support you in registering this procedure in the Estonian business portal and so that the company complies with the requirements. This service fee is 80Eur (state fee included).

How can I use the Share Capital?

You may use this money to make payments, business-related expenses, investments, loans, or simply keep it in the account. The company is not obliged to keep the share capital in the bank.

Can you pay for the company´s share capital with the profits/revenue of the company?

No. The share capital should only be paid by the shareholders, which is why the company is called “limited liability company”: the liability of the shareholders is equal to the amount they have contributed.

About the taxes

Without a doubt, some of the biggest questions and concerns of the e-residents are: How and when do I pay taxes, how much should I pay and to whom or where? Don’t worry, that’s why Sunny Latam is with you; to make this something much simpler and that doesn´t bring you nightmares. Let´s jump right into it!

First, it is important to keep in mind that Estonia is NOT a tax haven, and your company will at some point pay taxes like any other. If there are two sure things in life, they are death and taxes.

Fortunately, Estonia has a modern, transparent and digitalized tax system, specially designed to support companies from the start, ensuring their healthy financial growth through capital reinvestment and facilitating the payment of taxes online.

Regarding the WHEN; As long as you reinvest the money that your company generates and justify the expenses related to the business, you will not pay taxes at the end of the fiscal year. That means, a Corporate Income Tax of 0%.

The taxes that you will owe to Estonia, you pay when you distribute dividends (profits) to the shareholders. How much? Dividends activate 20% of CIT on the gross distribution, which is equivalent to 25% of the net distribution. The Estonian tax rate is formally expressed as 20/80.

To Whom? Remember that you and your company are two separate persons. Your company is a tax resident of Estonia while you will remain tax resident of your country of residence. So your company pays corporate taxes in Estonia, and you in your country of fiscal/tax residence.

If you wish to know more about taxes, dividends, salaries, or any other tax topic, we ask you get in touch with u at: info@sunnylatam.com, where one of our consultants will support and guide you on the subject (applicable service fees during the consultancy) .

Dividends

Dividends activate 20% of CIT on the gross distribution, which is equivalent to 25% of the net distribution. The Estonian tax rate is formally expressed as 20/80.

Dividends distribution

When distributing dividends, it is important to follow and comply with the following requirements:

• Make sure you have fully paid and registered the share capital.
• The last annual report must be approved with a resolution digitally signed by the shareholders.
• When deciding the amount of the dividend, be sure not to exceed retained earnings or undistributed earnings according to the company’s Annual Report.
• The net assets of the company may not fall below half of the company’s share capital or minimum mandatory share capital as a result of the payment of dividends, whichever is greater.
• As sole shareholder, draft and sign the dividend distribution decision.
• The company must pay dividends in cash to the shareholder’s personal account.
• The respective accounting entries must be done.
• The payment of dividends must be declared in the TSD and the tax due on the distribution of dividends must be remitted before the 10th day of the month following the actual payment.

Salaries

Can I be self-employed by my company?

Yes, and it is another of the alternatives to withdraw money from your company without having to pay taxes for distribution of dividends and without having made the minimum or registered share capital contribution.

There are two ways: assigning you a salary as an board member(director), and/or as an employee of your company. In many cases, the type of salary for a board member of a small business is compensation for performing duties as a manager / board member or as an employee, or a combination of both.

If you wish to know more about taxes, dividends, salaries, or any other tax topic, we ask you get in touch with u at: info@sunnylatam.com, where one of our consultants will support and guide you on the subject (applicable service fees during the consultancy) .

What is the difference between board member salary and employee salary?

It is important to understand and remember that, in your company, you are considered to perform two types of tasks: Being a board member or director, which means you take care of the administrative and bureaucratic tasks of your company.

Additionally, you can also be the only worker or employee; who performs the operational tasks of the company, which add value to the services / products you offer. Provision of services such as consulting and customer service, production, web design or programming, trading, etc; They all can be considered as activities of an employee of your company.

However, the main difference between the board member salary and the employee salary, lies in the taxation differences.

Board member salary taxes:

The remuneration of the board members (administrator) is applied for the fulfillment of the company’s managerial tasks, such as hiring personnel, management, business development, signing contracts, banking, etc.

Board member salary is always taxed in Estonia. How much? With 20% on the gross remuneration, plus the social tax (33%) on the previous gross remuneration. Social security tax is also paid in Estonia, unless you prove that you already contribute to social security in another European country (residence) by providing a form A1 (E101).

Employee salary taxes:

The tax on the employee’s salary is applied in your country of residenceor in the country from where the work is performed. That is, if you live and work outside of Estonia, this salary is NOT taxed in Estonia.

If the employee, that is, you, perform the work from Spain or Germany, then you will declare your income there. The part of the employee’s salary will be added to your tax base when you make your tax returns (IRPF) and you will pay taxes on what corresponds to you.

So this salary is taxed in Estonia and also in my country of residence?

Estonia being a country of the U.E. has double-taxation agreements with other member countries, so you will NOT have to pay double for the administrator’s salary.

If the activities as a board member partially qualifies with the fulfillment of the management or operation tasks of the company, then you can make a combination of both salaries. The suggested distribution ratio must be evaluated on a case-by-case basis, however, many companies exercise a ratio of 20/80 or 30/70, where the lower part corresponds to the board member’s salary and the rest (higher) to the employee´s.

If you live outside of Estonia, your employee salary is not taxed there, only the board member salary. So the lower the director’s salary in the distribution, the lower the taxes to be paid in Estonia.

And what about the autonomos (freelancers) in Spain?

This is a great alternative for those who work under the figure of AUTONOMO; You can unregister, because with your company in Estonia you can still invoice your clients and show that you contribute to social security voluntarily, saving you the tedious monthly fee (€300 approx). It is better to unregister as Autonomo and pay social taxes by self-employment, since the tax burden is much lower.

Let´s talk about VAT (TAX)

What is VAT and intracommunity VAT number?

VAT (value added tax) is a type of tax applied to consumption and/or the sale of goods and services. In the case of Estonia, it is 20%.

Now, the intra-community VAT number is a unique code that identifies a legal person (company) subject to tax. In Estonia it always begins with the letters “EE” followed by 9 digits, for Spain it is “ES” followed by another letter and 8 digits.

Many companies face strict VAT compliance requirements when they start operating abroad. Whether they provide goods and services cross-borders or ship products to an overseas warehouse or fulfillment center, provide digital services to other businesses and consumers… they likely have a VAT number.

Does my company needs a VAT number?

It depends on whether it meets any of the following characteristics:

• You purchase goods or services from other companies in the EU, for example: Facebook advertising, Google Ads or other digital services.
• You sell physical products to customers (B2B and / or B2C) within the E.U.
• At least part of the manufacturing, transit, storage or distribution of goods or services is managed from Estonia,
• You provide services such as web development, web design, consulting, marketing, etc., to other companies (B2B) in the E.U. and you earn more than €40,000 a year,
• You sell digital services (SaaS / SaaP) to European clients (B2B and / or B2C).

What is the VAT number for?

The VAT number helps you track the amount of taxes your business pays and collects (incoming and outgoing VAT) through purchases and sales (expenses and income).

1. Helps to identify clients’ tax status and tax location.
2. For B2B purchase / sale (Reverse Charge or Reversible Exchange mechanism).
3. To complete the VAT refund form (Include your VAT number on all your tax receipts and invoices).

Do I need an Estonian VAT number?

If you are looking for a global expansion and have discovered the benefits and opportunities of new markets with your company in Estonia, then yes!

Important: Once your company reaches the distance selling threshold (VAT crossborder), you must obtain the VAT number in the country where this limit was exceeded.

Who issues a VAT number?

Only Tax Office (EMTA) is entitled to issue a VAT number, however this process can be complicated and time consuming. It is for the above reasons that Sunny Latam will support you in reviewing the commercial details and submitting the application online, so that you can obtain the VAT number within 3 – 7 business days.

Do I need to add VAT? If yes, when and how much?

Easy… it depends on the type of business you will be dealing with, who are your clients and where they are.

If your company provides services that requires your direct intervention, such as: consulting, marketing, design, programming, etc.

• If your clients are companies from the U.E. with VAT number = You DO NOT add VAT (0% Reverse Charge).
• If your client is B2C or a company within the U.E. with no VAT number = you DO add VAT (20% Estonian).
• If your clients are outside the E.U. (Latam, Canada, USA, Australia, etc) = DO NOT add VAT to your invoices.

Now, if your company provides digital services, which are those that do not require your direct intervention because they are automated. Example: Apps, Downloads, Streamings, among others.

• Your client is B2B (European) with VAT number = You DO NOT add VAT.
• Your client does not have a VAT number, but is in Europe (B2C or B2B) = you DOadd the VAT of their country of origin.
• Finally, if your client is outside of Europe = You DO NOT add VAT.

Bank Account

Having a business bank account

E-residents use a wide range of payment institutions for their banking needs. The solution they choose varies based on their geographic location, business needs, and prior experience using payment institution services.

As an e-resident, you can choose a combination of banking options or change your bank account in the future. For example, some e-residents choose a banking provider with an account that they can easily open online to start their business. Later, once your business is worth the investment or meets certain criteria, they switch to a banking provider with more features.

Digital Banks = Fintechs

Depending on your situation, there may be several banking options and possibly the best of them is through a fintech.

This is because these institutions offer the option of opening accounts completely online and are often more flexible than traditional banks. Plus, you can get an account with many of the same features as traditional banking, including a European IBAN (international bank account number) and the ability to make and receive payments in different currencies.

The variety of options is wide, so we recommend you do an exhaustive research to find out which of them best suits your needs and business profile. Now, due to the experience with our clients, at Sunny Latam we recommend that you consider Wise (formerly TransferWise) as a first option.

Can my company have an account in Euros?

Wise is a financial institution that allows you to open a personal and business account, with which you can send and receive payments in different currencies, including the main EUR, USD, GBP, AUD, among others. At the time of account opening, you must enter information about your company (registration code, economic activity, shareholders, legal and administrative address, etc.). To activate your account, you will be charged a small one-time fee.

One of the advantages that Wise offers for the administration of your company is the payment of the share capital and its registration.

In case of any problems or questions, Wise has a 24/7 customer service line in English. In Spanish there is the option of chatting or requesting a call from them; just write them and ask them to call you.

How to send money from my Wise account (EUR) to Latin America?

This transfer can be made from your Wise business account directly to the bank account of your choice in any of the Latin American countries where Wise can send money.

All you have to do from the Wise platform is convert your money to the destination currency you like (ex. BRL, CLP, MXN, etc.) and, finally, transfer those funds to an account in the country you want.

How to send money from Latin America to my company account (EUR)?

One of the best options currently offered by fintechs is probably Global66, which is a Chile-based fintech that allows you to easily send funds from an account in CLP, COP, BRL, PEN, ARS or MXN to any account in EUR located in Europe (as a Wise account in EUR for the purpose of paying the share capital).

If you want more information about banking, you can write to us at: info@sunnylatam.com, where one of our consultants will support and guide you on the subject (applicable service fees during the consultancy).

E-COMMERCE (FBA & PAYPAL)

E-commerce has become one of the largest industries in the last 10 years, and is also one of the most popular business models among Estonian e-residents. Next we will talk about the advantages and possibilities of having an e-commerce or dropshipping with your company in Estonia.

What are the advantages of e-commerce?

• It is available 24 hours a day, 7 days a week.
• The scope of your business is extended to new users.
• There is a competitive advantage.
• The effectiveness of your business is increased through customer segmentation.
• There are no costs related to the establishment of a physical store.
• You can scale your business, that is, you can sell to an unlimited number of people at the same time.

What are the benefits of having an e-commerce company in Estonia through e-residency?

There are many advantages when choosing to open your e-commerce business in Estonia. Estonia is the first country in the world that has offered a digital identity that knows no borders, and that seeks to provide an opportunity to various entrepreneurs around the globe.

E-residency is the way to access the services offered by the Estonian government without having to visit the country. You can start your company, have access to the European Union market and have the necessary tools to manage your company remotely.

If you are looking to have a company dedicated to e-commerce or dropshipping, without depending on a fixed residence, avoid bureaucratic procedures and have European clients and suppliers, e-residency is the answer.

What are the administrative and tax benefits for e-commerce companies in Estonia through e-residency?

There are many benefits to becoming an e-resident:

• You do not need to depend on a specific residence.
• You can establish and operate your company 100% remotely.
• You can live in any country without the need to make changes in your company.
• You will have the advantages of starting a company in Europe.
• You can use various payment providers, such as Stripe, Paypal, among others.
• You can sign and pay your taxes online.
• The e-residency is not a tax haven, but the Estonian tax system is very modern, digital and designed to support entrepreneurs from the get-go.
• You will not have to pay taxes as long as the money that enters the company is reinvested in it.
• For more information regarding taxes, enter here.

What are the e-commerce business models?

It is possible to categorize e-commerce with its business models depending on how they generate their income and how the exchange of products, goods or services between buyer and seller is carried out:

• Marketplace → It is a website where various companies offer their products or services.
• Dropshipping → It is a normal e-commerce, but the essential difference is that the seller does not send the product, but a third party does.
• Online store with your own products → It is the same as a physical store, but the products or services are sold online.
• Services → It is not necessary to sell products or goods, you can also sell services such as mentoring and / or consulting.

One of the simplest and most common ways to start an e-commerce is through the “Fulfillment by Amazon” (FBA) program; a dropshipping model created by Amazon that makes various services available to its sellers, such as receiving, storing and shipping your products to customers around the world.

What platforms and / or marketplaces can be used with e-residency?

Integrating your e-commerce store to a platform or marketplace can be one of the most appropriate decisions when starting a business. Industry leading marketplaces are frequently found helping e-commerce entrepreneurs boost their business in incredible ways.

We are talking about the marketplace giants such as eBay, Amazon and Etsy. These marketplaces are very popular in the e-commerce fields and are constantly under development with the aim of creating suitable tools for entrepreneurs.

Regarding e-commerce platforms, we recommend the following:

1. WooCommerce: WooCommerce is a platform widely used by WordPress lovers as it helps from small to large companies to manage their store online. It will allow you to offer your products under your terms since it is quite flexible when it comes to customizing your online store.
2. Shopify: Shopify has become one of the leading platforms in the field of e-commerce, helping countless entrepreneurs to establish an online presence through the sale of products and services.
3. Wix: Wix is an ecommerce platform that is characterized by being very easy to use when building your website. With its design tools and user interface, it makes it an ideal option for entrepreneurs with basic knowledge of web page design.

What are the necessary documents to open accounts on payment platforms, such as PayPal?

It is not necessary to have a bank account for your business, but it is recommended to open one before setting up your PayPal account for your business. In addition, you will have to confirm an email address, provide contact information, and provide the bank account number where you would like to receive the deposited money.

You will have to provide the name of your company (which will appear on your clients’ invoice), and it will also ask you to describe the type of business of your company.

• Autonomo / Freelance
• Limited Liability Company
• Incorporated
• Nonprofit organization.
• Government entity.

Depending on the type of business you choose, PayPal could require more information, such as the product or service that your company sells, the website, the monthly sales volume, and your company identification number. Lastly, it will ask you to provide contact information for your customers.

If you want more information about e-commerce, payment providers and marketplaces, you can write to us at: info@sunnylatam.com, where one of our consultants will support and guide you on the subject (applicable service fees during the consultancy).