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Executive Summary
Estonia is one of three Baltic countries (also Latvia and Lithuania), it boarders to Russia and Latvia, and to Sweden and Finland via the sea. The surface of Estonia covers around 45,000 sq km and Tallinn is its capital.

The national language, Estonian, and the cultural peculiarities have many elements in common with Finnish people and their traditions.

Estonia renewed its independence from the Soviet regime in 1991 and has organized itself according to a democratic parliamentary republic model. At once after that it has implemented effective reforms favoring social and economic growth, and today it is one of the fastest growing economies in Europe, being described as a Baltic Tiger. Since 2004 it makes a part of the EU and NATO. Even though being a dependent country in terms of energy, its food, construction, electronic and IT industries are highly developed (Skype was invented in Estonia).

The national currency is Estonian kroona (EEK).

Geography
The country is situated on the eastern coast of the Baltic Sea, the average elevation is around 50 meters above the sea level, while its highest point is Suur Munamagi – 318 m. There are numerous lakes in Estonia, the biggest of which is Lake Peipus – over 3,500 sq km. Vohandu is the biggest of many rivers. Estonia has many small islands, the most known of which is Saaremaa.

It has a temperate climate in the transition zone between continental and maritime characteristics. Thanks to the Gulf Stream it has quite a mild climate despite being situated in the North. The average winter temperature is around – 5 C, and in summer it is around + 16 C.

Map, Flag and Coat of Arm


Types of Company

Private Limited Liability Company (OU)


One person can establish a company with a minimum initial capital of 40,000 EEK. The liability is limited to the amount of capital subscribed. If a company’s capital exceeds 40,000 EEK capital, its accounts must be audited.

Public Limited Liability Company (AS)
One private or corporate entity can establish a company with a minimum capital of 400,000 EEK. The management board manages the company and it is controlled by the supervisory committee assigned by the company’s shareholders. The company’s liability is limited to the amount of the capital and its shares are offered to the general public

General Partnership
Partners are liable for the structure’s obligations and the profits of the partnership are not taxed as the separate body. Profits are divided among all the partners proportionally to the capital invested, unless the partnership agreement declares another option

Limited Partnership
To form a limited partnership at least one of the partners should be a general and at least one should be a limited partner, the liability of which is limited to the capital invested.
Branch, Sole Proprietorship and Co-operative associations can be established in Estonia as well.

Taxation
The tax year in Estonia starts on the 1st of January and ends on December 31st.

Private
In 2008 personal income tax for Estonian residents is 22%, but it is planned to reduce it to 18% in 2010. Worldwide income of Estonian residents is taxed. Residents are persons who spend more than 183 days in a year on the territory of Estonia and if a person’s permanent residence in Estonia qualifies him/her as a resident. Individuals are supposed to submit an income report till the end of March; those whose salary is of the amount inferior to the one stated in the law are not supposed to submit such a report.

Corporate
Companies income tax is 22% and capital gain tax is usually added to it. Companies are required to submit monthly reports accompanied by the tax payment till the 10th day of the following month.

An employer is supposed to deduct taxes from employees’ salaries every month and is liable to pay 33% to national insurance, while employees do not have such an obligation

Three are some tax deductions and exemptions applicable in particular cases. There is no inheritance or gift tax. The land tax ranges from 0.1% up to 2.5% of the value of the land. The standard VAT rate is 18%, while 5% is a reduced rate applicable to certain products and services. Every business the turnover of which exceeds 250,000 EEK must be registered with VAT authorities.

 
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