Our Estonian company formation agents are at the service of investors who want to set up foundations. We will first ensure clients know the conditions to meet to open a foundation in Estonia, so they can prepare the necessary papers, and then we will guide them through the registration process.
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The main characteristics of Estonian foundations
The Non-profit Associations Act is the main law that covers the creation of foundations in Estonia. Also known as non-profit organizations (NPOs), they are established with the purpose of completing various activities for social welfare.
Non-profit organizations in Estonia are created to fulfil social purposes without earning profits from the activities they undertake. However, under certain circumstances, they can operate as any other type of company, including:
- having Estonian bank accounts;
- entering into contracts;
- hiring employees.
Foundations can generate income that will be used for achieving the goals they were created. Also, any remaining profit will be distributed to the same causes, as they cannot pay dividends to their members.
Should you decide to open a foundation in Estonia, our local specialists can help you.
Requirements to open an NPO in Estonia
The conditions to set up a foundation in Estonia are not many, as you can read below:
- it must have at least 2 members;
- it must also appoint a minimum of one board member who must be a natural person;
- it must secure an Estonian registered address.
Its registration is based on the Articles of Association, just like in the case of Estonian companies. Our company registration agents in Estonia can offer more information on the conditions to be met when setting up such an entity.
Documents to prepare to open a foundation in Estonia
The following documents must be prepared when setting up an NPO in Estonia:
- passport copies and details of all members, including the director’s;
- the Memorandum of Association which must state the purpose of the foundation;
- a name reservation form;
- a valid email address opened on the name of the foundation.
It is also possible for a foundation to have a corporate member (with the exception presented above). In this case, the name, registered number, and address of the company must be supplied instead of the passport copy.
You can rely on our local specialists for support in preparing and filing all the documents with the Companies Register. The entire process takes about a week to complete.
Content of the Articles of Association of an Estonian foundation
After passing the resolution for creating the foundation, the members must draft the Articles of Association. They must have a specific content that must provide the following information:
- the name and legal address of the foundation;
- the names and addresses of the founders (the details vary if the founders are natural persons or companies);
- details about the value of the assets each founder contributes with to the foundation;
- the names and addresses of the members of the management and supervisory boards;
- the purpose of the foundation;
- the procedure through which the assets are transferred to the NPO;
- information on whether the foundation is created for a limited period of time (if applicable);
- how the assets will be distributed in case of dissolution.
The details about the distribution of the assets in case of dissolving an Estonian foundation can lead to obtaining a tax incentive if a list of beneficiaries is submitted to the Registrar. On the respective list, there can be any company or another association. Our Estonian accountants can offer more information on this subject.
Management board of a foundation in Estonia
When opening a foundation in Estonia, the founders have the obligation of creating a management board and appointing its members. There are no specific requirements for their number. The founders can also decide on the establishment of a supervisory board that will be in charge of:
- organizing the administration of the foundation;
- planning and coordinating its activities;
- supervising the operations of the NPO.
Our company formation agents in Estonia can offer more information about the provisions of the Foundations Act on this matter.
Remote registration
An advantage of opening a foundation in Estonia is the possibility of registering it remotely. This option is often used by foreign members who can apply for e-residency in Estonia and benefit from this status to run their activities.
Should you decide on this type of registration, our company formation specialists in Estonia can help you file for e-residency.
Accounting requirements for foundations in Estonia
Estonian foundations are subject to similar accounting requirements as private limited liability companies. They must file annual reports with the tax authorities no later than the end of May of the following year after the closing of a calendar year.
From a taxation point of view, the foundation does not pay the corporate tax, it is subject to:
- a social tax of 33%;
- a 20% income tax;
- it may also pay the VAT at the standard rate of 24% for certain activities.
You can rely on our accountants in Estonia for support in dealing with the financial requirements imposed on foundations.
Reporting requirements for foundations in Estonia
Even if foundations can benefit from various tax exemptions, they are still subject to accounting requirements. The most important one refers to them being required to filing annual reports even if they do not have any activity in the respective year.
The report must comprise:
- the annual accounts of the foundation;
- the management report.
The first one is an accounting document providing for the foundation’s balance sheet, income and cash flow statements, as well as a declaration of changes in terms of ownership equity, if applicable.
The management report must contain information about the financial events that have occurred during the fiscal year, as well as details about future activities of the foundations.
Alongside these documents, the foundation must also submit information about donations or gifts received during the year.
You can also rely on us for support in filing a crypto license in Estonia.
If you want to open a foundation in Estonia and need assistance, do not hesitate to contact our local advisors.