A SPV (special purpose vehicle) company in Estonia is a legal entity, generally registered under the form of a limited liability company, which was created to accomplish certain short-term or specific purposes. SPV companies are usually utilized by companies to isolate the firm from financial risks. Our Estonian company formation advisors can offer assistance in registering a SPV entity in Estonia, which can also include the undertaking of various financial transactions like securitization.
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How to set up a SPV company in Estonia
Foreign entrepreneurs who are looking to open a SPV company in Estonia need to follow certain registration procedures which differ for those required in commercial businesses.
To register a limited liability company in Estonia, the following steps have to be followed:
- select a company name;
- register the office and the business address to receive mail;
- deposit the minimum share capital of at least EUR 7,500;
- organize the Articles of Association and the Memorandum of Association;
- register the company with the Commercial Register of Estonia;
- register with the Register of Economic Activities if the company’s activities require to. Our company formation professionals in Estonia can provide more details on what these activities consist of;
- comply with VAT payment, if necessary.
The main characteristics of SPVs in Estonia
In most cases, special purpose entities (SPEs) in Estonia are created for specific objectives by other companies, parent businesses, however, they are characterized by the following:
- they are created as independent companies held by a group of investors;
- they can issue equity or debt to raise capital;
- the respective capital is used to finance various projects;
- parent companies use SPEs to isolate financial risks, as the SPV will be used to protect the capital of the investors;
- the SPE can also be used to simplify the legal and regulatory requisites of the project the special company was registered for.
Our Estonian company formation specialists can offer more information on the features of SPVs.
Uses of a SPV company in Estonia
If you want to open a SPV in Estonia, you can use it for various projects. However, some of the investments it is most useful for are:
- startup companies, especially since such projects are usually risky due to their innovative character and many of them pool money from investors to finance their operations;
- raising venture capital which can also be quite risky for large companies seeking to reduce the risks incurred by their investors;
- digital asset investments, especially in Estonia, where cryptocurrency is highly regulated.
In the latter case, the SPV can be used to obtain a crypto license in Estonia.
Management and compliance of SPVs in Estonia
The management of a SPE in Estonia is local. The parent company appoints a resident director (nominees are also accepted) who will report directly to the mother business. The director must prepare, file, and maintain all legal and accounting documents in accordance with the Estonian legislation. If the parent company is foreign, the SPV must pay attention to international rules, such as accounting ones.
For correct financial compliance, you can rely on our accountants in Estonia who can also assist with registration with the Tax and Customs Board.
Securitization in Estonia
Securitization, which is a common activity of SPVs in Estonia, represents the process of packaging and turning loans into shares, which can then be sold to investors. Any properly functional financial market should incorporate this type of transaction.
A securitization transaction implies several parties, such as:
- the sponsor;
- the third-party credit enablers;
- the trustee;
- the securitization entity;
- the underwriter;
- the credit rating agencies;
- the initial lender;
- the originator;
- the investor.
Taxation of SPVs in Estonia
Considering it is a domestic company, the SPV will be subject to the same taxes as local enterprises. However, it can also obtain important tax benefits.
Here are some of the most important tax aspects to consider:
- the SPV must pay the corporate tax which is levied at a 22% rate;
- for certain activities, it may also be subject to the 22% VAT;
- it can take advantage of approximately 60 double tax treaties, and thus reduce the taxes paid;
- income from the sale of shares from investment property is exempt from taxes if reinvested in the business.
Entrepreneurs are invited to get in touch with our company registration representatives in Estonia for further information related to the incorporation of an Estonian SPV.