A company in Estonia can be registered in a single day, from anywhere in the world, with a share capital of just one cent. This is still true — and that is precisely why there has been so much misunderstanding surrounding the issue. Estonian law does not impose any formal ‘substance requirements’ on an ordinary company. However, there are four bodies that independently assess whether there is genuine business activity behind a legal entity: the bank during onboarding, the regulator during licensing, your country’s tax authority when verifying residency, and the counterparty during a compliance check. A refusal from any of them brings business to a standstill just as effectively as a direct ban.
At the same time, there is no need to ‘build up substance’ just in case: renting an office that stands empty and having a director who makes no decisions costs money and does not address any of the four issues. The right question is phrased differently: what level of presence does your specific business model require, and to whom will you need to justify it?
We start with this assessment, and then build up your presence in stages: from a suitable address and a contact person to an office, a local manager and staff, in line with the requirements of the specific regulator.
| Topic | Practical guidance |
|---|---|
| Statutory minimum requirements | Registered office in Estonia; contact person if the board of directors is based outside the EEA or Switzerland |
| Resident director | Not required for a standard company |
| Who assesses the reality of the business’s operations | Banks and the EMI (Estonian Financial Supervision Authority), the financial regulator during the licensing process, tax authorities, and major counterparties |
| Tax residency of the company | An Estonian company is resident in Estonia by virtue of its registration |
| The main risk for the owner | Recognition of a permanent establishment in the country from which the company is effectively managed |
| ATAD 3 (Unshell) | The directive has been removed from the agenda; its principles are being incorporated into the DAC6 reform, which is expected to be discussed in 2026 |
| What remains in force | The general anti-abuse rule under ATAD I, the principal purpose test in agreements, and the practice regarding beneficial ownership |
| Licensed activities | For CASPs under MiCA and payment licences, the presence requirements are clear and verifiable |
| Typical minimum requirements for a bank | A clear business model, a link to Estonia or the region, genuine contracts, a traceable source of funds |
| What doesn’t happen | ‘Turnkey substance’ as an off-the-shelf product with a guarantee: each client assesses it in their own way |
If you have any questions, our managers are always on hand and ready to help! If you’re not sure whether you need an office in Estonia at all, just describe your business model and we’ll advise you, free of charge, on the level of presence that’s sufficient.
This is the main misunderstanding surrounding the issue. Estonian company law imposes no requirements on an ordinary company regarding an office, the number of employees or the residence of the director. The minimum requirements are a registered office and a contact person, provided the board of directors is based outside Estonia, the EEA or Switzerland.
The problem is that it is not the law that assesses the reality of the business’s operations, but four different parties with different criteria:
Practical conclusion: ‘sufficient substance’ is not an absolute measure, but rather the answer to the question ‘sufficient for whom?’. You need to start by identifying the addressee, not by renting an office.
For several years, the market had been awaiting the Unshell Directive (ATAD 3), which was intended to introduce uniform minimum presence tests for EU companies. The directive has been taken off the agenda: the Council has decided not to adopt a separate act, but to incorporate the principles for combating shell companies into the DAC6 reform — the mandatory disclosure regime. The reform is expected to be discussed in 2026; the specific details are still being finalised, and there is no fixed date.
The conclusion often drawn from this – that ‘there is no need to establish substance’ – is incorrect. The tools that previously resolved the majority of disputes remain in force:
In other words, the tool has changed, but not the direction. For the owner of an Estonian company, this means one simple thing: a business presence should be established not to comply with a specific directive, but to be able to explain what the company does and who makes the decisions. Materials from competitors that still describe ATAD 3 as an impending requirement are simply out of date.
Presence is not a simple ‘yes or no’ choice, but a spectrum. We use the following scale.
Most companies need Level 1, some need Level 2, and only licensed projects require Levels 3 and 4. Paying extra for an unnecessary level is just as much of a mistake as not having one: an empty office in the application looks worse than no office at all, because it suggests an intention to create a false impression.
A company’s presence is made up of the small details managed by different service providers: the registered address with one, the accounts with another, and the documentation with a third. It is precisely at these junctures that discrepancies arise, which the bank picks up on — a contract with one address, a register with another, and financial statements that do not match the business model description.
Bank onboarding is the most common point where a lack of presence is evident. In practice, they look at the overall picture: a clear description of the business’s activities without vague generalisations; links to Estonia or the region – clients, contractors, expenses; who manages the company and where they are based; a traceable source of funds; whether projected turnover aligns with the stated business model; and the existence of a website, agreements and initial counterparties.
It is important to understand that the bank is under no obligation to explain a refusal and is entitled to review its decision regarding an existing customer. It therefore makes sense to keep your proof-of-presence dossier up to date at all times, rather than compiling it only once your account has already been restricted.
The requirements here are straightforward. To obtain a CASP licence under MiCA, a company must have a registered office in the country where it provides at least some of its services, a place of effective management within the EU, and at least one director who is a resident of the EU. For payment and other financial licences, the requirements regarding management, internal control and compliance functions are set out in national law and assessed on their merits: the regulator checks not merely the existence of a post, but the individual’s actual ability to perform the role.
This is the most underestimated risk for a non-resident owner. An Estonian company is a tax resident of Estonia, but if decisions are taken from another country, the Estonian tax authority may conclude that the business is in fact being conducted in that country via an unregistered permanent establishment. The consequences include taxation of profits in that country, fines and the need to rectify the accounts.
What tips the balance in your favour: board meetings held and minuted in Estonia; the presence in Estonia of a person who actually makes operational decisions; Estonian expenses and contracts; correspondence and documents showing that management is located where claimed. What works against you: a sole board member who is permanently based in another country, and a complete lack of evidence of activity in Estonia.
The cost of ownership rises non-linearly. The baseline consists of fixed costs for a registered address, a contact person and bookkeeping. The economic component adds the costs of local services and, possibly, salaries. An operational presence entails rent, staff and associated taxes — a fundamentally different order of magnitude. The regulatory level adds control functions and infrastructure to meet supervisory requirements.
This is precisely why a diagnostic assessment pays off: the difference between the levels is measured not in percentages but in multiples, and moving to a level higher than necessary represents a recurring, rather than a one-off, cost.
We do not provide nominal directors, we do not register employees who do not work, and we do not construct a ‘presence’ based on documents that have no substance. The reason is not merely ethical: such arrangements would not stand up to either a banking or a tax audit, and for a licensed company, they create the risk of losing its licence. If your business model genuinely requires a person in Estonia, it must be someone who actually performs a function.
Please describe the model and specify the recipient: a bank, a regulator, a tax authority or a counterparty. Within one working day, we will provide an analysis showing the current level, the target level, the gap between them and the annual cost of ownership.
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