Opening a Branch vs a Subsidiary in Estonia

Foreign companies are encouraged to open branch offices or  subsidiaries in Estonia due to the Estonian government  pro-  investment legislation and constant economic growth.  Foreign  companies will be treated like any Estonian company and  benefit from the same tax facilities in 2026.

 Branch offices (filials) in Estonia

 A foreign company may establish a branch office in Estonia. In case of the Estonian branch  office the liability will fall onto the parent company, as the branch office cannot be considered  an independent legal entity. An Estonian branch office must submit the parent company’s  financial statements with the Companies Registry in Estonia. The branch office has the  same obligations as the parent company.

The Branch office must register with the Commercial Register even if it acts as an extension of the parent company. The registration process of a branch takes about one month and must be either notarised or submitted with a digital signature through the e-Business Register.

When registering a company with the Commercial Register the parent company must submit an application form, the memorandum and articles of association, and, where required, proof of payment of the share capital (an OÜ may defer contributions and no bank confirmation is needed for contributions under €50,000).

Subsidiaries in Estonia

Companies may set up subsidiaries in Estonia. Estonian subsidiaries will be treated as independent legal entities that have their own accounting system thus being subject to the Estonian taxation system. The most common types of Estonian subsidiaries are the public limited liability company and private limited liability company. The liability of the company will be limited to the capital contribution of each shareholder.

Subsidiaries must be registered with the Commercial Registry in Estonia and the registration process will take no longer than one week.

Comparison between a branch office and a subsidiary in Estonia for 2026

The main difference between a branch office and a subsidiary in Estonia lies in the independency of conducting business operations. While the subsidiary is regarded as an independent entity, the branch office totally depends on the parent company and must undertake the same type of operations. In terms of registration, the process for registering a subsidiary in 2026 will take about one week compared to the registration process of a branch office that can take up to a month. However, both types of companies must register with the Commercial Register.

In case of taxation, both types of companies are subject to the same taxes, but the subsidiary may benefit from better taxation plans when it comes to earnings repatriated with the parent company. In case of the branch office, it will not be subject to the audit requirement; it will only submit an annual report of the parent company.

Estonia is a hub for international businesses, with many companies having opened branches or subsidiaries here. If you are a foreign national who wishes to remain in the country, our team can also give you information about residency in Estonia: the main types of temporary residence permits, the visas, extending your stay in the country, having your family join you in Estonia, and more.

Estonian taxes for branches and subsidiaries

The tax regime in Estonia underwent certain changes, and in 2025-2026 some of the tax rates have changed. Below, our team highlights some of the most important ones:

• The corporate income tax on distributed profits increased to 22% (22/78) from 2025; the planned rise to 24% in 2026 was cancelled;
• The personal income tax rate also stays at 22%, with a general basic exemption of €700 per month (€8,400 a year) from 2026;
• The value-added tax has also increased to 24% (the standard rate), following a 2025 change that started entering into force on July 1st. Other reduced rates have also increased (for example, the VAT rate on accommodation services and that for press publications);
• A new motor vehicle tax has been introduced and the lawmakers also made other changes that can influence companies (based on their activities), such as those that offer fringe benefits, as some of the tax-exempt thresholds have increased.

Clients who have questions about our services for individuals can reach out to us for information on how we can assist them, according to their particular situation. We also assist foreign clients who have been lawfully residing in the country and wish to apply for permanent residency or Estonian citizenship, if they meet the conditions for income, minimum language proficiency, and others. 

Opening a branch or a subsidiary is not a direct route to residency, therefore, those interested in Estonian immigration can reach out to our team for detailed information on how they can first acquire temporary residence, followed by how they can apply for the right of permanent residence after a number of years. if your goal is to relocate to the country for business purposes, we can assist you.

For details on how to register a company in Estonia in 2026 you can contact our law firm. Our lawyers can also assist you in case you need trademark registration services in Estonia or other business related services.