Easier Availability for Foreign Companies to Start Operations in Estonia

The state is changing the regulation for branches as a result of which foreign companies will no longer be required to register a branch to operate in Estonia. Furthermore, rules for the submission of annual reports will change. The Chamber is not against the amendment, but suggested that they would be made clearer.

The Ministry of Justice has prepared a draft act, the aim of which is, among other things, to make starting operations in Estonia easier for foreign companies. For example, the Commercial Code will be updated with the opportunity to register a branch electronically. Today, a foreign company can register a branch only at a notary’s office. Additionally, it will be stated in a clearer manner that if a foreign company wants to operate in Estonia, they do not necessarily have to register a branch in the Commercial Register, but in the case of some areas registering may be mandatory, e.g. in case of credit institutions.

Changes related to annual reports
The Chamber of Commerce supports the amendment according to which in case if a foreign company is not obliged to publish their annual report in their home country, the branch registered in Estonia would not have to prepare or submit this for the Commercial Register. For the purposes of transparency of the business environment, the Chamber supported that in such situation, a branch should send to the register a report only for the branch as such.

Proposal to clarify the amendments
In order to ensure that the rules are as clear as possible for those who have to fulfil the rules established for branches, the Chamber of Commerce proposed the Ministry to clarify certain aspects in the explanatory memorandum. For example, the following questions that may arise should be clarified: would an unregistered branch be a branch and be subject to requirements established for branches (e.g. reporting obligation, obligation to appoint a manager etc.); does the annual report of a branch have to be audited; if the draft act ensures that the registrar cannot request translating of the annual report of a foreign company into Estonian; for which financial years will the Act be applicable for the first time. The Chamber of Commerce has proposed for the sake of clarity to highlight these aspects more clearly in the explanatory memorandum or if necessary clarify the wording of the draft act.

The plan is to enter the amendments into force on 1 August 2021.
Overview of the amendments is available HERE.