Alternative Investment Fund (AIF) In Estonia

Estonia is undoubtedly one of the best places in Europe to set up small alternative investment funds. Whether you are interested in establishing a venture fund, cryptocurrency fund, real estate fund, Estonia offers a simplified registration process, easy business management, and access to various financial markets, which can be of interest to investors that are looking to diversify their portfolio and assets. This article will give you an extensive overview of having your alternative investment fund (AIF) in Estonia.

Regulatory Compliance Associates is eager, available, and open to discuss your requirements – please do not hesitate to contact us!

Benefits of an Alternative Investment Fund in Estonia

Considering that Estonia is one of the most digitally developed countries in the world and the fact that it is ranked as 1st in Tax Competitiveness out of all European OECD countries, it has a lot to offer:

  • 0% corporate income tax

All Estonian businesses can defer the taxation of their profits if they retain and reinvest their profits. The effective corporate income tax (CIT) rate is 0% in such cases while other local taxes are fair and simple.

  • Easy establishment and management processes

Local residents and Estonian e-residents have the luxury of establishing and managing their businesses completely online using Estonian digital services from anywhere in the world.

  • Ability to diversify your investment portfolio

As Estonia is part of the European Union, you will have the ability to invest in various capital markets, stocks, derivatives, instruments, precious metals, real estate, startup businesses, and even in cryptocurrencies and other virtual assets.

  • Low set-up and maintenance costs

Compared to other highly rated jurisdictions, where establishing alternative investment funds is highly beneficial, Estonia has one of the lowest entry and business maintenance costs.

Please note that there are many other benefits to opening an alternative investment fund in Estonia, however, we consider these to be the most important points to mention.

Registering Your Alternative Investment Fund in Estonia

Determining the Purpose of the Investment Fund

As mentioned above in the article, it is possible to use an alternative investment fund in Estonia to invest in various types of capital markets and financial instruments. Therefore, it is very important to think through what are the planned activities which can in turn lay out the necessary steps you need to take to establish your business.

Some alternative investment funds in Estonia require a license from Finantsinspektsioon and the Estonian Financial Intelligence Unit; others are only required to submit a notice.

Besides the licensing aspect, with the determination of desired activities come along with compliance aspects that must be met to start carrying out operational activities which will have a direct impact on the initial investment required to get your company operational and to start making investments.

As mentioned above, an alternative investment fund can easily be purposed for:

Venture Capital Fund

Investing in start-up businesses can be a very lucrative business, especially if you do it in Estonia. Estonia has close to 1400 start-up companies that are dreaming of becoming the next unicorns. In the first quarter of 2022, Estonian startup companies received combined funding of €906.6 million, which means that the venture capital market is enormous.

Establishing a venture fund in Estonia might make your fund a part of the journey of the next unicorn company. Furthermore, various crowdfunding platforms in Estonia offer easy access to make investments of various sizes in a variety of start-ups in a streamlined manner.

Cryptocurrency Fund

Estonia is one of the most popular jurisdictions in the world where blockchain businesses start new projects and where cryptocurrency companies can offer their services while being licensed. This in turn has largely increased the amount of trust investors have in service providers that offer a wallet, exchange, transfer services, and even initial coin offerings (ICO). This means that investment funds can safely invest in different virtual assets while knowing that their investments are safe. In addition, there are no extra taxes on virtual assets and profits are taxed just like regular currencies and other income.

Real Estate Fund

Establishing a real estate fund is a very effective way of increasing capital and putting investors’ money to work to gain profits. A real estate fund may own individual commercial or private properties which may offer returns regularly either through dividends or royalties. Furthermore, Estonia does not have any property taxes which makes holding immovable assets a low-cost solution which can bring long or short-term profits to the fund.

Establishing Your Alternative Investment Fund in Estonia

It is important to keep in mind how you will structure your alternative investment fund in Estonia as this will have a direct impact on the whole establishment and management process.

Alternative investment funds in Estonia can be structured to have two legal entities, where one entity is the alternative investment fund itself, and the second one is a business that manages the fund, or with just one legal entity – the alternative investment fund.

Besides the structuring aspect, it is possible to establish an alternative investment fund with a license from Finantsinspektsioon and one without a license. The difference between an alternative investment fund with and without a license lies in the types of acivities it can carry out.

If you will not obtain a license from Finantsinspektsioon, you must still register with them that you are starting operations in that area. During the
registration process you must submit a legal analysis that shows the existence
of the investment fund and its management, as well as the necessity of
registration.

On the other hand, whether you obtain a license from Finantsinspektsioon or not, must
still obtain a financial institution license from the FIU which may take around
60 days to complete. This license means that certain anti-money laundering
practices must be followed within the company and legal compliance must be met
on an ongoing basis.

Regulatory Compliance Associates Provides Expert Legal Advice and Guidance

Regulatory Compliance Associates is here to provide you with expert legal advice and guidance throughout the process of investing in Estonia. We have long-term expertise in the Estonian financial market and working with Estonian legislation which makes us the perfect partner for you.

In case you need any help related to alternative investment funds, cryptocurrency, financial licenses, or compliance in general, please feel free to contact us!

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