What is SPV and why should you consider setting it up in Estonia?
Are you the owner of a promising startup with a highly talented team? Maybe you’ve devised a scalable business model that can be rolled out across the globe or you’re embarking on a large-scale real estate development project. Alternatively, you might be running an investment fund, actively seeking out new opportunities and with eager investors standing by. However, to secure funding for these projects, you’ll need to navigate a sea of bureaucracy and legal paperwork, particularly if you’re dealing with international investors. Fortunately, Estonian SPV (Special Purpose Vehicle) provides a streamlined, cost-effective solution that can simplify the process for all parties involved.
What is a Special Purpose Vehicle (SPV)?
A SPV, or Special Purpose Vehicle, is an Estonian legal entity that is created for a specific, limited purpose. It is often used in business and finance to isolate financial risk and to facilitate the financing of a specific project or investment.
SPVs are typically structured as independent companies that are owned by a group of investors. The SPV may issue debt or equity securities to raise capital, which is then used to finance the project or investment. By isolating financial risk in a separate legal entity, SPVs can help protect the parent company or investors from potential losses, and can also help to simplify the legal and regulatory requirements associated with the project or investment.
In the context of the paragraph above, an Estonian SPV is a specific type of Special Purpose Vehicle that is incorporated in Estonia, and which can be used to facilitate the financing of international projects and investments.
Why Estonian SPV is the best investment vehicle?
Creation and administration is fast, easy and cheap
Setting up and administering an Estonian SPV is a relatively simple and cost-effective process. The entire process can be completed online in less than a week. The Estonian ecosystem is advanced and digital, which reduces the need for face-to-face meetings or physical paperwork. This means the setup costs are very competitive compared to other countries. Moreover, once established, the SPV can be managed from any location in the world, providing convenience and flexibility.
One of the primary advantages of using an Estonian SPV is the tax benefits it provides. Income from the sale of shares of the investment object will be tax-free as long as the shares are kept inside the SPV and used for business purposes. This allows businesses to reinvest their tax-free profits into new projects, helping to fuel future growth. Additionally, Estonia has double taxation avoidance agreements with 59 countries, which means that investors may be able to avoid paying taxes in multiple jurisdictions.
Another advantage of using an Estonian SPV is the risk reduction it provides. Each SPV is created separately for every investment project, meaning that if one project fails, it does not affect other assets or active businesses. This provides a level of protection for investors and helps to reduce overall risk. In addition, the use of an SPV can also help to insulate parent companies from potential financial losses associated with the investment, as the SPV is a separate legal entity.
How do I set up a SPV as an investment vehicle in Estonia?
The steps to set up the SPV are:
What are the costs for setting up and maintaining the SPV?
Here is the list of costs, which you need to take into account:
- SPV incorporation
- State fee
- Estonian address and contact person fee
- Preparation of shareholders agreement
- Preparation of the investments agreement between investor and SPV
- Preparation of contract between Startup and SPV
- Notary fees
- Translation costs
- Annual accounting and reporting
- Liquidation of the SPV
The total sum is dependent which service provider you use. We recommend buying everything as a full package to save on costs. We in Silva Hunt provide a full-service SPV incorporating, management and liquidation.
What to look out for when creating SPV?
To ensure a smooth and successful investment process, it is crucial to have a detailed shareholders’ agreement that outlines how decisions will be made, how reporting will be done, and how investors can add money and exit from the investment vehicle. Additionally, the Articles of Association must be aligned with the purpose of the SPV to ensure legal compliance. For expert guidance on these matters, we recommend consulting with our specialists in Silva Hunt.
To facilitate a seamless investment process, it is advisable for all investors to obtain e-residency cards and establish Estonian OÜs or holdings. A holding, or investment vehicle, is a company intended for a private individual that consolidates the owner’s assets and provides protection against various business risks. This allows investors to invest in different asset classes such as stocks, real estate, loans, cryptocurrency, minerals, and more. For further information on holdings, please refer to our website HERE.
In the event that an investor does not have an e-residency card or an Estonian entity, the process simply requires a bit more paperwork with a notary. Our team is here to assist you every step of the way, making the investment process as smooth and stress-free as possible.
In conclusion, if you’re planning your next funding round and looking to onboard investors from different countries, an Estonian SPV is an excellent solution that can make the process fast, easy, and cost-effective. Our team of experts at Silva Hunt is dedicated to providing comprehensive consultation on this topic and ensuring a successful investment process for you and your team.