Other than the most popular form of incorporation in Estonia, a Limited Liability Company (OÜ), it is worth considering the registration of a Non-profit Organization (MTÜ), if the activities of an entity are neither solely business-related nor for-profit, but involved in development, education, sports and raising public awareness.

An MTÜ is a union between at least two members, who can be either private persons or legal entities, and where all the members have one equal vote at the general meeting, which is the highest body of management in the organization.

The main activity must not be profit making, which does not mean the organization cannot be related to profit generating activities, only that its revenue must not be distributed as dividends, but spent on the objectives the organization had originally been created for.

Establishing a Non-profit Organization (MTÜ)

Establishing an MTÜ should be considered when an organization with a goal other than earning profits is needed, usually in the following areas:

  • sports clubs
  • education and culture
  • raising public awareness
  • environmental organizations
  • miscellaneous interest groups and clubs

An MTÜ does not need to make a share capital contribution and its assets will be membership fees, donations and other monetary support, which should be spent on achieving the goals the organization has been set. Profits from its activities cannot be shared between the members as dividends, but the MTÜ is not restricted from generating income from concerts, publications, conferences, etc.

MTÜ’s are also able to apply for European Union funding for projects, which range from those related to immigration to environmental issues and youth activities.

To establish an MTÜ:

  • A meeting of the Founders must be carried out
  • Agreement of Establishment and Articles of Association, signed by all attendees must be concluded
  • Signatures of the board members must be confirmed
  • A fee must be stated
  • A petition must be confirmed

It should be noted that every entity in the Estonian Business Register, including non-profit organizations, must carry out bookkeeping according to Estonian law.

Liquidation of an MTÜ

A general meeting must be held to start liquidation of an MTÜ and at least two-thirds of the members must be in favour of the decision. Every member must confirm their presence at the meeting, and confirm decisions, either by standard or electronic signature.

The assets of the MTÜ distributed to the members after the liquidation decision has been approved do not bring any tax liabilities to the MTÜ, but to the members who have received those funds or assets, who must declare them in their annual tax return (tax declaration).

Lauri Kurs

[email protected]

© 2019 HsHaus

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