Fulfillment by Amazon (FBA) is a program of the American company that allows anyone to open an online store and sell products to customers around the world. The only requirement is obviously, a company that serves as the legal framework for the activity. In this article, we discuss how to create your FBA company in Estonia, its benefits, and some considerations to take into account.
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How Does the Fulfillment by Amazon Program Work?
FBA is really nothing more than a classic drop-shipping system where the provider is Amazon.
What is drop-shipping? It is a business model that consists of an online store that sells products from third-party suppliers. When a customer buys a product in your online store, it is the supplier who sends the goods to them. You charge the customer, and then the provider charges you, or the provider charges the customer directly and then pays you a fee.
The idea is similar to a wholesale-retail relationship but on demand.
In the case of FBA, the supplier is Amazon, that is, it is Amazon who physically sends the product to the customer, while your company will be in charge of promoting and selling the product to the final consumer.
On this page, you have a more detailed explanation of how it works with Amazon.
Why Establishing Your FBA Company in Estonia?
There are many advantages to registering and operating your Amazon FBA company in Estonia. The e-Residency program, which allows anyone to open and operate a business in Estonia completely online, together with the innovative fiscal system of the Baltic country, is a winning combination to start selling products on Amazon.
Let’s talk about some of the advantages.
Completely Online Administration
To begin with, Estonia has been digitizing its entire administration for decades. To the point of being the first country that allowed Internet voting. Estonians can do any paperwork online, from paying their taxes to registering their new car or seeing what homework their child has at school.
But not only the Estonians. At the end of 2014, Estonia launched the e-Residency program, which allows any inhabitant of the planet to become a virtual resident of the Estonian digital nation. Although it does not give you any right to citizenship or residency, being an e-resident allows you to do very interesting things, such as opening a business and managing it without visiting Estonia.
You can say that other European institutions are also digital … But there really is no possible comparison. We are talking about a system that allows you to sign an online power of attorney for another person to manage the accounting of your company and declare taxes for you. In less than a minute, and without the intervention of a notary.
Why is that important? For starters, your FBA company will live completely in the digital world. In addition, as an entrepreneur, you can manage your business completely online. You can be a digital nomad, traveling around the world, and comfortably manage your company from your laptop wherever you are.
A Unique and Innovative Tax System
Most western business systems are not only very complex, but some of them seem designed to make it difficult for entrepreneurs to open a business. Sooner or later, you will need to go physically to an office to perform some bureaucratic procedure. To make things worse, in some countries, you even need to pay a fee to act as a freelancer or have a company, and that’s a competitive disadvantage.
In contrast, the Estonian tax system seems designed for small entrepreneurs and startups. First of all, opening a company is easy, cheap, and not subject to monthly payments beyond accountancy. In addition, you do not pay taxes for the income of the company, or the money that gets reinvested in it. This includes any justified expense of the business, such as invoices to professionals for work done, hosting and servers, public transport costs to see customers, a laptop … think about the possibilities.
That means that in the first months, in which possibly the income of your online store will still be low, by not assigning salaries, you do not have to pay taxes. You only pay taxes when you distribute dividends or salaries.
But more important than any fiscal advantage is the fact that the Estonian business system is transparent and easy to understand. In this post, we explain it in detail.
Important Aspects to Consider
The e-Residency program is especially suitable for digital products and services. Does that mean you can not sell physical products? Generally, it would not be advisable for a series of issues that we have mentioned previously, but the drop-shipping model (and, by extension, derivative models such as Amazon FBA) are based on the premise that it is the supplier, and not your company, the one that makes the shipment to the final customer, and therefore manages the warehouse, inventory, and products. The role of your company is limited to that of an e-Commerce, a facilitator of the sale.
Everything You Need to Start Working as an FBA Seller
Here in Companio, we take care of registering your company with our ‘Company Registration’ Pack. This includes everything you need to start working as an FBA dropshipping vendor, such as the company registration, intra-community VAT in Estonia, virtual office service, including contact person and physical address for the company, and support during the process of becoming e-Resident. From that moment, our ‘Monthly Accountancy’ Pack will allow you to focus on growing your business while we take care of the rest.
Depending on what you sell, and your activity, it may be necessary to obtain a specific license, although this is not usually the case. If you have doubts about it, do not hesitate, to request a consultancy with us.