Does this mean I can form a corporate entity in Estonia and gain all the tax benefits without any physical presence?
If you don't - let's say you're Dutch, living in Holland and consulting mostly for Dutch clients, then forget it.
But let's say you're Dutch, you have a girlfriend in Estonia, you work from there a week every month, and you have clients in several EU countries, with NL only one of them... Maybe you even have a local employee in Estonia. That will work no problem.
Those should convince you that you need good fiscal advice and a somewhat conservative attitude when it comes to fiscal grey areas.
If you want to avoid paying a lot of taxes, build a multinational and set up tax avoidance schemes like the Double Irish with a Dutch sandwich. https://en.wikipedia.org/wiki/Double_Irish_arrangement . But hurry, because some of this might actually become a bit more difficult starting from next year...
It's probably cheaper to simply pay Irish corp. tax (12.5%) for all but the biggest companies. You have to setup 2 Irish companies, a Dutch company and a Caribbean-based company, a battalion of tax lawyers and advisers to exploit the loophole legally....etc
Whether a company is considered to be CFC depends on many factors such as double taxation treaties between the two countries, the amount of shares you own and the level of taxation in the offshore country.
The rest depends on various double-taxation treaties which affect more individuals.
You're likely to run into domestic Controlled Foreign Corporation rules. Basically if you or your family own a large portion of a foreign registered company and that company is taxed less than domestic tax rates, it'll be classed as actually residing in your home country for corporate tax purposes.
As soon as you distribute the profits, 10% tax applies from the Estonian end.