Entrepreneurs seeking business opportunities will find Estonia to be a promising destination. With a strategic location in Northern Europe and a thriving economy, Estonia offers a favorable environment for establishing and growing companies.
Estonia, known for its innovative spirit and tech-savvy society, presents a range of advantages for businesses looking to expand. Its pro-business policies, ease of company formation, and tech-friendly infrastructure make it an attractive choice for entrepreneurs across the globe.
PopulationThe current total population in Estonia, according to the latest data, is approximately 1.3 million people. (Source: World Bank, 2023)
| Country |
Estonia |
| Language |
The most spoken languages in Estonia, each with the percentage value in round brackets, are:
– Estonian (Official Language) (68.5%)
– Russian (29.6%) |
| Time in Estonia |
The GMT time in Estonia is UTC+3. |
| Currency |
The currency used in Estonia is the Euro (€), with the three-letter code EUR. |
| Religion |
The most professed religions in Estonia, each with the percentage value in round brackets, are:
– No religion (54.1%)
– Christianity (43.8%) |
| Tax regime |
The tax regime in Estonia is characterized by a progressive income tax rate, with a maximum rate of 20%. |
| VAT |
VAT (Value Added Tax) in Estonia is 20%. |
| Overage salary |
The average salary in Estonia is around €1,500 per month. (Source: Statistics Estonia, 2023) |
| Types of incorporations |
Types of companies in Estonia:
– Osaühing (OÜ) – Private Limited Company
– Aktsiaselts (AS) – Public Limited Company
– Täisühing (TÜ) – General Partnership
– Usaldusühing (Us) – Trust Company
– Füüsilisest isikust ettevõtja (FIE) – Sole Proprietor |
Why opening a company in Estonia
Opening a company in Estonia provides numerous benefits for entrepreneurs. The country’s digital infrastructure, minimal bureaucracy, and supportive business ecosystem make it an ideal choice for startups and innovative ventures. Entrepreneurs looking to operate in a tech-savvy environment will find Estonia’s e-residency program and streamlined company registration process highly appealing.
Advantages
Ease of Company Formation
Estonia offers a straightforward and efficient company registration process, making it easy for entrepreneurs to establish their businesses quickly.
Digital Society
Estonia’s advanced digital infrastructure enables businesses to operate seamlessly in an online environment, reducing administrative burdens.
Tax Benefits
Estonia’s competitive tax system includes a low corporate income tax rate and encourages reinvestment of profits, fostering business growth.
Access to EU Markets
Estonia’s membership in the European Union provides businesses with access to a large and diverse market.
Innovation Hub
Estonia’s reputation as an innovation hub makes it an attractive location for tech startups and companies seeking to develop cutting-edge solutions.
Disadvantages
Language Barrier
While English is widely spoken, some business transactions may require knowledge of Estonian or Russian.
Seasonal Challenges
Estonia’s northern location brings about seasonal variations that could impact certain industries.
Limited Local Market
Estonia’s relatively small population limits the size of the domestic market.
Competition
Estonia’s attractiveness to entrepreneurs has led to increased competition in certain sectors.
Regulatory Changes
Entrepreneurs should stay informed about any changes in regulations that could impact their business operations.
Taxes
Estonia’s tax system is characterized by its simplicity and competitiveness. Businesses are subject to a flat corporate income tax rate of 20%, applying only to distributed profits. Undistributed profits can be reinvested without immediate tax liability, fostering business growth and innovation. Additionally, Estonia’s double taxation treaties and e-residency program contribute to its appeal as a business-friendly jurisdiction.
Company types in Estonia
Osaühing (OÜ) – Private Limited Company
| Type |
Cost of Incorporation |
Minimum Share Capital |
Taxes |
| Osaühing (OÜ) |
Varies |
€2,500 |
20% corporate income tax |
Estonia’s most common company type, Osaühing, offers limited liability and a straightforward incorporation process. It requires a minimum share capital of €2,500 and is suitable for small to medium-sized enterprises.
Aktsiaselts (AS) – Public Limited Company
| Type |
Cost of Incorporation |
Minimum Share Capital |
Taxes |
| Aktsiaselts (AS) |
Varies |
€25,000 |
20% corporate income tax |
Aktsiaselts is suitable for larger businesses and allows for public offerings. It requires a minimum share capital of €25,000.
Täisühing (TÜ) – General Partnership
| Type |
Cost of Incorporation |
Minimum Share Capital |
Taxes |
| Täisühing (TÜ) |
Varies |
None |
Partners’ personal income tax |
Täisühing is a partnership where partners are jointly liable for the company’s obligations. There is no minimum share capital requirement.
Usaldusühing (Us) – Trust Company
| Type |
Cost of Incorporation |
Minimum Share Capital |
Taxes |
| Usaldusühing (Us) |
Varies |
None |
Partners’ personal income tax |
Usaldusühing is a trust company suitable for specific purposes. It has no minimum share capital requirement.
Füüsilisest isikust ettevõtja (FIE) – Sole Proprietor
| Type |
Cost of Registration |
Minimum Share Capital |
Taxes |
| Füüsilisest isikust ettevõtja (FIE) |
Low |
None |
Personal income tax |
FIE allows individuals to conduct business activities as sole proprietors. It’s a cost-effective option with minimal formalities.
VAT in Estonia
Estonia’s Value Added Tax (VAT) rate is 20%. VAT applies to most goods and services, including imports and domestic supplies. Businesses engaged in VAT-liable activities are required to register for VAT and comply with related reporting obligations. Certain goods and services, such as healthcare and education, may be subject to reduced VAT rates or exemptions.
Common questions
How to register a company in Estonia?
To register a company in Estonia, you can follow a streamlined process through the e-Business Register. The process involves submitting necessary documentation, such as the articles of association and information about shareholders. Once approved, you’ll receive a registration code and can start operating your business. It’s important to note that specific details and requirements may vary based on your chosen legal structure and the nature of your business.
What are the requirements for company incorporation in Estonia?
Requirements for company incorporation in Estonia include preparing the articles of association, appointing a management board, providing information about shareholders, and having a local address for legal purposes. You may also need to apply for any necessary licenses or permits depending on your business activities.
Can a foreigner open a company in Estonia?
Yes, foreigners can easily open a company in Estonia. The country has a welcoming business environment and encourages international entrepreneurs to establish their ventures. To register a company, foreigners need to follow the same process as residents. However, non-resident founders might be required to appoint a local contact person or obtain an Estonian e-residency to facilitate communication with authorities.
What is the corporate tax rate in Estonia?
Estonia offers an attractive corporate tax system known as the “Estonian corporate income tax.” Companies are subject to a flat income tax rate of 20%, which is only applied to distributed profits. Undistributed profits can be reinvested without immediate tax liability. This system encourages business growth and innovation by allowing companies to retain their earnings for future investments.
How long does it take to incorporate a company in Estonia?
The time required to incorporate a company in Estonia is relatively short and efficient. In most cases, the registration process takes a few working days. This efficiency is due to Estonia’s advanced digital infrastructure and streamlined administrative procedures. However, the exact processing time can vary based on factors such as the chosen legal form, completeness of documentation, and the workload of authorities at the time of submission.
What are the accounting and reporting requirements for companies in Estonia?
Companies in Estonia are required to maintain accurate accounting records in compliance with local accounting standards. Annual financial statements must be prepared, audited (for certain types of companies), and submitted to the Commercial Register. Additionally, companies must file an annual report that includes information about the company’s financial performance, ownership structure, and other relevant details. Non-compliance with these requirements can result in penalties.
How does VAT work in Estonia?
Value Added Tax (VAT) in Estonia is charged at a standard rate of 20% on most goods and services. Businesses engaged in VAT-liable activities are required to register for VAT with the Tax and Customs Board. They must collect VAT on their sales and remit the collected amount to the tax authority. Certain goods and services, such as medical services and education, may be subject to reduced VAT rates or exemptions.
What is the e-residency program in Estonia?
Estonia offers an innovative e-residency program that allows non-residents to establish and manage a business online. E-residency provides individuals with a digital identity, allowing them to access online government services, sign documents digitally, and establish and manage companies from anywhere in the world. While e-residency doesn’t grant physical residency or citizenship, it offers a range of benefits for international entrepreneurs.
What industries thrive in Estonia?
Estonia’s strong emphasis on technology and innovation has led to the growth of various industries. The tech sector, including software development, IT services, and startups, thrives due to the country’s digital infrastructure and supportive ecosystem. Additionally, e-commerce, financial technology (FinTech), and creative industries are also emerging as significant contributors to Estonia’s economy. With its skilled workforce and pro-business policies, Estonia presents opportunities for various sectors to flourish in a globalized business landscape. Here are some of the industries that have flourished in Estonia:
- Technology and ICT: Estonia is often referred to as the “Baltic Silicon Valley” due to its thriving technology sector. The country is known for developing groundbreaking digital solutions and services. Its e-governance initiatives, digital signatures, and secure online platforms have gained international recognition. The tech industry encompasses software development, IT services, cybersecurity, and emerging fields like artificial intelligence and blockchain.
- E-commerce: With its tech-savvy population and digital infrastructure, Estonia’s e-commerce sector has experienced substantial growth. Local entrepreneurs and international businesses alike benefit from the country’s advanced online payment systems, secure e-commerce platforms, and efficient logistics networks.
- Startups and Innovation: Estonia’s startup ecosystem is vibrant and dynamic, supported by various incubators, accelerators, and co-working spaces. The government’s pro-innovation policies and accessible funding opportunities attract entrepreneurs seeking to develop and scale innovative ideas. The country’s e-residency program further contributes to its reputation as a hub for startups.
- Fintech (Financial Technology): Estonia has emerged as a significant player in the fintech industry. The country’s progressive regulatory environment and digital banking services have led to the growth of fintech startups focused on payment solutions, peer-to-peer lending, and blockchain-based financial services.
