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Doing Business in Estonia

One of the key advantages of doing business in Estonia is the 0% income tax on retained or reinvested profits, which attracts foreign investors and entrepreneurs—the country’s infrastructure, legal framework, and investment environment further support new and existing businesses. Estonia’s pioneering e-Residency program, being the first of its kind, enables individuals to establish and operate location-independent companies online.

Estonia, a small Northern European country with a population of just over 1.3 million, has rapidly emerged as an attractive destination for doing business. Known for its skilled workforce and innovative e-services, Estonia offers a favorable business environment coupled with a high income economy. The ease of doing business in the country is evident in its globally competitive ranking and thriving sectors such as IT, FinTech, and software development.

Key Takeaways

  • Estonia boasts a favorable business climate, with 0% income tax on retained or reinvested profits and a highly skilled workforce
  • Key industries in the country include IT, FinTech, and software development, offering ample market opportunities
  • The innovative e-Residency program allows for the creation and management of location-independent businesses online

Estonia Business Guides

Estonia’s Geographic and Economic Overview

Estonia, a small country located in Eastern Europe, is known for its vibrant culture, picturesque landscapes, and strategic geographical location. As a member of the European Union, Estonia enjoys strong connections and economic cooperation with other EU countries, including close ties with Sweden, Finland, and Germany.

The Estonian economy has shown remarkable growth since regaining its independence, positioning itself as one of the fastest-growing economies in the region. In fact, Estonia takes the top position in the OECD tax competitiveness index. The country’s GDP growth has been quite dynamic, reaching 4.1% in 2019, but experiencing a slight dip to -3.0% in 2020 due to the global pandemic. However, the economy bounced back in 2021 with a growth of 8.3%, although it is projected to slightly decrease to -1.3% in 2022.

estonia economic overview

Estonia offers a plethora of business opportunities and a favorable climate for both local and foreign investors. The country has been successful in attracting foreign direct investments, mainly due to its transparent and efficient business environment. In addition, the World Bank’s Ease of Doing Business index ranks Estonia 12th, signaling the country’s commitment to providing a business-friendly atmosphere.

One of the key factors that make Estonia an attractive destination for investment is its reputation for being the least corrupt country in Central and Eastern Europe, according to Transparency International’s Corruption Perception Index. This speaks volumes about the transparent governance and ethical business practices that are prevalent in the country.

In conclusion, Estonia’s strategic location, membership in the EU, growing economy, and transparent business environment present numerous opportunities for those looking to invest or conduct business in the country.

Estonian Market Opportunities

Estonia offers a range of investment and business opportunities for both multinational companies and high-growth startups. The country has a competitive economy and serves as a Northern European hub for industrial, global business services, and supply chain sectors. Estonia is also a world leader in IT, from which businesses across various industries can leverage value.

One of the key benefits of doing business in Estonia is its favorable location at the heart of the Baltic Sea Region. This region is a fast-growing market of nearly 100 million people and offers an attractive balance between East and West. Estonia’s excellent business environment and stable political climate have allowed for a conducive landscape for businesses to operate in.

However, the biggest challenge that Estonia faces is its small domestic market, with a population of just 1.3 million people. American companies venturing into this marketplace may encounter stiff competition from European companies, particularly those from Finland and Sweden. Despite the limited population size, Estonia ranks highly in terms of ease of doing business, with a Doing Business SCORE of 80.6.

Some key business opportunities in Estonia revolve around leveraging IT across various sectors. As IT services are driving value in multiple industries, Estonia’s strong IT infrastructure and capabilities offer a unique selling point to foreign businesses.

When considering investment and business opportunities in Estonia, potential investors should take into account the benefits of its strategic location, excellent business environment, the fast-growing industries, and IT capabilities. While the domestic market is relatively small, Estonia’s strong focus on IT and digitalization allows foreign businesses to tap into the country’s infrastructure and resources, thus creating myriad possibilities for growth and success in the region.

Business Environment in Estonia

Regulatory Environment

Estonia offers a transparent and supportive legislation for businesses, enabling them to focus on growth rather than red tape. The country has come a long way since restoring its independence, with constant improvements in the ease of doing business. There’s a quick and efficient process to start a company, taking as little as 3 hours thanks to Estonia’s innovative e-services.

Economic Freedom

Estonia ranks high in various indices, reflecting its economic freedom, liberal policies, and ease of doing business. It has a competitive edge with its 0% income tax on retained or reinvested profits, making it an attractive destination for businesses. The country also boasts a skilled workforce, allowing companies to take advantage of the rich talent pool available.

Business Climate

The Estonian business climate is characterized by factors such as business communication, etiquette, and meeting practices. Estonia respects internship and student placements, work-life balance, and the use of social media. These elements contribute to a positive and nurturing environment where businesses can thrive. Estonia’s adoption of modern technology and digital solutions also make it a desirable place for IT, R&D, software, hardware, and FinTech businesses.

Enterprise Estonia

Enterprise Estonia is a state agency responsible for promoting foreign investment and supporting local businesses. They offer various programs, grants, and services to help businesses grow and innovate. By connecting investors and international companies with the local business environment, Enterprise Estonia plays a crucial role in fostering the country’s economic growth and competitive edge.

Investment Environment

Estonia presents a favorable investment environment for businesses and investors seeking opportunities in the heart of the Baltic Sea Region. The country is known for its stable government, liberal economic policy, and excellent business environment, which together create a well-suited atmosphere for investment and growth. Estonia’s competitive economy has proven to be a Northern European hub for various sectors, including industrial, global business services, and supply chain industries, as well as a world leader in information technology source.

Foreign investors have played a significant role in the development of Estonia, with a total stock investment of USD 38 billion by 2021. Key sectors that have attracted the most foreign direct investment (FDI) include the financial sector (27%), real estate (17%), retail and wholesale sectors (15%), and science and technology (13%) source. The country’s euro zone membership and low corruption scores further enhance its investment climate, making it an attractive destination for international companies.

Estonia ranks 18th out of 190 countries in the World Bank’s Ease of Doing Business report in terms of Starting a Business source. This highlights the country’s efficient regulatory environment and streamlined procedures for small- to medium-sized limited liability companies looking to start operations in Estonia.

Bilateral investment agreements have also played a part in fostering foreign investment in the country, with Estonia having signed multiple such agreements with several nations. These agreements serve to protect and promote investments made by investors from the contracting states, creating a mutually beneficial environment for both parties involved.

Outward investment from Estonia is substantial as well, indicating the strength of the country’s economy and its companies’ capabilities to operate and invest abroad. Businesses in Estonia have access to nearly 100 million people in the Baltic Sea Region market, providing ample opportunities for growth and expansion in both domestic and international markets source.

In summary, Estonia’s investment environment offers numerous advantages for companies and investors, backed by a strong, stable, and competitive economy. The combination of a high ease of doing business, supportive government policies, and attractive investment sectors make Estonia an ideal destination for both domestic and foreign investments.

Starting a Business in Estonia

Estonia offers a favorable environment for entrepreneurs and investors seeking to start a business. The country’s transparent and stable legal system supports the development and growth of businesses in various sectors. Initiating a business in Estonia is made simple through the e-Residency program, which enables foreign entrepreneurs to establish a company fully online.

There are several entity types offered by the Estonian Commercial Code, such as private limited companies (OÜ), public limited companies (AS), general partnerships (TÜ), limited partnerships (UÜ), and commercial associations (ühistu). Nearly 98% of companies are established online, making it an appealing option for businesses seeking a quick and efficient start-up process.

Enterprise Estonia is a valuable resource that promotes business opportunities in the country by providing information on incentives, potential partners, and investment opportunities. This organization is dedicated to fostering innovation, ensuring economic freedom, and providing guidance for businesses in their growth journey.

For those seeking to work in Estonia, obtaining the necessary permits is essential. Both residence permits and work permits may be required, depending on the individual circumstances. Non-European Union (EU) citizens may need to apply for a residence permit or a work permit through the Estonian Police and Border Guard Board. EU citizens, on the other hand, have the right to work in Estonia without a work permit, but they must obtain a right of temporary residence and register their place of residence within three months of arrival.

When starting a business in Estonia, it is crucial to register with the Employment Register, as this registers all employees and provides vital information regarding their employment contracts, working hours, and salaries. In addition, companies must register their economic activities with the Register of Economic Activities to ensure compliance with Estonia’s regulations and licensing requirements.

In summary, Estonia offers a supportive environment for entrepreneurs and investors looking to establish a business. With its straightforward processes, diverse opportunities, and resources like Enterprise Estonia, initiating a company in this innovative nation can be an advantageous endeavor.

Key Industries in Estonia

Estonia has a diverse and rapidly growing economy, with several key industries driving its success. One of these sectors is manufacturing, which plays an essential role in the country’s economy. Notable industries within this sector include the production of chemical products, textiles, machinery, and equipment. Moreover, Estonia has made significant advancements in the field of electronics, with a particular emphasis on information technology and telecommunications.

The country’s energy industry primarily relies on domestic oil shale deposits, which are used for generating electricity and producing various chemical products. This rich resource has laid the foundation for the growth of the oil shale energy sector in Estonia.

estonia key industries

Biotechnology is another promising industry in Estonia, encompassing numerous fields such as pharmaceuticals, diagnostics, and environmental protection. Estonian biotechnology companies often collaborate with research institutions, driving innovation and competitiveness in the industry.

While not its largest, Estonia’s mining industry still plays a significant role in the country’s economy, mainly due to oil shale extraction. Additionally, Estonia has phosphates and other mineral resources contributing to this industry.

The water supply and gas sectors provide essential services to the Estonian population and form the backbone for other industrial and domestic activities. This industry has seen substantial investments in infrastructure, technology, and improvements in service quality.

Another vital sector in Estonia is transport. The country’s strategic location along major trade routes in Northern Europe allows it to develop as a regional transport hub. Estonia’s transport sector encompasses maritime activities like shipbuilding and port services, as well as investments in modernizing rail and road networks.

Overall, Estonia boasts a dynamic economy with a diverse range of industries, each contributing uniquely to the country’s growth, competitiveness, and innovation.

Taxation in Estonia

Corporate Taxation

The corporate taxation system in Estonia is unique as it implements a 0% income tax on reinvested and retained profits for resident companies and the permanent establishments of foreign entities, including branches. Estonian companies are only subject to a 20% income tax on distributed profits, such as dividends and deemed distributions. This taxation structure encourages businesses to reinvest their earnings, fostering growth and development within the country.

Income Tax System

The Estonian income tax system follows a flat rate of 20% on personal income tax. Additionally, there are social tax contributions to consider: a 33% social tax, an unemployment contribution of 1.6% withheld by the company, and a 0.8% contribution applied to the gross salary. In certain cases, if the corporate income tax is paid at a 14% reduced rate, personal income tax is adjusted to 7%. This flat-rate system simplifies the tax process for individuals and businesses, reducing administrative burdens.

OECD Tax Competitiveness Index

Estonia ranks highly on the OECD Tax Competitiveness Index, consistently scoring as one of the most competitive tax systems in the developed world. This is mainly attributed to its straightforward tax structure, including the unique corporate taxation policy and the flat-rate income tax system. These competitive tax policies make Estonia an attractive destination for businesses and foreign investment.

Legal Framework and Compliance

Estonia’s legal system is based on the Continental European civil law model and has been influenced by the German legal system. Unlike common law countries, Estonian law features detailed modifications, enabling the resolution of issues by these modifications.

The legal system in Estonia is primarily divided into private and public law. Private law comprises civil and commercial law, whereas public law encompasses administrative, criminal, and constitutional law. The Estonian court system is organized into three levels: county and administrative courts, circuit courts, and the Supreme Court.

Estonia has made commendable progress in corruption control, ranking highly on Transparency International’s Corruption Perceptions Index. The country has stringent laws to combat corruption and bribery, illustrating its commitment to maintaining an ethical and transparent business environment.

Foreign investors have equal rights and obligations as local entrepreneurs in Estonia. All foreign investors can establish companies and conduct business in the country without any significant restrictions. Additionally, Estonia complies with the EU Foreign Investment Screening Regulation, ensuring a level playing field for businesses from other European Union member states.

In summary, Estonia’s legal framework and compliance landscape provide a conducive environment for doing business. The country’s commitment to maintaining a transparent and fair environment and adherence to the Continental European civil law model make it an attractive destination for foreign investors. Furthermore, the robust and well-structured court system ensures that businesses can rely on the legal system for dispute resolution and enforcement of contracts.

Technology and Innovation

Estonia has emerged as one of the world’s most advanced digital societies, adopting various technological solutions like electronic voting, online learning in schools, digital bureaucracy, and healthcare. This has allowed the country to provide uninterrupted digital public services during unprecedented events like the COVID-19 pandemic.

Information and Communication Technology (ICT) has taken center stage in Estonia’s digital transformation. The nation has been proactive in adopting and nurturing innovations in various aspects of public life, such as becoming the first country in the EU to legalize the road-testing of autonomous vehicles. Estonia’s digital ecosystem continues growing, creating a seamless society integrating ICT into daily life.

As part of Estonia’s commitment to innovation, the government has established a unique model known as e-Estonia, where the entire political culture is centered on technological advancements. This approach, which some might call policy entrepreneurship, has led to the branding of Estonia as an innovation hub. One of the key decisions under this model was adopting a flat tax in 1994, making Estonia the first country to implement such a policy.

Estonia reinforces its innovation goals by strategically focusing on research and development (R&D). The country aims to build stronger absorptive capacities and involve academic and business sectors. To achieve this, Enterprise Estonia has become an innovation agency, building new technological and programming skills.

The country’s commitment to progress in IT and innovation has earned Estonia a high ranking on the Global Innovation Index. This reflects Estonia’s ability to foster and sustain a technological adoption and development culture that has and will continue to, significantly impact its business environment. Efforts like these further solidify Estonia’s position as a leading player in the global technological landscape.

Estonian Infrastructure

Estonia offers a modern and well-developed infrastructure that facilitates business operations. Its capital, Tallinn, is the largest city and an important hub for commerce, which offers various benefits to entrepreneurs and investors alike.

In terms of transport, the country has a comprehensive network of ports, railroads, and roadways. Estonia’s strategic location in the Baltic region ensures easy access to major transport routes, connecting it to neighboring countries and international markets. Several ports are available around the country, with the Port of Tallinn being the largest and most advanced, playing a significant role in Estonia’s economic development.

Rail transportation is efficient and well-organized in Estonia, with an extensive railroad network connecting major cities and industrial areas domestically and internationally. The improved railway lines enable smooth cross-border transportation, primarily with Russia, Latvia, and Lithuania. Road transportation is equally efficient, with well-maintained highways and roads that enable easy and fast movement of goods and people within the country.

Estonia’s waterways also play an important role in its infrastructure system. The country is blessed with numerous rivers and lakes that are navigable year-round. Although waterborne transportation is not the primary means of transport, it does contribute to Estonia’s ability to transport goods and provide a practical solution for logistics and supply chain operations.

The country has invested heavily in developing its telecommunications infrastructure, earning a reputation as a digital leader in the region. Estonia is considered the most advanced digital society in the world, boasting strong digital infrastructure and extensive e-government services. This achievement results in time and cost savings for businesses and fosters a transparent and secure ecosystem for digital transactions.

In conclusion, Estonia’s well-developed and efficient infrastructure presents a conducive environment for businesses to thrive. The country’s strategic geographical position, modern transport network, and cutting-edge digital infrastructure offer entrepreneurs and investors a competitive edge in the global market.


If you’re considering doing business in Estonia, several organizations and agencies can provide valuable assistance and guidance. One important organization to contact is the Estonian Investment Agency (EIA). The EIA offers essential support by providing information on the Estonian business environment, investment opportunities, and advice on setting up businesses. You can get in touch with them through their official website.

Another valuable resource is the American Chamber of Commerce in Estonia (AmCham Estonia). As a leading business organization, AmCham Estonia promotes the interests of U.S. and Estonian companies. Their in-depth knowledge and experience in bilateral trade and investment can be instrumental in helping you expand your business in Estonia. To contact AmCham Estonia, visit their website and fill out the provided contact form.

Finally, you can always contact Estonian government agencies if you have any specific questions or need advice about doing business in Estonia. They offer various tailored services and cooperation possibilities for businesses. Business-related inquiries can be directed to the official Estonian government website.

In conclusion, when starting or expanding your business in Estonia, remember to take advantage of the support offered by various organizations like the EIA, AmCham Estonia, and the Estonian government. By reaching out to these entities, you can receive valuable assistance and guidance to help ensure your business’s success in Estonia.

Frequently Asked Questions

To start a business in Estonia, potential investors should follow several key steps including researching the Estonian business environment, conducting market analysis, creating a business plan, and selecting a suitable legal form for the company. Other important steps involve registering the company, opening a bank account, obtaining necessary licenses, and ensuring compliance with the local tax and reporting regulations source.

The e-Residency program enables foreign entrepreneurs to run a location-independent business online while retaining access to Estonia's advanced digital infrastructure. E-Residents receive a digital ID card which allows them to authenticate their identity and conduct secure transactions online. This program greatly simplifies company registration, submitting tax declarations, and accessing local banking and financial services source.

Registering a limited liability company (LLC) in Estonia typically involves choosing a unique name for the company, preparing the required foundation documents (such as articles of association), opening a local bank account, and registering with the Estonian Business Registry. The process can be completed within a few days, either by the investor or through the services of a local adviser source.

Estonia's tax system offers several benefits for businesses, such as a flat corporate tax rate and no tax on undistributed profits. Reinvested earnings are tax-free, encouraging business growth. Additionally, the Estonian government offers various tax incentives for research and development activities, promoting innovation source.

Estonia boasts the highest startup density in the European Union, with a strong focus on supporting innovation and entrepreneurship. The government offers various financing programs, incubators, and accelerators to help startups grow. Estonia also has a vibrant startup ecosystem, with networks of investors, mentors, and other startups actively collaborating and sharing knowledge source.

Some of the most prevalent sectors for businesses in Estonia include information and communication technology (ICT), finance, manufacturing, trade and logistics, and energy. Estonia's advanced digital infrastructure and highly skilled workforce make it an ideal location for companies in these sectors to grow and thrive source.

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Article By
Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.