Estonia is becoming an increasingly popular location for entrepreneurs and business owners. Often referred to as the “Silicon Valley of Europe“, the county is certainly one to keep an eye on.
One of the main reasons for this is the country’s e-residency and e-Business programmes, which allow foreigners to easily set up and operate a business online, making it easier than ever for online entrepreneurs, freelancers, and businesses to expand into Europe.
Here, we talk you through everything you need to know about setting up a business in Estonia.
Why Set Up A Business In Estonia?
Estonia has an appealing business environment for a number of reasons. Some of these include:
Location
Located in Northern Europe, Estonia is a great place to access markets all across the EU, Russia and the Commonwealth of Independent States (CIS).
Low Corporate Taxes
Estonia has a flat corporate tax rate on 20% of profits. However, if you reinvest this profit back into the business, then no corporate tax is charged.
Easy Set Up
Estonia’s e-government services make it easy to register and run a business online, even for non citizens. Registration takes around 15 minutes on average and taxes can be paid online too, making it an easy economy to enter.
Great Startup Environment
Estonia is known for being a startup hub. In fact, it has produced more unicorns per capita than any other European country, with big names on its roster like Skype, Bolt, and Wise (formerly TransferWise).
Government Support
The government offers grants for businesses that focus on green energy, poverty reduction, education and more. For non-EU business owners, Estonia has a startup visa programme called the Estonian Startup Visa or Scale-up Visa that allows you to stay in the country while you kick start your business.
What To Consider Before Starting A Business In Estonia
Before you start your business in Estonia, there are a few things you should consider, such as:
Cost of Living
Estonia has a relatively low cost of living compared to many other European countries. According to Study Estonia, the monthly average living cost for students can be around 300-500 euros, not including rent.
Like with most countries, the capital Tallinn is the most expensive but for those running businesses online, working from Estonia can be a great way to cut costs.
Language
Whilst the official language is Estonian, Russian and English are also widely spoken. Having a good grasp on one of these languages will set you up well for networking and hiring employees in the country.
Economic Growth
Estonia has had steady economic growth, driven by its entrepreneurial population, low public debt and stable government. However, inflation in the country did reach nearly 20% in 2022, making it one to keep an eye on.
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How To Set Up A Business In Estonia
Here, we take you through a step-by-step guide to setting up a business in Estonia.
1. Apply for e-Residency
If you aren’t a citizen already, the first step is to apply for e-residency.
E-residency allows non Estonian citizens to run an Estonian business remotely. Here’s what you need to know about applying:
- Application: Visit the Estonian e-residency portal online, fill out the form, and submit your documents. You’ll need to upload a government-issued ID, passport-style photo and provide a statement about why you want to open a business in Estonia.
- Fees: The application fee ranges from €100 to €120, depending on where you choose to pick up your e-residency card.
- Approval Time: After submitting your application, you can expect to hear back within 30 days. Once approved, you’ll get a digital ID card that will allow you to sign documents online, pay taxes and most importantly: register your business!
2. Choose Your Business Structure
In Estonia, you can choose from a few different types of business structure, depending on how you envision your company growing.
Some examples of this are:
- Private Limited Company (OÜ): This is the easiest and most flexible structure for SMEs and startups. You just need a minimum share capital of €0.01 to get started.
- Public Limited Company (AS): A better option for bigger businesses that may want to issue shares or raise capital. You need a minimum share capital of €25,000 to get started – so it’s a little big more of a commitment.
- Sole Trader (FIE): Perfect for freelancers or self-employed people, the person is liable for all taxes and debts.
3. Register Your Company Online
Once you have e-residency, you can then register your company online through Estonia’s e-Business Register. This is a super easy process, and shouldn’t take longer than 15 minutes. Here’s what you’ll need to do:
- Choose a name for your business and check that it is available using the e-Business Register’s name query tool.
- If you’re a non-Estonian citizen, you just need a legal address in Estonia and a local contact person. But don’t worry, there are tons of companies that offer virtual office addresses and contact person services for around €30-150 per month.
- Log into the e-Business Register using your e-residency ID, fill out the forms, and pay the fee of €265. Your company will usually be registered within 1 working day – and then it’s time to get started!
4. Open Business Bank Account
To have an Estonian business, you’ll need a business bank account to receive payments and pay taxes. The good news is that this doesn’t have to be an Estonian bank, it just needs to be an account that deals in euros.
5. Get To Know The Tax System
One of the most appealing parts about starting a business in Estonia is the corporate tax system. Here’s what you need to know:
- Corporate Tax: Estonia has a flat corporate tax rate of 20% on profits. If you reinvest your profits into the business, you don’t need to pay any corporate tax is applied.
- VAT: The VAT rate is 22%, applicable to businesses with an annual turnover of over €40,000.
- Social Tax: If you are hiring employees, employers must pay a social tax of 33% on wages.
- Personal Income Tax: For sole traders, the income tax rate sits flat at 20%, making it much more appealing than other European countries.
Why Estonia Is The Perfect Place To Start Your Business
Estonia is not just a great place to live, it’s also an amazing place to start a business. Whether you’re a freelancer, startup founder or a bigger business looking to expand into the EU, Estonia makes it easy to tap into their economy.
By using their e-residency programme, you can open yourself up to lower taxes, government grants and access to one of the most exciting economies in Europe.