Published on and written by Cyril Jarnias
Estonia has become a top destination for expatriate entrepreneurs looking to establish their business abroad. This small Baltic country offers a dynamic business environment, favorable taxation, and cutting-edge digital infrastructure that make it a true paradise for startups and innovative companies. In this comprehensive guide, we’ll explore the fundamental steps to create your business in Estonia as an expat, covering the essential legal, administrative, tax, and cultural aspects for your success.
Why Choose Estonia to Start Your Business?
Before diving into practical details, it’s important to understand what makes Estonia so attractive to international entrepreneurs.
Advanced Digital Environment
Estonia is recognized as one of the most digitized countries in the world. The Estonian government has implemented a digital infrastructure that allows almost all administrative procedures to be completed online, including business formation. This advanced digitalization greatly facilitates life for entrepreneurs, whether they’re on-site or remote.
Favorable Taxation
The Estonian tax system is renowned for its simplicity and attractiveness. One major advantage is the absence of corporate income tax on reinvested profits. Only distributed profits are taxed, allowing companies to grow faster by reinvesting their earnings.
Access to the European Market
As a member of the European Union, Estonia offers direct access to the European single market. This represents a significant opportunity for companies looking to expand internationally.
Strong Entrepreneurial Culture
Estonia has developed a flourishing startup ecosystem, with numerous international successes like Skype, Wise (formerly TransferWise), and Bolt. This dynamic entrepreneurial culture creates an environment conducive to innovation and business development.
Legal Structures for Starting Your Business in Estonia
When you decide to start your business in Estonia, several legal forms are available to you. The choice of structure will depend on your objectives, the size of your project, and your specific needs.
Private Limited Company (OÜ – Osaühing)
This is the most popular legal form in Estonia, particularly suitable for small and medium-sized businesses. The main characteristics are:
- Minimum share capital: 2,500 euros (which can be paid later)
- Limited liability for shareholders
- Simplified management
- Possibility of having only one shareholder
Public Limited Company (AS – Aktsiaselts)
This structure is more suitable for large companies or projects requiring significant investment. Its main characteristics are:
- Minimum share capital: 25,000 euros
- More complex structure with a board of directors
- Possibility to issue shares
- Better suited for companies considering an IPO
Sole Proprietorship (FIE – Füüsilisest isikust ettevõtja)
This form is suitable for entrepreneurs wishing to operate under their own name. It offers the advantage of simple creation but involves unlimited liability for the owner.
Steps to Create Your Business in Estonia
Business formation in Estonia is renowned for its speed and simplicity, particularly thanks to the e-Residency system that allows non-residents to create and manage a company entirely online.
1. Obtain e-Residency (Optional but Recommended)
e-Residency is a digital status offered by Estonia to foreign entrepreneurs. It allows you to access Estonian digital services and manage your business remotely. To obtain it:
- Apply online on the official e-Residency website
- Pay the application fee (approximately 100-120 euros)
- Undergo a background check
- Pick up your e-resident card at an Estonian embassy
2. Choose a Name for Your Business
Check name availability on the Estonian commercial register and ensure it complies with local naming rules.
3. Prepare Required Documents
You will need the following documents:
- Company articles of association
- Information about shareholders and board members
- Registered office address (you can use a virtual office service)
4. Register Your Business
Registration is done online via the Centre of Registers and Information Systems (RIK) portal. The process is fast and can be completed in a few hours if all documents are in order.
5. Open a Bank Account
Although not mandatory for registration, a bank account will be necessary for business operations. You can open an account with an Estonian bank or use online banking services like Wise Business or Revolut Business.
6. Register with Tax Authorities
Once your business is registered, you must register with the Estonian Tax and Customs Board for tax and social obligations.
Tax Considerations for Expat Entrepreneurs in Estonia
The Estonian tax system is renowned for its simplicity and attractiveness. Here are the main points to know:
Corporate Tax
Estonia applies a unique corporate taxation system:
- 20% tax rate only on distributed profits
- No tax on profits reinvested in the company
- Simplified monthly tax returns
VAT
The standard VAT rate in Estonia is 20%. VAT registration is mandatory if annual turnover exceeds 40,000 euros.
Personal Income Tax
If you become an Estonian tax resident, you will be subject to a flat 20% tax rate on your personal income.
Social Security Contributions
Estonian companies must pay social security contributions for their employees, including for salaried directors.
Good to Know:
It’s crucial to fully understand the tax implications of your expat status. Consult an international tax expert to optimize your situation.
Funding and Support for Expat Entrepreneurs in Estonia
Estonia offers a favorable ecosystem for startups and entrepreneurs, with numerous funding and support options.
Incubators and Accelerators
Estonia has several recognized incubators and accelerators, such as:
- Startup Wise Guys
- Tehnopol Startup Incubator
- Lift99
These structures offer not only funding but also mentorship, workspace, and access to valuable networks.
Government Support
The Estonian government offers various support programs for innovative businesses, particularly through Enterprise Estonia (EAS). These aids can take the form of grants, subsidized loans, or guarantees.
Venture Capital
The Estonian startup ecosystem attracts many venture capital investors, both local and international. Events like Latitude59 allow entrepreneurs to meet potential investors.
Crowdfunding
Crowdfunding platforms like Funderbeam, based in Estonia, offer opportunities to raise funds from individual investors.
Understanding Business Culture in Estonia
To succeed as an expat entrepreneur in Estonia, it’s essential to understand and adapt to the local business culture.
Direct Communication
Estonians are known for their direct and pragmatic communication style. Expect concise, fact-based exchanges.
Punctuality and Efficiency
Punctuality is very important in Estonian culture. Meetings start and end on time, and are generally efficient and results-oriented.
Flat Hierarchy
Estonian companies tend to have flat hierarchical structures, with quick decision-making and significant autonomy granted to employees.
Importance of Digital
Estonian society is deeply digitized. Expect most professional and administrative interactions to take place online.
Networking
Although Estonians may seem reserved at first, networking is important in the business world. Attend industry events and meetups to expand your network.
Challenges and Opportunities for Expat Entrepreneurs in Estonia
Starting a business in Estonia as an expat presents both unique challenges and exciting opportunities.
Challenges
- Language barrier: Although English is widely spoken in business circles, knowledge of Estonian can be an advantage for certain interactions
- Climate: Long, dark winters can be difficult for some expats
- Local market size: Since the Estonian market is relatively small, it’s often necessary to think internationally from the start
Opportunities
- Dynamic startup ecosystem: Estonia offers an environment conducive to innovation and rapid startup growth
- Access to European market: A base in Estonia provides easy access to the EU single market
- Advanced digital infrastructure: Estonian e-government greatly facilitates administrative procedures for entrepreneurs
- Relatively low cost of living: Compared to other European capitals, Tallinn offers good value for money
Useful Resources for Expat Entrepreneurs in Estonia
To help you in your entrepreneurial journey in Estonia, here are some essential resources:
- e-Estonia: The official Estonian e-government portal
- Startup Estonia: Government initiative supporting the startup ecosystem
- Work in Estonia: Platform for international talents wanting to work in Estonia
- Estonian Investment Agency: Information on investment and business development in Estonia
- International House of Estonia: Service center for expats in Tallinn
Starting your business in Estonia as an expat offers numerous opportunities thanks to a favorable business environment, advantageous taxation, and cutting-edge digital infrastructure. By following the steps outlined in this guide and leveraging available resources, you’ll be well equipped to launch your entrepreneurial adventure in this dynamic and innovative Baltic country.
Good to Know:
The key to success as an expat entrepreneur in Estonia lies in thorough preparation, adaptation to local culture, and leveraging the unique advantages offered by the Estonian ecosystem.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
