Estonian economy has become highly competitive and it supports big international companies as well as newly established start-ups. In recent years Estonia has become the world leader in IT and the country invests highly in the sector.

Estonia has a world-class human capital and its skilled workforce will be a great asset for any entrepreneur who is going to establish a business in Estonia. Estonian workforce is highly qualified and multilingual. English is widely spoken in the country.

Establishing business in Estonia has been made extremely easy. It has become the first country in the world that offers e-residency. This means that entrepreneurs around the world can set up a business in Estonia if they are e-residents. It also allows the entrepreneur to run the business remotely.


Before undertaking business activity in Estonia, it is necessary to choose which type of legal entity to form. The Commercial Code of Estonia governs business establishment in the country. According to the commercial code there are five forms of legal entities. These are private limited company (OÜ), public limited company (AS), general partnership (TÜ) and limited partneship (UÜ). The most common forms of business are private limited company and public limited company.

There are two ways to establish a new company in Estonia. The first is the electronic registration through the Company Registration Portal. This option is available only for a natural person who has an e-residency or Estonian ID-card. A natural person- founder has an opportunity to establish a company with no contribution. The second option is registration through a notary.


In Estonia companies are not subject to traditional corporate income tax. Estonian resident companies and the permanent establishments of foreign entities (including branches) are subject to 20% income tax only in respect to all distributed profits (both actual and deemed). Starting from January 1, 2018 – the corporate income tax rate on regular profit distributions was lowered from 20% to 14%, but only in cases where dividends are paid to legal persons.

Personal income tax rate in Estonia is 20%. The period of taxation for personal income tax is one calendar year. Taxation of the income of employees shall generally be performed by withholding income tax at a rate of 20% of the gross salary of the employee.

Standard VAT rate in Estonia is 20%. The reduced VAT rate for 9% is applied for books, medical products, periodic publications and accomodation services. 0% rate is for all goods and services related to International Business.


The core of the Estonian labor relations is regulated by the Estonian Employment Contracts Act.

Expats are liable to pay resident taxes in Estonia only if they stay in Estonia for at least 183 days over a period of 12 consecutive calendar months. When the foreign employee fulfils the criteria for tax residency in Estonia he/she should register the form of determination of residence.

To employ people for the business in Estonia, it is always necessary to register the employees in the Employment Register that is kept by the Tax and Customs Board. In case the employees do not have an Estonian ID number yet, they have to acquire it from the local government.

In case the employer decides to terminate the labor contract, the notice must be given according to the employment period and varies between 15 days for persons with less than a year working period, and 90 days for persons that have worked for over 10 years in a company.


Estonia is a member of the European Union so moving and working inside the EU for the citizens of EU-countries is free. However if a foreign national wants to stay and work in Estonia more than 90 days a residence permit has to be applied.

The expat community is biggest and liveliest in the capital Tallinn. However also Tartu hosts a rather big group of foreign students and workers.

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