Establishing a company in Estonia

Estonia is a small country of the Baltic in Northern Europe, situated along the Baltic Sea on its western border, with the Gulf of Finland to the north, Latvia to the south, and Russia to the southeasterly regions of the country. It also shares maritime borders with Sweden and Finland. In 1991, with the collapse of the USSR, Estonia gained its independence. The people are primarily Finnic in origin, the official language is Estonian, greatly similar to Finnish and somewhat similar to Hungarian. The local work force is considered educated and professional, and along with low local wage rates, this constitutes a significant advantage for foreign companies considering setting up business there.

The population of Estonia is only 1.3 million, making it one of the least inhabited European countries. The capital, and also the largest city, is Tallinn, with 430,000 residents. The government system is a democratic parliamentary republic, it is a full member state in the EU (from 2004) and of the euro zone, as well as a member of the OECD. Geographically, most of Estonia’s land includes low plains with much higher elevations along the northern and southern borders, and the state has a long coastline dotted with endless coves and limestone cliffs. Approximately half of the land is covered in natural forests.

Three things you did not know about Estonia:

• Estonia has the highest per capita income of all former Soviet states; this tiny country can claim an advanced economy that is developed and successful in many respects. It is ranked very high is terms of HDI (Human Development Index), and is ranked third globally in terms of freedom of the press.
• The Skype Company, bringing to the world the opportunity of free online conversations, was developed almost exclusively in Estonia by a group of Estonian entrepreneurs. Generally the country has an extremely developed software industry that collaborates with development teams of many international organizations.
• Despite a small population of less than 2 million, Estonia is included in the prestigious list of states that have produced and launched their own satellites. The official launch was conducted in May 2013 for educational purposes for state schools and universities; the minuscule satellite is only 1 liter in volume and 10x10x11.35 cm cube in size.

Estonia’s economy

Estonia has a booming, advanced and very competitive economy, and is considered highly placed in terms of economic freedom and transparency among the East Europe economies. GDP is almost 30 billion USD, and per capita income is 22,000 USD. With a free trade policy, Estonia has placed greater and greater emphasis on competitiveness, an advanced business environment and generally positive agenda regarding business and entrepreneurship. It has instated strict budget restrictions and employed effective fiscal policies, resulting is almost no external debts in comparison with other EU members, and has an impressively stable economy. The previous local currency (Kroon = EEK) was replaced by the euro in 2011.

The major activities of Estonia are focused on the electronics and telecommunications industries, an advanced high-tech sector, a relatively large oil sector that supplies most of the state’s energy needs, as well as other developed fields, including chemistry, textiles, banking and financial services, fish and lumber. The country’s main economic partners are the Nordic states and Germany. Establishing a company in Estonia offers many opportunities in terms of convenient tax rates and excellent business and investment environment, as well as the benefits of being active in the EU.

Additional information about establishing offshore companies in Estonia: