Estonia, or the Republic of Estonia, is the fastest growing market in Europe, serving more than 90 million people. This European country has the smallest national debt, a very high credit rating, and ranks second in terms of growth rate after the Czech Republic. It is a country with an upper-middle-income, with a GDP per capita of $23,723, and a population of about 1,325 million people. Information technologies and telecommunications occupy a special place in the structure of the economy. Many experts consider Estonia to be the most progressive country in the world in terms of the pace of development of the IT sector. For example, up to 99% of banking transactions in Estonia are performed online. Even the most remote towns and villages have access to the Internet.
Ease of Doing Business in Estonia
The business climate in Estonia is as favorable as possible and attracts many foreign investors. Estonian legislation does not provide any special restrictions on foreigners conducting business in the territory of the country. Moreover, foreign entrepreneurs have equal rights with residents to obtain different benefits or loans, including EU financial institutions. Furthermore, the Republic of Estonia has a low level of corruption and fair pricing.
The main share of the country’s economy is services and industry. The Estonian government also supports all spheres of business, paying special attention to transport, communication, trade, and real estate. In addition, constant investment from Sweden and Finland keeps the economy in balance, providing new perspectives for small and big businesses.
According to the Doing Business 2020 report, ease of doing business ranking in Estonia is:
- Rank: 18
- DB score: 80.6
The ease of doing business score (DB score) serves as the basis for ranking economies on their business environment and shows an economy’s absolute position relative to the best regulatory performance, while the ease of doing business ranking is an indication of an economy’s position relative to that of other countries’ economies.
Business Taxes in Estonia
Among other undeniable advantages, business immigration to Estonia is attractive due to one of the most liberal, flexible, and simple tax systems in the world, offering low-interest rates. In Estonia, there is a so-called “deferred income tax”. The Estonian tax system requires you to pay income tax only if you allocate it, allowing foreign companies to use Estonian companies for reinvestment. Therefore, the zero income tax motivates entrepreneurs to attract income again for business development and growth. Nevertheless, taxes must be paid when making payments out of the company, for example, in the form of dividends. The Dividend Tax rate is 25%.
In addition, Estonia has signed double taxation treaties with 60 countries.
There are tax payments, also known as the total number of taxes, paid by businesses (plus electronic filing). This tax is counted as paid once a year even if payments are more often. The World Bank research shows that Estonia’s tax payments number is 8.
An income tax is a tax imposed on individuals or business entities (taxpayers) in respect of their income or profits earned. Income tax rates may vary by the types or characteristics of the taxpayer and the type of income.
As for Estonia’s Personal Income Tax Rate, it is 20%.
A corporate tax (also called corporation tax or company tax) is a direct tax imposed on the profits of a corporation. The corporate income tax (CIT) rate in Estonia is 20% (only in the case of profit distribution).
VAT is paid when the turnover is more than 16 thousand euros per year. The basic rate is 20%. For some types of business activities, there are lower rates of 9% and 0%.