In the last few years, Estonia has seen an increased interest from foreign businesses. In fact, in 2017 alone, over 1,200 new businesses were set up by non-Estonians. Many of those businesses were technology start-ups and IT companies who saw great potential in the Estonian market. But why exactly is that so? Is it solely because of the low tax burden and business-friendly legislation or is there something else? While many people have heard about Estonia due to its digital transformation and e-residency program, not everyone knows that the country also offers a variety of positive factors for startups and new businesses. This article goes into more detail about why you should consider investing in an open company in Estonia for your next venture– and what makes Estonia such a great place to do so:
E-Residency in a nutshell
First, let’s get one thing clear – e-residency is not a citizenship or a way to become an official resident of Estonia. While it does come with some advantages and benefits, it’s not a substitute for a visa or citizenship. E-residents can use Estonian digital identity for authentication and signature. This means that they can certify their documents online, sign contracts online and conduct secure transactions online. They can also use this digital ID to open a bank account within Estonia. E-residents usually use one of the Estonian data centres for their communications. In fact, the Estonian data centres are also used by NATO, the European Parliament and the European Commission. E-residency is a program that allows citizens of any country to receive an identification card that is digitally signed. The card can be used to engage in a wide range of digital services and is used as a means of identification in many countries across the world. E-residency is the culmination of Estonian e-Government efforts that started in 2002. The goal of the e-residency program is to enable people from around the world to conduct business online as if they were onsite in Estonia.
Flexibility and ease of doing business
In this day and age, it is crucial to have a business set-up that enables you to pivot and scale at will. What’s more, your corporate structure should also be flexible enough to facilitate quick decision-making. Estonia offers plenty of flexibility in this regard. First and foremost, the incorporation procedure is straightforward and quick. It usually takes about 2-3 weeks to incorporate a company. Estonian companies are formed as public limited companies (PL). This means that a minimum of two shareholders are required to set up a company. While you can be one of the shareholders, there is no limit on how many shareholders your company can have. In Estonia, it is possible to transfer shares of a company without requiring the signatures of the shareholders. This makes the transfer of the shares between investors easier and faster.
Good working environment for technology companies
While Estonia is an attractive country to do business in generally, it is also an excellent environment for tech companies. Estonia ranks high on all the main indicators that are important for tech companies and investors. Estonia was the first country in the world to allow citizens to access the internet through dial-up (in 1991). And in 2001, it was the first country to offer internet access over a wide-area network. Estonia has 1 of the most modern and sophisticated e-governance systems in the world. The IT sector in the country employs about 36,000 people and has an annual turnover of about €3.7 billion. Estonia has been a member of the European Union since 2004 and is part of the Schengen Area, which means that business travellers don’t need a visa to travel to other EU countries.
Advanced digital infrastructure
As mentioned above, Estonia’s technology-friendly environment goes hand in hand with an advanced and sophisticated digital infrastructure. Estonia is a world leader in the use of e-services and is often referred to as the “e-government island”. Estonians conduct more than 80% of their government-related business online. This includes everything from obtaining health insurance to filing taxes and conducting business. Home to world-leading digital companies like Transferwise, Pipedrive and Skype, Estonia is also the birthplace of blockchain and the first cryptocurrency wallet called Bitcoin Wallet was launched in the country.
Security by default
One of the most important things to consider when thinking about investing in a country and its businesses is the level of security offered to companies, investors and entrepreneurs. Estonia has a strong track record on this front. This small country has been a member of NATO since 2004 and is one of the most digitally advanced countries in the world. Estonia’s e-residency program is operated and maintained by the country’s Information System Authority. The country boasts a level of security and governmental oversight that is hard to find in other countries. Estonia’s Information System Authority is the main IT security authority in the country. It is governed by the Ministry of Economic Affairs and Communications.
Transparency and constant improvement of the legislative environment
Estonia is generally seen as a transparent and open economy. The country has been classed as a “free” economy in the Index of Economic Freedom since 2001. Additionally, Estonia is also open for business. The country has a business-friendly legislation, and it is easy to start a business in the country. Estonia’s corporate tax rate is the lowest in the EU. The country also offers very low payroll taxes and no capital gains tax. When it comes to freedom of doing business, Estonia is a very attractive country to be in. The country ranks high on a range of key indicators, such as ease of starting a business, paying taxes, trading across borders, and enforcing contracts. Estonia has a constant strive towards improvement. The country has been actively improving the legislative environment since it regained its independence in 1991. Moreover, the country is also constantly adapting to the changing global business environment.
Conclusion
Estonia is one of the best countries in the world to set up a new business. The country offers a combination of low taxes, a great digital infrastructure, and an easy incorporation process. More importantly, the country is transparent and constantly improving its legislative environment to attract more investors and entrepreneurs. If you’re looking for a new country to start your business, Estonia is certainly worth considering.
