Doing Business in Estonia
Estonia is situated in Northern Europe along the Baltic Sea. Sweden is the western neighbour across the Baltic Sea. Estonia borders Russia with St. Petersburg approximately 200 kilometres across the north-eastern border. Estonia also borders Latvia and it has approximately 1.35 million inhabitants.
Tallinn, the capital, is situated on the Baltic Sea coast about 60 kilometres south of Helsinki. The population of Tallinn is approximately 400 000. Other big cities in Estonia are Tartu, Narva and Pärnu.
The business in Estonia is characterised as free business and trade as in EU practices. Many companies are subsidiaries of European firms.
Estonia has some of the highest credit. Estonia is a member of euro area but the country’s cost level is still lower than neighbouring Scandinavian countries.
Throughout the regained independence economic and fiscal policy of the Government has mostly been aimed at long-term economic growth. The Government attitude is very welcoming for foreign capital, especially in sectors that export, innovate and support regional development. 0% corporate income tax is imposed on reinvested earnings in Estonia.
Estonia is one of the leading countries in creating and implementing e-government and cyber security. Most of people use internet banking services and complete their income tax return over the internet.
Non-residents may apply for e-Residency which is a state issued secure digital identity that allows digital authentication and the digital signing of documents. The purpose is to make life easier by using e-services that have been accessible for years already. Estonia hosts the cyber security centre and the IT-agency of the European Union.
State institutions may also exercise legislative power. The Government of the Republic and the ministers have the right to pass regulations on the basis of and for the implementation of laws.
If the Parliament is unable to convene the President of the Republic may issue decrees which have the force of law.
As a member of EU since 2004 Estonia is bound by EU law. The Ministry of Justice is responsible for the coordination of the Estonian law and EU law about harmonising Estonian legal acts with EU legal acts.
Population of Estonia is around 1.35 million people. The population growth rate has been very modest. Life expectancy is 77 (73 years for men and 81 years for women). Population density is 31 inhabitants per square km. Two-thirds of the population is urban and one third is rural. 70% of the population is of Estonian ethnicity. The second largest ethnic group is Russian -approximately 25% of the population. 1.7% of the population is Ukrainian and Belarusians and Finns make up approximately 1% and 0.6% respectively.
Official language is Estonian. Estonian belongs to the Finno-Baltic group of the Finno-Ugric language family. It is closely related to Finnish while Hungarian is a more distant relative. Estonia uses Latin alphabet. Majority of the Estonian business community is internationally oriented, furthermore many Estonians speak English, Russian and, especially in Northern Estonia - Finnish.
Estonia is one of the least religious countries in the world. There is a tolerance toward all religions however. Estonians are predominantly Lutherans but religion does not have a significant impact on life. There is a Russian Orthodox community in Estonia too.
Real estate market was the most active in the period of 2004-2006, but in 2007 the number and value of real-estate transactions began to fall. Then the real estate market went through a severe recession. Market participants had to face a number of difficult decisions and reorganize their way of doing business. After a while the real estate market recovered and volumes and values started to increase.
In 2013 the real estate market continued to rise. The rise mainly was based on the positive developments of the Estonian economy. The number of transactions increased by 15% and the total value increased by 18%. About half of the purchase transactions concerned apartments. Real estate market was the most active in Harju and Tartu Counties which accounted for 40% and 10% of all transactions.
The most active part of the real estate market is the market of real estate in Estonia. The high number of transactions and limited offering in some market segments has increased the prices. Average price per square meter of an apartment in 2013 was 840 euros.
Free trade zones
There are four free trade zones established under separate orders of the Estonian Government. Muuga; Paldiski and Sillamäe in the northern coast of Estonia as well as in Valga in Southeast Estonia.