About Estonia  

The Estonian cost level is gradually converging with the surrounding EU, but still, there are meaningful differences. On average, Estonian wages are about a third of those in Sweden or Finland, but maybe more importantly, wages are very market sensitive. Therefore, the spread between high and low income earners is substantially wider in Estonia than in the neighbouring Nordic countries.

Estonian taxes are low and simple. There is a general flat income tax (currently 21 percent) which applies to private individuals' earnings whether out of work or capital. There is no corporate profit tax, instead the flat 21 percent tax is withheld when profits are distributed, e.g. as dividends, to the owners of the company. Social fees are levied at a rate of 33 percent of gross wages, but sick- and maternity leave costs are covered by the state. Estonia's value-added tax rate is 20%.

Office rents, utilities and costs of various auxiliary services to businesses in Estonia are priced somewhat lower than in Scandinavia. Electricity is sold by a state monopoly and Estonia is self-sufficient in electricity. Gas is imported from Russia at EU-prices, and water and sewage costs are determined by local municipalities. The Competition Authority supervises the pricing of all public utilities.

Since our independence in 1991, Estonian business life has largely reoriented from the east to the west. Long before joining the EU, Estonia adapted its legislation and business procedures to conditions in Western Europe. Businesses introduced Western accounting systems, gained Western quality certificates and, most importantly, Western business contacts. Focus increased on learning English and other European languages. This massive reorientation during almost 20 years has created a business environment according to Western standards.

In line with a generally liberal view on economics, the start-up and close-down of companies in Estonia is cheap and simple. Compared to its neighbouring Nordic countries, the hiring and laying off of people in Estonia is regarded more as an open market agreement between employer and employee. Trade unions generally intervene only regarding the level of minimum wages.

The business culture of a country is obviously also determined by a number of subtle and less tangible aspects. Estonians are known to be quite formal in their business relations, for example, agreed times are held and payment terms and other contracts are honored. The entrepreneurial and working spirit is considered to be strong, sometimes at the expense of social skills. Business meetings tend to be formal and not personal.

Communications technology makes distances insignificant in Estonia. The country has been a front-runner in applying modern IT-solutions wherever possible. From registering a company to submitting its annual report, the Estonian entrepreneur corresponds with public institutions using e- and m-services. Entrepreneurs can easily find partners for cooperation, and even ministers and other decision makers are conveniently accessible to the public.

Distances are short in Estonia, also from a logistical point of view. The country's business life is concentrated around the capital of Tallinn, where more than half of the country's GDP is produced. And operating one's business from Tallinn means being within a 30 minute drive from the international airport. But even Estonia's most remote parts are no farther away than a couple of hours' travel from the capital, and mobile internet is available in the farthest corners of the country.

The vicinity of major Northern European cities such as Stockholm, Helsinki and St. Petersburg, means a lot for the internationalization of Estonia, and particularly Tallinn. This can clearly be seen in tourism - seven million passengers travel through Tallinn's seaport every year. The favourable location also helps entering into cross-border business relationships. Estonia is the link between Western and Eastern Europe.