Low cost of doing business

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.