Estonia

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Estonia is currently open for FDI and foreign investors are treated on an equal footing with local investors, though the government is developing a screening mechanism to adhere to the EU Foreign Investment Screening Regulation (Regulation 2019/452 ) entered into force on 10 April 2019. This new regulation will be applicable from 11 October 2020 and creates an information-sharing mechanism between Member States and allows Member States and the European Commission to comment on foreign investments foreseen in other Member States.

The Estonian Investment Agency (EIA), a part of Enterprise Estonia, is a government agency promoting foreign investments in Estonia and assisting international companies in finding business opportunities in Estonia. EIA offers comprehensive, one-stop investment consultancy services, free of charge. The agency’s goal is to increase awareness of business opportunities in Estonia and promote the image of Estonia as an attractive country for investments. More info: http://www.investinestonia.com/en/estonian-investment-agency/about-the-agency 

Limits on Foreign Control and Right to Private Ownership and Establishment

Estonia’s government has not set limitations on foreign ownership. Licenses are required for foreign investors to enter the following sectors: mining, energy, gas and water supply, railroad and transport, waterways, ports, dams and other water-related structures and telecommunications and communication networks. The Estonian Financial Supervision Authority issues licenses for foreign interests seeking to invest in or establish a bank. Additionally, the Estonian Competition Authority reviews transactions for anti-competition concerns. Government review and licensing have proven to be routine and non-discriminatory.

As a member of the EU, the Government of Estonia (GOE) maintains liberal policies in order to attract investment and export-oriented companies. Creating favorable conditions for FDI and openness to foreign trade has been the foundation of Estonia’s economic strategy. Existing requirements are not intended to restrict foreign ownership but rather to regulate it and establish clear ownership responsibilities.

Other Investment Policy Reviews

In 2019 the government had a third-party investment policy review (IPR) through the Organization for Economic Co-operation and Development (OECD).  The outcome showed Estonia’s economy is performing well and public finances are in excellent shape, yet growth is softening and spending pressures from infrastructure needs and an ageing population are mounting. The report said efforts should now focus on improving income equality and well-being, greening growth and accelerating the country’s digital transformation. Full report: http://www.oecd.org/economy/estonia-economic-snapshot.

Business Facilitation

The World Bank’s Ease of Doing Business report ranks Estonia in 18th place out of 190 countries on the ease of Starting a Business. Economic freedom, ease of doing business, per capita investments, the record-low national debt, euro zone membership, and low corruption scores – all these factors play a role in fostering a good climate for business facilitation.

In Estonia there are two ways to register your business:

  • Electronic registration via the e-Commercial Register’s Company Registration Portal (takes between 5 minutes and 1 business day)
  • Through a notary (takes 2-3 business days)

Access to the Register: https://www.eesti.ee/en/doing-business/establishing-a-company/comparison-of-each-form-of-business/ 

On July 1, 2014, an amended Taxation Act establishing the employment register entered into force, requiring all natural and legal employers to register the persons employed by them with the Estonian Tax and Customs Board.  The company must register itself as a value-added tax payer if the taxable turnover of the company, excluding imports of goods, exceeds EUR 40,000 as calculated from the beginning of the calendar year.

There are certain areas of activity (like construction, electrical works, fire safety, financial services, security services, etc.) in which business operation requires an additional registration in the Register of Economic Activities (MTR), but this can be done after registration of the company in the Commercial Register: https://mtr.mkm.ee/ 

International institutions and organizations give Estonia’s economic policies high marks. The Wall Street Journal/Heritage Foundation’s 2020 Index of Economic Freedom ranked Estonia 10th in the world. The index is a composite of scores in monetary policy, banking and finance, open markets, wages and prices. Full report: https://www.heritage.org/index/country/estonia  Estonia scores highly on this scale for investment freedom, fiscal freedom, financial freedom, property rights, business freedom, and monetary freedom.

The World Bank DB 2019 Starting a Business Score also ranks Estonia 18th in the world.  https://www.doingbusiness.org/en/rankings

Outward Investment

Estonia does not restrict domestic investors from investing abroad nor does it promote outward investment. Estonia companies have invested abroad about USD 10 billion, mostly into EU countries. The main sectors for outward investments are services, manufacturing, real estate and financial.

Investment Climate Statements
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The Lessons of 1989: Freedom and Our Future