Ease of Doing Business Rank: 18
Estonia is a Northern European country on the Baltic Sea. It is a Baltic state, along with Latvia and Lithuania which lie directly south of the country.
Finland lies to the north, Russia lies to the east, and Sweden lies to west.
The official and native language of Estonia is Estonian. It is spoken by most the population (67.3%), followed by Russian as a minority language (29.7%). German and Swedish are also minority languages spoken in some regions.
English is a popular non-native language in Estonia because of its use in the business world. Younger Estonians are more likely to speak English, while older Estonians tend to speak Russian as their second language.
The 2019 Estonian population estimate is 1.03 million.
Almost half the population lives in the capital city of Tallinn (430,805), followed by two smaller urban centers with over 50,000 inhabitants: Tartu (93,715) and Narva (56,103). The remaining cities have populations under 50,000.
The top industries in Estonia are oil shale energy, telecommunications, textiles, chemical products, banking, services, food and fishing, timber, shipbuilding, electronics, and transportation.
The Times Higher Education World Rankings ranks two Estonian universities in the top 1,000 in the world, with the University of Tartu ranking in the top 500.
The Legatum Prosperity Index ranks Estonia’s education system 11th out of 149.
The most common business entities in Estonia are General Partnership, Limited Partnership, Private Limited Liability Company, Public Limited Liability Company, Commercial Association, and Sole Proprietorship.
The most popular incorporated entities in Estonia are the Private Limited Liability Company and Public Limited Liability Company.
The 2018 International Tax Competitiveness Index ranked Estonia 1st in the world, as they have for five years in a row. Estonia has the best tax code in the OECD. Members include 36 major economies in the world such as the U.S., Canada, Germany, and Switzerland.
They state Estonia’s tax system includes four positive features in its tax code:
This business-friendly tax system creates excellent tax deferral opportunities on income. Companies can lend out their retained earnings, or invest them in whatever vehicles they choose including real estate, precious metals, stocks, bonds, investment funds, and more.
The Estonian government does not provide specific incentives, but their corporate tax system is very advantageous to international companies.
Estonia’s capital city of Tallinn is the principal center of business and financial center of the country.
Estonia boasts a rich history, national parks, islands, and scenic coastlines. The historic center of the capital city Tallinn is a UNESCO World Heritage site, dating back to the 13th century medieval period. Buildings include a castle, opulent churches, and well-preserved examples of merchant houses.
Just an hour outside Tallinn is Lahemaa National Park. It is known for its ethereal bogs dotted with trees and boardwalks favored by hikers. Amidst the park lies Sagadi Manor, a sprawling 18th century manorial estate owned by wealthy barons.
Soomaa National Park is another beautiful, natural area worthy of a visit. It is best explored by canoe since water levels often peak, making hiking impossible. Visitors may see deer, elk, wild boar, and more.
In Northern Estonia, the Rakvere Castle built in the 16th century is the most impressive structure. Danish kings, knight-monks of the Livonian Order, and the Swedish and Polish states all claimed the castle for themselves at one time.
Narva Castle built in the 13th century lies in the eastern region. It was originally the residence of the Danish king’s Vice-Regent and is the best-preserved example of a defense structure in the country.
Estonia also has islands which attract surfers, sail boats, and hiking expeditions. Hiiumaa is one of the most-loved islands and features a lighthouse from the 15th century.
Saaremaa is the largest island in Estonia. Danes, Swedes, Germans and Russians ruled the island at one time. Saaremaa has an intact medieval castle and museum, but it is also the ideal spot for birdwatching and photography.
Estonia’s fine beaches are also worth exploring. Parnu’s white sand and dunes make it the go-to spot for vacationers. The coastal resort has a promenade for strolls or just to sit and while away the hours staring at the sea.
The early tribes of Estonia had little contact with Western civilization. They traded with Vikings and later battled Russians.
By 1202, the Catholic bishop of present day Riga formed an order of crusading knights to subdue the pagans. Albrecht von Buxthoeven invaded Estonia in 1208 and forcibly converted the region to Catholicism. Germans now occupied southern Estonia. However, the Christian kingdoms of Denmark and Sweden were eager for expansion into the area.
In 1218, Albrecht asked King Valdemar II of Denmark for assistance, but Valdemar made a deal with the crusading Knights of the Sword instead. Danes invaded northern Estonia in 1219 and by 1227 they occupied all of Estonia.
By 1237, the country was divided between the Teutonic Knights, who had absorbed the Knights of the Swords, and the Danes. The Teutonic Knights ruled the south and the Danes the north. However, Germanic people remained the ruling class.
Between 1343 and 1346, the Estonians rebelled during the St George’s Night Uprising. However, occupying forces crushed the rebellion.
In 1558, the Russians invaded Estonia. Swedes captured the capital of Tallinn in 1561. A long, bloody war ensued with the Swedes finally victorious in 1582.
Estonia flourished under Swedish rule for over a century but was stricken with famine and later plague. Sweden and Russia fought again, and in 1721 the Swedes ceded Estonia to the Russians.
An interest in Estonian culture, heritage, and nationalism grew in Estonia during the 19th century, despite Russian efforts to make Russian compulsory. The Russian Revolution of 1905 stirred unrest in Estonia.
Demonstrations led to arrests and deportations and Russia prevailed. When the second Russian Revolution erupted in 1917, the Tsar abdicated and Estonians sought independence.
The Russian government granted some autonomy, but not independence. Meanwhile, the Communist Party seized power in Moscow and refused even limited autonomy for Estonia.
However, the situation changed by the end of 1917. German forces advanced on Russia and by 1918 they also invaded Estonia. They occupied the country until the end of World War I when they surrendered to the western allies.
However, Russia viewed this as an opportunity, invaded Estonia, and captured most of the country. Estonians fought the Russians with the help of the British navy. In 1920, the Treaty of Tartu ended the conflict and Estonia became an independent country.
Early in the thirties, Estonia wrestled with the establishment of their constitution and parliament. Eventually, President Konstantin seized power in 1934 and ruled as a dictator until 1938, when he relinquished some of his powers and established a constitution.
Russia invaded Estonia again during World War II. In 1940, the country was absorbed into the Soviet Union under a Communist regime. However, Germans invaded Russia and Estonia again.
In 1944, the Russians overtook Estonia again and Hitler ordered a withdrawal of his troops. The Russians’ authoritarian rule between 1947 and 1952 led to collective farming, industrialization, and deportations.
By the 1980s, Gorbachev’s glasnost and perestroika policies weakened the Soviet’s communist hold. Within a decade, Estonians had some legal and economic autonomy.
In 1991, the majority of Estonians voted in favor of independence in a referendum; however, Communists attempted a coup. The coup was thwarted and Russia recognized Estonian independence.
Today, Estonia operates under a market economy without communist influence. The last Russian troops left the country in 1994. They are a member of the European Union and adopted the euro as their currency.
The religious population is predominantly non-religious 54.14%, followed by Christian. However, non-religious does not mean atheist. Neopaganism, Buddhism, and Hinduism are growing in popularity.
According to the 2019 census, 68.5% of the population of Estonia identified themselves as Estonian, 24.8% as Russian, 1.8% as Ukrainian, and many other smaller groups.
According to Forbes’ 2019 Best Countries for Business, Estonia is the 28th best country in the world for conducting business.
The 2019 Index of Economic Freedom rates Estonia 15th globally and states, “The current government continues to pursue its predecessors’ free-market, pro-business economic agenda and sound fiscal policies, which have led to balanced budgets, low public debt, and greater economic freedom.”
World Bank’s “Doing Business” rankings rate Estonia 16th for ease of doing business in the world.