While the article trots out the usual motifs (“the tiny Baltic nation of Estonia, with just 1.3 million citizens punches well above its weight in its inexorable ascent to digital powerhouse status” – those are the exact words used) it contains this gem from Prime Minister Kaja Kallas, namely that: “We are probably the only country in the world where people compete on how fast they can submit their tax returns.”
Efforts to encourage business and to head off any fears relating to the current security situation in the region can be encouraged by the fact that share capital for establishing a company in Estonia – due to be slashed to one cent as of February 1 next year and down from the current €2,500 compares somewhat favorably with Germany’s (€25,000) and France’s (€37,500) equivalent figures, while IT literacy is mentioned as another plus (strong English-language skills are not, but equally could be – ed.).
The piece also aims to iron out what it calls a bad rep regarding Estonia’s tax system, and while it does not elaborate on what this bad rep might be, notes that, in simple terms: “If profits are reinvested within the company then no corporation tax is due until you finally pay out dividends,” while this zero rate makes the government: “Essentially a 20 percent investor in you, too”, the piece continues, quoting Luukas Ilves, now deputy secretary general at the Ministry of Economic Affairs and Communications, holding the digital development portfolio.
The 93,000-plus Estonian e-residents (4,000 of whom are from the U.K. and 36,000 from elsewhere in the EU) must, given their own countries also have transparent tax systems, the piece argues, find other aspects about Estonia appealing too – though the tax code covering around 36 pages in total, according to e-Residency chief Lauri Haav, means the system is certainly one of the simpler ones.
The piece also references Estonia’s highest number of unicorns (almost a dozen now) per capita, tech conferences such as Latitude59, digital nomad and startup visas and other means of support, and the record 15-and-a-half minutes it recently took someone to incorporate a company in Estonia, as other draws.
The original Forbes piece is here.
The corporate tax system may eventually need overhauling to bring it in line with EU norms.
Concerns had been raised in some quarters at the beginning of the current invasion of Ukraine by the Russian Federation that doing business in Estonia, which borders Russia, was seen to be accompanied by higher risk and so was scaring potential or existing investors away.
Conversely, Brexit was followed by a surge in interest in programs such as e-Residency.