Investment Guide 2015

Destination: EstoniaInvestment Guide

Currency: EURO (€)

Government: parliamentary democracy

Membership: EU, NATO, OECD, WTO,

Eurozone, Schengen area

Calling code: +372

Time zone: UTC+2

Units of measure: metric system

Electricity: 220 V

Driving: on the right

Emergency number: 112

CAPITAL

Tallinn

REPUBLIC OF ESTONIA

POPULATION

1,315,000

AREA

45,227 sq. km

NATIONAL FLAG

Currency: EURO (€)

Government: parliamentary democracy

Membership: EU, NATO, OECD, WTO,

Eurozone, Schengen area

Calling code: +372

Time zone: UTC+2

Units of measure: metric system

Electricity: 220 V

Driving: on the right

Emergency number: 112

CONTENTS

6 ESTONIA AT A GLANCE 8 . . . . . . Economy at a Glance10 . . . . . . Foreign Direct Investments11 . . . . . . Foreign Trade

12 COMING TO ESTONIA12 . . . . . . EU Common Visa Policy14 . . . . . . Visa Application Process16 . . . . . . Establishing a Company20 . . . . . . Legal Forms of Companies24 . . . . . . Establishing a Private Limited Company – as Easy as Dancing28 . . . . . . Accounting Requirements

32 INFRASTRUCTURE AND PREMISES32 . . . . . . Transport Infrastructure34 . . . . . . Free Trade Zones35 . . . . . . Industrial Parks36 . . . . . . Premises

38 UTILITIES38 . . . . . . Electricity39 . . . . . . Water40 . . . . . . Industrial Gas41 . . . . . . Broadband Network

42 FINANCING A BUSINESS42 . . . . . . Financial System44 . . . . . . EBRD Financing45 . . . . . . National Business Support Organizations 46 . . . . . . EU Structural Support

48 LABOUR MARKET48 . . . . . . Labour Legislation51 . . . . . . Terminating an Employment Contract52 . . . . . . Working Time and Vacation54 . . . . . . Public Holidays56 . . . . . . Remuneration57 . . . . . . Finding Suitable Staff

58 TAXATION58 . . . . . . The Tax System60 . . . . . . Corporate Income Tax61 . . . . . . Labour Taxes62 . . . . . . VAT (Value Added Tax)63 . . . . . . Personal Income Tax64 . . . . . . Other Taxes65 . . . . . . Paying Taxes66 . . . . . . The Legal System 66 . . . . . . Foreign Businesses67 . . . . . . Environmental Law68 . . . . . . Planning and Building69 . . . . . . The Justice System and Legal Aid

72 LIVING IN ESTONIA74 . . . . . . Cost of Living75 . . . . . . Education System77 . . . . . . Health Care Services78 . . . . . . Residence Permits82 . . . . . . Work Permits84 . . . . . . e-Estonia

Taking a business to another country is a serious step for any company and needs careful consideration in a number of respects.

However, this step doesn’t have to be daunting. Once you are well prepared and have good friends in Estonia, it will be an enjoyable and rewarding journey. This investment guide helps you prepare yourself and we at the Estonian Investment Agency can be your local friends.

So what is it like to run a business in Estonia? The most important thing is that in Estonia we like to get things done in

an innovative and transparent way. Highly skilled labour force, good geographical location and modern infrastructure make it very

simple to conduct business in Estonia. ‘Efficiency’ and ‘flexibility’ are the words most used by many foreign investors to describe the local

business culture. For example, with the Estonian e-Residency, it is easy to run a company in Estonia from anywhere in the world – signing contracts

digitally, conducting e-banking or declaring taxes in the e-Tax Board could not be more convenient.

Obviously, no investment guide alone gives a full picture of the nuances relevant for your business. Therefore, I warmly invite you to contact the professional team at the Estonian Investment Agency. We are here to make your investment a success!

Indrek Pällo Director Estonian Investment Agency

4

6

ESTONIA AT A GLANCEOfficial name: Republic of EstoniaCapital city: TallinnOfficial language: EstonianTotal area: 45,227 km2 (17,462 sq. mi.)Population: 1.32 million (2014)National Flag: Currency: EURO (€)Government: parliamentary democracyMember of EU, NATO, OECD, WTO, Eurozone, Schengen AreaCalling code: +372Time zone: UTC+2Units of measure: metric systemElectricity: 220 VDriving: on the rightEmergency number: 112

7

ESTONIA AT A GLANCE

8

Economy at a GlanceEstonia has become one of the most dynamic and modern economies. The Heritage Foundation and the Wall Street Journal rank Estonia’s economy 8th freest in the world and 2nd in Europe (2015). Out of 189 countries Estonia was placed 17th in the World Bank’s 2014 “Ease of Doing Business” ranking.

Since the collapse of the Soviet Union, Estonia has been one of the fastest growing countries in the region. Quick reforms, westernization of the economy and openness to foreign capital have been the main drivers behind the

change. Skype is a good example – it was founded in Estonia, but had also foreign founders and multiple offices in Europe.

Estonia also has some of the highest international credit ratings in the region: Standard & Poor: AA-; Moody’s: A1; Fitch IBCA: A+.

More than 71% of the Estonian GDP is derived from the service sectors, while industrial sectors yield 25% and primary branches (including agriculture) approximately 4%

9

of overall output. Nevertheless, the structure of Estonian economy is diverse and not concentrated in one or two sectors.

Estonia combines elements of old and new economies – while the recent success of Skype has sparked a lot of activity in the start-up scene, Estonia is also developing industries tied to natural resources, whether in forestry or oil shale for the energy sector.

About 50% of Estonia is covered by forest and therefore

the Estonian economy largely relies on forest-related industry. However, the Estonian energy sector is based on oil shale, a natural resource quite rare elsewhere in the world.

Our relatively recently acquired statehood has allowed Estonia to essentially start from scratch with all of its legislation. Compared to most Western European countries, legacy legislation is not an obstacle, and this creates a good basis for flexible and needs-based legislation.

ESTONIA AT A GLANCE

Investments as of 1 January 2015

total 15.9 billion

Real

est

ate

activ

ities

17%

Financial sector

27% Wholesale and retail trade

15%

Manufacturing

13%

Profes

siona

l, scie

ntific

and t

echn

ical

activ

ities

8%

10

Foreign Direct InvestmentsAs of 1 January 2015, Estonia has attracted in total 15.9 billion EUR worth of investments, of which 27% have been in the financial sector, 17% in real estate activities, 15% in wholesale and retail trade, 13% in manufacturing and 8% in professional, scientific and technical activities. This makes Estonia one of the leading countries in Eastern and Central Europe regarding foreign direct investment per capita.

As much as 26% of all investments have been made by Swedish companies, 22% by Finnish companies, 10% by Dutch companies and 6% by Norwegian companies.

Additional Information:

www.investinestonia.com

11

ESTONIA AT A GLANCE

Foreign TradeEstonia is both geographically and economically close to Scandinavia; its main trading partners include Sweden, Finland, Russia, Germany, Latvia and Lithuania.

Machinery and equipment are the most frequently exported commodities, followed by mineral and agricultural products and food preparations. On the services side, Estonia exports mainly transport services, various travel services and business services.

The structure of imports is similar to that of exports — the biggest share in imports is also held by machinery and equipment, followed by mineral and agricultural products and food preparations. The share of services in Estonian imports is approximately 19%, and these are mainly transport and travel services.


www.tradewithestonia.com

12

COMING TO ESTONIAEU Common Visa PolicyEstonia belongs to both the Eurozone and Schengen Area.

Citizens from some non-EU countries are required to hold a visa when travelling to the Schengen Area and the EU has a common list of countries whose citizens must have a visa when crossing its external borders. Nationals of Schengen states are limited to staying 3 months in a six-month period. These limitations and exceptions also apply for a list of countries available on the webpage of Ministry of Foreign Affairs (vm.ee/en/who-does-not-need-visa-visit-estonia). Not surprisingly, citizens of non-EU countries are required to hold a visa. The process and requirements can be found here: vm.ee/en/applying-visa-schengen-area

http://vm.ee/en/who-does-not-need-visa-visit-estonia

http://vm.ee/en/applying-visa-schengen-area

13

The first thing to know about visas are the various types:

» Airport transit visa (type A) ) – as the name says – this is a visa for transit only. You may not enter Estonia.

» Short-stay visa (type C) – single or multiple-entry stays of up to 90 days within a six-month period in the Schengen Area.

» Long-stay visa (type D) – valid only in Estonia and issued for single or multiple stays in Estonia of up to six months within a twelve-month period.

All the information necessary for your visa application can be found on the Ministry of Foreign Affairs webpage: vm.ee/en – For Travellers – Visiting Estonia.

Generally, a short-stay visa issued by one of the Schengen States entitles its holder to travel throughout the 26 Schengen States for up to three months within a six-month period. Visas for visits exceeding that period remain subject to national procedures.


Ministry of Foreign Affairs www.vm.ee/en

Police and Border Guard Board www.politsei.ee/en/teenused/

COMING TO ESTONIA

http://vm.ee/en

http://www.vm.ee/en

14

Visa Application ProcessVisa applicants who wish to visit only Estonia must apply for a Schengen visa from an Estonian foreign representative.

Visa applicants wishing to visit several Schengen member states (incl. Estonia) must apply for a visa from the main destination’s foreign representative. The main destination is the Schengen State in which the applicant plans to spend the most time.

Visa applicants who wish to visit several Schengen member states and are not sure about the main destination or plan to spend an equal number of days in each state must apply for a visa from the representative of the country at which the person enters the Schengen Area.

A visa application should in principle be submitted at least 15 calendar days before the intended visit (as this is the normal processing time) and cannot be submitted earlier than three months before the start of the intended visit.

15


Applying for a visa for the Schengen Area

www.vm.ee/en/applying-visa-schengen-area

Visa application forms

www.vm.ee/en/visa-application-forms

Estonian representatives handling visa applications

www.vm.ee/et/node/2430

COMING TO ESTONIA

16

ESTABLISHING A COMPANY

Establishing a company in Estonia is simple and can be done online as many other business transactions.

e-Services supporting businesses in Estoniae-Business Register – Company management online made easy.

e-Tax Board – The electronic version of the Estonian Tax and Customs Board, enabling businesses to declare taxes online, as well as make customs declarations.

e-Arveldaja – State-provided online accounting software.

digital signatures – Sign documents electronically with validity equal to signatures on paper (an ID-card or e-Residence card required).

online banking – Banking and invoicing online. The main service providers in this regard are LHV, Swedbank, SEB, Nordea and Danske Bank.

17

e-Residency for ForeignersThe Republic of Estonia is the first country to offer e-Residency – a transnational digital identity available to anyone in the world interested in administering a location-independent business online.


About e-Residency e-resident.gov.ee


http://e-resident.gov.ee

19

e-Residents of Estonia can establish a company online within a day, administer the company online from anywhere around the world without the need for a local director, conduct e-banking and make online money transfers, have access to payment service providers, declare taxes online and digitally sign documents and contracts. All of these cost-efficient and hassle-free services have been available for Estonians for over a decade – now by providing e-Residency, Estonia is moving towards the idea of a country without borders.

The simple set-up that makes it all possible

e-Residents receive a smart ID-card which provides:

» secure digital authentication

» digital signing of documents

» digital verification of document authenticity

» document encryption

The digital signature and authentication are legally equal to handwritten signatures and face-to-face identification in Estonia and between partners upon agreement anywhere around the world. The card has a microchip with security certificates for PIN1 and PIN2. PIN1 is a minimum of 4 digits for authorization. PIN2 has a minimum of 5 digits for a digital signature.

Apply for e-Residency: e-resident.gov.ee


http://e-resident.gov.ee

20

Legal Forms of CompaniesBy far the most common forms of business entities in Estonia are Private Limited Company (OÜ) and Public Limited Company (AS).

According to the Commercial Code, there are five forms of business entity: private limited company (which is the most popular legal entity set up by foreigners in Estonia), public limited company, general partnership, limited partnership or commercial association, and sole proprietorship.

Estonia has been working hard to facilitate the process of creating a new company. The process has been made fully digital and a new company can be established in a matter of minutes.

Private Limited Company (in Estonian: Osaühing or OÜ)

A private limited company is a company that has its share capital divided into private limited company shares. A private limited company is liable for the performance of its obligations with all of its assets, but a shareholder is not personally liable for the obligations of the company.

The minimum nominal value of a share is 1 EUR and the share capital must be a minimum of 2,500 EUR. If the founders are private persons and the share capital is less than 25,000 EUR, they can decide whether or not to pay their share when establishing the company. Until the whole

21

sum has been paid, the founders are personally liable for the obligations of the company up to the amount of the missing contribution.

A private limited company must have a management board – a directing body that represents and directs the private limited company. The management board may have one member or several members. They must be natural persons with active legal capacity without the obligation to hold shares from the company. If more than half of the board members do not permanently reside in Estonia, the company must give the Commercial Register a contact name and address in Estonia where necessary documents can be sent. The foreign owner must give the Commercial Register his/her address and e-mail address.

Although not mandated by law, a private limited company may have a supervisory board if prescribed by the Articles of Association. An auditor, who can be prescribed by law or Articles of Association, is mandatory when the company surpasses certain threshold values in terms of turnover, number of employees and asset value.

Public Limited Company (Aktsiaselts or AS)

One or more natural or legal persons with or without a share subscription may found a public limited company and its share capital is divided into public limited company shares. A public limited company is liable for the performance of its obligations with all of its assets, but a shareholder is not personally liable for the obligations of the public limited company.

The share capital must be a minimum of 25,000 EUR, and the minimum nominal value of a share should be 0.1 EUR. Shares must be registered and entered in the Estonian Central Register of Securities. The rights attached to registered shares belong to the person who is entered as the shareholder in the share register.

A public limited company must have a management board and a supervisory board. The management board is the directing body that represents and directs the public limited company. The management board may have one or several members. They must be natural persons with active legal capacity without obligation to hold any shares


22

of the company. Members of the supervisory board must not be members of the management board.

The supervisory board plans the activities and organizes the management of the public limited company, and supervises the activities of the management board. The supervisory board must hold a general meeting to present the results of a review. The supervisory board must give orders to the management board for the organization of the management of the public limited company. The supervisory board must have at least three members, unless the Articles of Association prescribe a greater number of members.

A member of the supervisory board must be a natural person with active legal capacity. If more than half of the

board members do not reside in Estonia, the company must give the Commercial Register a contact in Estonia where necessary documents can be sent. The foreign owner must give the Commercial Register his/her address and e-mail address.

A public limited company must have an appointed auditor.

Branch of a Foreign Company

If a foreign commercial undertaking wants to permanently offer goods or services in its own name in Estonia, it should enter its branch in the Commercial Register. A branch is not a legal person. The company is liable for the obligations arising from the activities of the branch. In the

23

cases provided by law, a company must obtain a licence in order to found a branch in Estonia.

A foreign company must appoint a director or board of directors for the branch. A director must be a natural person with active legal capacity. The residence of at least one director must be in Estonia, in a member state of the EEA or in the Swiss Confederation. If several directors are appointed for a branch, each of them may represent the branch unless it is specified that the directors or some of them may represent the branch jointly.

A foreign company must maintain separate bookkeeping accounts concerning the branch. Accounts concerning the branch must be maintained pursuant to the requirements of the Accounting Act.


Estonian Central Register of Securities

www.e-register.ee/en

Estonian Commercial Code

www.riigiteataja.ee/en/eli/ee/504042014002/consolide/current

Establishing a Private Limited Company – as Easy as Dancing


2

1

3

4

5

24

Establishing a Private Limited Company – as Easy as Dancing

Choosing and checking the business name ariregister.rik.ee/nimeparing.py

Registration of the company

Electronic filing request to the Commercial Register. For the holders of an Estonian, Portuguese, Finnish or

Belgian ID card or Lithuanian Mobile ID ettevotjaportaal.rik.ee

OR verification of foundation documents by a notary. List of notaries

www.notar.ee/18383

http://ariregister.rik.ee/nimeparing.py

http://ettevotjaportaal.rik.ee

2

1

3

4

5

25

Acquiring licenses if the area of activity is subject to special requirements

Information on the areas of activity and electronic registration at the Register of Economic Activities mtr.mkm.ee

Registration of the employees in the employee registry at the Tax Office www.emta.ee/

Registration of the company as a VAT payer at the Tax Office www.emta.ee

http://mtr.mkm.ee

26

Entry in Commercial RegisterIn order to enter a private limited company in the Commercial Register, the management board must submit a petition to the Commercial Register. The following documents should be enclosed with the application:

» the Memorandum of Association;

» the Articles of Association;

» a bank notice concerning the payment of share capital if the share capital must be paid before entry in Commercial Register;

» the names, personal identification codes and addresses of the founders and the amount of their contributions;

» share capital for a private/public company can be either monetary or non-monetary. When a non-monetary contribution is made, documents certifying the value of the contribution and an auditor’s written opinion on the valuation are also required;

» a notarized expression of consent of every member of the board to act as a member of the board and the confirmation of the absence of circumstances that would rule that out;

» the names, personal identification codes and residential addresses of the members of the management board, the supervisory board and the auditors;

» information on the planned principal activity;

» contact numbers (telephone, fax, etc.);

» other documents required by law.

27

The following information should be entered in the Commercial Register:

» the business name of the private limited company;

» the address of the private limited company;

» the amount of share capital;

» the foundation of the company without making contributions;

» the date of signing the Memorandum of Association;

» the names and personal identification codes of the members of the management board;

» the members of the management board entitled to represent the private limited company in addition to those provided for in subsection 181 (1) of the Commercial Code;

» the beginning and end of the financial year of the private limited company;

» other information required by law.

If registered electronically, a company can be established in just a few hours. Registering through a notary takes up to 5 days.

The state fee for registering a private limited company is 145 EUR. If the services of a notary are used, then the notary fee (which depends on the number of founders) and the amount of share capital must be paid as well.

Entries in the commercial register are public. Everyone has the right to examine the registry cards and business files, and to obtain copies of registry cards and documents in the business files.

If the full process still seems like something you would like to avoid, a list of companies that can establish a company for you is provided below.


Estonian Commercial Code goo.gl/ncJr7H

Centre of Registers and Information Systems www.rik.ee/en

Chamber of Notaries www.notar.ee


http://goo.gl/ncJr7H

28

Accounting RequirementsThe Law on Accounting (valid from 1 January 2003) regulates basic accounting functions in all business entities registered in Estonia. It does not regulate accounting for taxes, which are regulated by other laws and acts. The essence of the law is framed in compliance with the International Accounting Standards (IAS).

Almost all Estonian companies can choose whether to prepare their consolidated and annual accounts in accordance with International Financial Reporting Standards (IFRS) or the Estonian accounting standards (Estonian GAAP) written by the Estonian Accounting Standards Board. However, listed companies and financial institutions are required to prepare their accounts in accordance with IFRS.

The length of a financial year is 12 months. At the end of each financial year, an annual report that consists of the accounts and the management report is required. The auditor’s report and, in the case of a company, the profit distribution proposal for the financial year should be annexed to the annual report. The auditor’s report need not be annexed to the annual report if auditing is not compulsory.

The annual report should be filed with the Commercial Register within six months of the end of the financial year.

29

AuditingThe financial statements should be audited for all public limited companies and foundations.

In addition, an accounting entity should be audited if the accounting entity exceeds the limits of at least two of the following three criteria on the balance sheet of the accounting year:

» sales revenue (net turnover) in the case of a company, or income in the case of other accounting entities of 2 million EUR;

» total assets of 1 million EUR;

» 30 employees.

Or, if the accounting entity exceeds the limit of one of the following three criteria:


» total assets of 3 million EUR;

» 90 employees.


30

The financial statements of an accounting entity should be reviewed by an auditor if the accounting entity exceeds the limits of at least two of the following three criteria on the balance sheet of the accounting year:


» total assets of 0.5 million EUR;

» 15 employees.

Or, if the accounting entity exceeds the limit of one of the following three criteria:


» total assets of 1.5 million EUR;

» 45 employees.

A compulsory review may be replaced by an audit.

31



Accounting Act goo.gl/Jc8T7X

Auditors Activities Act goo.gl/yiT18o

Estonian Accounting Standards Board www.easb.ee

Estonian Board of Auditors www.audiitorkogu.ee

Accounting Companies www.investinestonia.com/investment-guide/useful-links#1-accounting

http://goo.gl/Jc8T7X

http://goo.gl/yiT18o

32

INFRASTRUCTURE AND PREMISESTransport Infrastructure

Air

Estonia’s main international airport is located in Tallinn, the nearest European capital to Asia. The airport is a 10 minute drive from the city centre. Airlines like Lufthansa, Turkish Airlines, Finnair, SAS, Vueling, LOT, Air Baltic, EasyJet and Ryanair among others have scheduled passenger flights to Tallinn. Airports in Helsinki, Copenhagen and Stockholm offer additional connecting flight options to global destinations.

There is also an international airport in Tartu with regular flights to Helsinki, Finland.

Sea

Estonia has a well developed port infrastructure — the largest port on the Baltic Sea and the deepest Baltic Sea ports are in Estonia and are able to receive large ocean-going vessels. In addition, three free trade zones are located directly at the ports.

Estonian ports are ice-free and easily navigable all year round. Europe’s most efficient terminals are also situated there, so the reloading of goods is performed faster. Estonian railway connections allow cargo delivery to and from seven ports, the largest of which is the Muuga Port owned by the Port of Tallinn.

Rail

The rail infrastructure in Estonia is developed and maintained by the state-owned company Estonian Railways. Estonia’s rail gauge is compatible with the railway networks of Eastern Europe and Russia.

The infrastructure of Estonian Railways has three border stations: two with Russia (Narva-Ivangorod and Koidula-Pechory) and one with Latvia (Valga-Valka). All border stations have 1500-metre-long station rails, making it easy to process even the longest of trains. The region’s only regular container train is operated between Estonia and Moscow.

Tallinn

Kärdla

Kuressaare

Pärnu Tartu

Paldiski

International flights

Kapellskär

Stockholm

Mariehamn

HelsinkiSt. Petersburg

33

Road

Estonia has a good quality road network and all roads are toll-free. There are 10 border inspection posts from Estonia to Russia. Electronic pre-arrival customs processing makes border crossing faster and smoother.


Tallinn Airport www.tallinn-airport.ee

Port of Tallinn www.portoftallinn.com

Estonian Railways www.evr.ee

Estonian Logistics and Transit Association www.transit.ee

INFRASTRUCTURE AND PREMISES

34

Free Trade ZonesThere are four free trade zones in Estonia:

» Paldiski free trade zone at the Paldiski Northern Port in Northwest Estonia; www.portofpaldiski.ee

» Muuga free trade zone in the Port of Muuga in north Estonia; www.portoftallinn.com/muuga-harbour

» Sillamäe free trade zone in the Port of Sillamäe in northeast Estonia; www.silport.ee

» Valga free trade zone on the mainland, Latvian border in southern Estonia.

Goods in the free trade zone are considered outside the customs territory. Goods brought to the free zone for later re-export are not subject to VAT, excise or customs duties. Estonia’s special tax advantage – no tax on reinvested profits – is also preserved in the free trade zones.

The free trade zones are established by the Estonian government, and monitored by Estonian Tax and Customs.


Estonian Tax and Customs Board www.emta.ee

35

Industrial ParksThere are many industrial parks with pre-developed infrastructure in different parts of Estonia that welcome manufacturing and logistics companies. All parks are located in good locations near highways, railways and ports.

A few examples of the largest parks:

» Ida-Viru Industrial Area with six industrial parks in eastern Estonia;

» Port of Sillamäe industrial park in eastern Estonia (a free zone);

» Port of Muuga industrial park close to Tallinn (a free zone);

» Port of Paldiski industrial park in northwest Estonia (a free zone);

» Narva Business Park close to Narva in eastern Estonia;

» Reola Business Park close to Tartu in southeast Estonia;

» Vahi Industrial Park close to Tartu in southeast Estonia;

» Loode-Pärnu Industrial Area close to Pärnu in southwest Estonia.


36

PremisesThere are no particular restrictions for foreigners acquiring immovables in Estonia. General restrictions fall into two main types according to the Restrictions on the Acquisition of Immovables Act:

» restrictions arising from the acquisition of 10 hectares or more of agricultural or forested land;

» restrictions arising for national defence reasons.

The Government may grant authorization to foreigners for the acquisition of an immovable in one of the two categories above for reasons significant to the State.

The following graph shows the indicative range for rents (excluding VAT and operating expenses) in the major towns of Estonia for class A and B1 office premises, medium-sized retail units in major shopping centres, and new and renovated warehouses (EUR/m2 per month):

Class A - property managed by a professional management company, located in the central business district (Südalinn), completely new construction, fully controllable technical systems, reasonable column spacing, raised floors and suspended ceilings, good underground parking ratio, corresponding infrastructure/amenities in the building (including cafeteria).

37

Class B1 - reconstructed or newly constructed buildings with fully or partially replaced technical systems, located in the city centre (Kesklinn) or on the edge of the city centre; possibility to install raised floors and suspended ceilings, western-standard interior fit-out and surface parking.

Real Estate Agents:

Colliers International Advisors, Estonia www.colliers.ee

Newsec Baltics www.newsec.ee

Arco Vara www.arcovara.ee

Ober Haus www.ober-haus.com

Uus Maa www.uusmaa.ee

1Partner Kinnisvara www.1partner.ee

Kapitali Grupp www.kapitaligrupp.ee

Mainor Ülemiste mainorulemiste.ee

Technopolis Ülemiste technopolis.ee

50

40

30

20

10

0

Office Retail Industrial

Tallinn

Tartu

Pärnu

Narva

Source: Colliers International Advisors, Estonia3.

9 -

16

5.0

- 11

.5

4.0

- 8.

0

3.1

- 6.

5

7.0

– 48

.0

6.5

- 24

.0

6.5

- 16

.0

6.5

- 15

.0

1.3

- 5.

1

2.0

- 4.

2

1.6

- 4.

4

2.3

- 3.

8

EUR / m2


http://mainorulemiste.ee

http://technopolis.ee

38

UTILITIESElectricityThe Estonian power system is a compound complex consisting of Narva oil shale fired power plants, the Iru combined heat and power plant (near Tallinn), wind parks and restored hydro plants.

The Estonian power grid is connected to the Russian and Latvian Grids and via two maritime cables (300 MW and 600 MW) to the Finnish (Nordic) Grid.

The Estonian energy system is the only predominantly oil-shale-based energy production system in the world. The largest energy provider in Estonia is Eesti Energia, a 100% state-owned company. Eesti Energia is the largest employer in Estonia and its bonds are listed on the London Stock Exchange.

The price of electricity comprises four components: electricity, network service, renewable energy support and excise duty. The price of electricity on the open market can be followed through the Nord Pool Spot www.nordpoolspot.com


Eesti Energia www.energia.ee

Elering www.elering.ee

Nord Pool Spot www.nordpoolspot.com

39

WaterWater supply and waste water services are provided by local water companies. The cost of water for industrial use in Tallinn is approximately 2.3 EUR per m3 (excluding VAT). Exact prices are available on the respective companies’ home pages.


Tallinna Vesi www.tallinnavesi.ee

Narva Vesi www.narvavesi.ee


40

Industrial GasEstonia’s natural gas company is Eesti Gaas, which imports natural gas into Estonia from Russia and Inchukalns’ underground gas storage in Latvia. Several LNG terminals are also underway. Gas is distributed to customers through gas pipelines, distribution stations and gas pressure reduction stations. Network services to all participants in the natural gas market in the territory of Estonia are provided by EG Võrguteenus.

The price of gas consists of three elements: gas, network service and excise duty. The price of natural gas for domestic users consuming 100,000 m3 or more per year is 0.315 EUR per m3 (excluding VAT). The price for industrial users is subject to negotiations and the price is determined on the basis of annual total consumption (over 100,000 m3 per year or less).


Eesti Gaas www.gaas.ee

41

Broadband NetworkEstonia has a highly developed telecommunications and IT infrastructure. A fibre optic backbone network connects all Estonian county centres.

By 2017, all Estonian households, enterprises and institutions will have access to broadband with a data connection speed up to 100 Mbit/s. The Estonian Broadband Development Foundation’s objective is to build a network of fibre optic cables across Estonia to make that possible.

Estonia is completely covered by digital networks providing wireless internet. A network of Public Access Points covers most cities and towns. Internet service providers offer connections of up to 400 Mbit/s to domestic users in urban areas. 4G mobile internet is available in cities and the 3.5G network covers all of Estonia.


Estonian Broadband Development Foundation www.elasa.ee

Eesti Telekom www.telekom.ee

Elion Ettevõtted www.elion.ee

Starman www.starman.ee

Televõrk www.televork.ee


42

FINANCING A BUSINESSFinancial SystemThe Estonian financial system is heavily dependent on the banking sector, therefore businesses rely on bank loans for financing, rather than the domestic capital markets. Banks operating in Estonia are predominantly subsidiaries or branches of Nordic banks; local banks make up only around 5% of the market. The four largest banks in Estonia – Swedbank, SEB Bank, Nordea Bank Finland and Danske Bank – have a combined market share of around 90%. This means that the financial sector is well developed and stable, offering Scandinavian services to businesses operating in Estonia. Consequently, even during the financial crisis in 2008 Estonia was one of the few countries that did not have to offer government support to its banking sector.

An overwhelming majority of companies in Estonia are SMEs for whom bank-based financing remains the most efficient. At the same time, a substantial share of medium and large enterprises in Estonia are owned by foreign companies, which provide them with other alternatives for obtaining funds beyond the local financial sector. For this reason, the financial markets of such a small country should be considered as part of the larger regional financial market.

43

The banks offer a wide range of services from everyday banking to sophisticated wealth management, and are also the largest providers of leasing and factoring services. Most banks also have insurance subsidiaries.

All financial service providers have to be registered with the Financial Supervision Authority (FSA). The FSA conducts state supervision over banks, insurance companies, insurance intermediaries, investment firms, management companies, investment and pension funds, as well as payment service providers, e-money institutions and the securities market, which have all been authorised by the FSA.

The central bank functions in Estonia are carried out by the Bank of Estonia.


Bank of Estonia www.eestipank.ee

Financial Supervision Authority www.fi.ee

Swedbank www.swedbank.ee

SEB Bank www.seb.ee

LHV Bank www.lhv.ee

Nordea Bank www.nordea.ee

Danske Bank www.danskebank.ee

FINANCING A BUSINESS

44

EBRD FinancingAccording to the Estonian Country Strategy approved in October 2012, the EBRD focuses on supporting investments in energy efficiency and renewable energy, improving the competitiveness of the export sector and supporting cross-border investments by Estonian companies in the EBRD’s region of operations.

The EBRD finances investments through loans and/or equity. The Bank’s share is typically up to 35% of an investment amount; the rest is normally provided by the sponsor and/or the commercial banks. In the case of equity investment, the EBRD’s maximum shareholding should not be more than 25%, nor should the Bank be the largest single shareholder. The minimum size of an EBRD loan should be 5 million EUR. In some rare cases smaller loans can be considered.

Estonia is expected to graduate at the end of 2015. After that date, the EBRD will not make any new investments in the country. Any commitments entered into prior to the graduation date will still be valid.


EBRD Estonia country page www.ebrd.com/pages/country/estonia.shtml

45

National Business Support Organizations Estonia has a number of national business support organisations that offer advisory services as well as financial support to companies, depending on their field of activity.

» The biggest organisation in this field is Enterprise Estonia, offering financial assistance, advisory services, cooperation opportunities, training for entrepreneurs and research establishments for the public and third sector. Enterprise Estonia is also the largest agency implementing company-oriented EU support programmes.

» Kredex offers companies various financing solutions such as loans, venture capital, credit insurance and guarantees.

» The aim of the investment activities of the Estonian Development Fund is to facilitate the birth of innovative and ambitious companies and to support the growth of a venture capital market.

» The Rural Development Foundation assists farmers and other SMEs in rural areas in the form of loan guarantees, loans and consultation services.

» The Agricultural Registers and Information Board is the agency implementing projects in crop farming, animal husbandry, fisheries and forestry.

» The Environmental Investment Centre is the agency implementing environmental projects.

» Horizon 2020 is the biggest EU Research and Innovation programme ever with nearly 80 billion in funding available over 7 years (2014 to 2020).


Enterprise Estonia www.eas.ee

Kredex www.kredex.ee

Estonian Development Fund www.arengufond.ee

Rural Development Foundation www.mes.ee

Agricultural Register and Information Board www.pria.ee

Environmental Investment Centre www.kik.ee

Horizon 2020 goo.gl/1QnGC5


http://goo.gl/1QnGC5

46

EU Structural SupportA new European Union seven-year budget period started in 2014. In total, the period will be implemented for ten years – until the end of 2023.

During that time, 3.5 billion EUR in total will be channelled to Estonia from the EU Structural Funds.

In the field of economic development, the main focus is on innovation and new business models: smart specialisation on information and communication technology; health technologies and services and the effective use of resources.


Ministry of Economic Affairs and Communications www.mkm.ee

EU Structural Funds www.struktuurifondid.ee/en

47


48

LABOUR MARKETLabour LegislationThe most important statutes and rules regulating the activities in the labour market are the Constitution of Estonia, Conventions of the International Organization of Labour, Employment Contracts Act, Collective Agreements Act, Trade Unions Act and several enactments of the Government and Ministries of Estonia.

An employment contract is required to include some specific terms, in the absence of which the contract is defective.

The following terms are mandatory:

» the identities of the parties (name, personal identification code or registration number, residence);

» the date of entry into the employment contract and commencement of work by the employee;

» a description of duties;

» the official title, if this brings about legal consequences;

49

» the agreed pay for the work (wages), including other benefits, if agreed upon;

» wages based on economic performance and transactions;

» the manner of calculation;

» the procedure for payment and the date wages are due (payday);

» taxes and payments payable and withheld by the employer;

» the time when the employee performs the agreed duties (working time);

» the place the work is performed;

» the duration of holidays;

» a reference to, or the terms of, advance notification of cancellation of the employment contract;

» the rules for organising the work approved by the employer;

» a reference to a collective agreement, if a collective agreement is applicable to the employee.

LABOUR MARKET

51

Terminating an Employment ContractA contract is considered to be expired on the following grounds:

» by agreement of the parties;

» end of the contract period;

» the initiative of the employee;

» the initiative of the employer;

» demands of third parties and conditions not depending on the parties involved.

Termination of a contract during a trial period: both the employee and the employer have the right to terminate the employment contract during a four-month trial period by informing the other party 15 calendar days in advance.

Terminating a contract by the employee: advance notification of at least 30 calendar days is required.

Terminating a contract by the employer: the employer may extraordinarily terminate an employment contract if the justification for

doing so arises directly from the employee or the prevailing financial situation. The employer must provide the employee with advance notice depending on the length of time the employee has been working:

» less than one year – 15 calendar days;

» 1-5 years – 30 calendar days;

» 5-10 years – 60 calendar days;

» more than 10 years – 90 calendar days.

In the case of redundancy, the employer must pay the employee compensation equivalent to one month’s average wages. In addition, the employee is also entitled to unemployment insurance benefits paid by the Unemployment Insurance Fund.

Notice of a contract termination by either party should be presented in writing, unless agreed otherwise.


Employment Contracts Act goo.gl/qgsCzn

LABOUR MARKET

http://goo.gl/qgsCzn

52

Working Time and Vacation

The length of a working week 5 days

The length of a working day 8 hours

General vacation 28 calendar days

Age of retirement (both men and women) 63 years

The standard working schedule in Estonia is eight hours a day, five days per week. The duration of one shift may not exceed 12 hours.

Overtime is allowed by mutual agreement. The working schedule together with overtime cannot exceed on average 48 hours per seven days over a calculation period of four months, unless otherwise provided by law. Employer and employee may agree on a longer working schedule than 48 hours if the working schedule does not exceed, on average, 52 hours per seven days over a calculation period of four months and the agreement is not unfair to the employee. An employee may cancel the agreement at any time with two weeks’ advance notice.

The duration of annual vacation is 28 days. An extended vacation is granted for some professions, such as state officials and local government officials, teachers, academic, pedagogical and scientific staff and others.

53

National holidays and public holidays are not included in vacation calculations. An employee may be granted unpaid leave at his or her request for a period of time established by agreement of the parties.

Maternity leave - A woman is granted 140 days for pregnancy and maternity leave, which may begin at least 70 days before the estimated birth date of the child. The maternity benefit is paid by the state.

Parental leave - A mother or father can take parental leave at her or his request for raising a child under 3 years of age. The parental benefit is paid by the state. Together, the maternity benefit and the parental benefit are paid for a period of 575 days.

Sickness - in case of sickness, an employee can be given up to 182 calendar days of paid sick leave (max 250 days per year). The gross wage during this period is 70% of the employee’s average salary for the previous year. The employer pays the wage from the 4th to 8th day of sickness and the state pays starting on the 9th day.

LABOUR MARKET

1 JANUARYNEW YEAR’S DAY 24 FEBRUARY

INDEPENDENCE DAY (ISESEISVUSPÄEV)

GOOD FRIDAY

EASTER SUNDAY

1 MAYSPRING DAY

7 WEEKS AFTER EASTER SUNDAYPENTECOST

23 JUNEVICTORY DAY (VÕIDUPÜHA)

24 JUNEST JOHN’S DAY OR

MIDSUMMER DAY (JAANIPÄEV)

20 AUGUSTRE-INDEPENDENCE DAY

24-26 DECEMBERCHRISTMAS

54

Public Holidays

» 1 January – New Year’s Day

» 24 February – Independence Day (Iseseisvuspäev)

» Good Friday

» Easter Sunday

» 1 May – Spring Day

» 7 weeks after Easter Sunday – Pentecost

» 23 June – Victory Day (Võidupüha)

» 24 June – St John’s Day or Midsummer Day (Jaanipäev)

» 20 August – Re-Independence Day

» 24-26 December – Christmas

1 JANUARYNEW YEAR’S DAY 24 FEBRUARY

INDEPENDENCE DAY (ISESEISVUSPÄEV)

GOOD FRIDAY

EASTER SUNDAY

1 MAYSPRING DAY

7 WEEKS AFTER EASTER SUNDAYPENTECOST

23 JUNEVICTORY DAY (VÕIDUPÜHA)

24 JUNEST JOHN’S DAY OR

MIDSUMMER DAY (JAANIPÄEV)

20 AUGUSTRE-INDEPENDENCE DAY

24-26 DECEMBERCHRISTMAS

55

If a public holiday falls on the weekend, a day off from work is not included in the following week.

The working days before New Year’s Day (January 1st), Independence Day (February 24th), Victory Day (June 23rd) and Christmas Eve (December 24th) are three hours shorter.


Employment Contracts Act goo.gl/k5KIRT

LABOUR MARKET

http://goo.gl/k5KIRT

56

RemunerationThe average wage in Estonia at the end of 2014 was 1,068 EUR. The monthly minimum wage for full-time work is 390 EUR. Wages must be paid at least once a month.

If the working hours are at night (from 10:00 pm to 6:00 am), employers shall pay wages exceeding the normal wages by 1.25 times, unless it has been agreed that the wages include remuneration for working at night.

Work during public holidays may be compensated either by offering time off or by extra remuneration of at least 50% of the wage rate.

Payment for overtime - additional remuneration per hour of overtime is at least 50% of the rate of the hourly wage.


Employment Contracts Act goo.gl/AfN9n6

http://goo.gl/AfN9n6

57

Finding Suitable StaffPotential sources for finding suitable staff:

» the Estonian Unemployment Insurance Fund (free-of-charge services to employers to identify workers who meet the criteria they submit);

» private recruitment companies; advertising in national and local papers (the Estonian Newspaper Association unites all the biggest newspapers in Estonia);

» career services of the main universities.


Estonian Unemployment Insurance Fund www.tootukassa.ee

Work in Estonia www.workinestonia.com

Estonian Newspaper Association www.eall.ee

Careers service of Tallinn University of Technology www.ttu.ee

Careers service of University of Tartu www.ut.ee

Recruitment Companies

www.cvo.ee

www.hrfactory.com

www.manpower.ee

www.fontes.ee

www.areserv.ee

www.almacareer.com

www.cv.ee

www.cvkeskus.ee

www.aristaexecutive.com

talentor.com

LABOUR MARKET

http://talentor.com

58

TAXATIONThe Tax SystemThe Estonian tax system consists of national taxes and local taxes collected by local governments in their jurisdiction. National taxes include income tax, social tax, land tax, gambling tax, value-added tax, duty and excise taxes and heavy goods vehicle tax. Local governments have the authority to impose local taxes, but effectively only a few have introduced local taxes, including boat tax, advertising tax, tax for closing streets, motor vehicle tax, tax on keeping domestic animals, amusement tax and parking fees.

Estonia does not impose any gift, inheritance or estate taxes. Various transactions may be subject to the payment of state fees (stamp duties).


The Ministry of Finance www.fin.ee


59

TAXATION

60

Corporate Income TaxEstonian resident companies and the permanent establishments of foreign entities (including branches) are subject to income tax only in respect to all distributed profits (both actual and deemed), including:

» corporate profits distributed in the tax period;

» gifts, donations and representation expenses;

» expenses and payments not related to business.

Fringe benefits are taxable at the level of the employer. The employer pays income tax and social tax on fringe benefits.

All distributions are subject to income tax at the rate of 20/80 of the amount of taxable payment. The transfer of the assets of the permanent establishment to its head office or to other companies is also treated like a distribution. Dividends paid to non-residents are no longer subject to withholding tax, irrespective of participation in the share capital of the distributing Estonian company. However, various withholding taxes may still apply to other payments to non-residents if they do not have a permanent establishment in Estonia or unless the tax treaties otherwise provide.

As the tax period for corporate entities is a month, income tax must be returned and paid monthly by the 10th day of the following month.

61

Labour TaxesEmployers registered in Estonia (including the permanent establishments of foreign entities) must pay social tax on all payments made to employees, except on those specifically exempted by law. Fringe benefits and the income tax thereof are also included in the taxable base. Currently, only employers and individuals engaged in business must make social tax contributions. Employees are not required to pay social tax.

The rate of social tax is 33% (20% for social security and 13% for health insurance). Besides the social tax, unemployment insurance tax at a rate of 0.8% must be paid on the gross salary (an additional 1.6% is withheld from the employees’ salary).



Ministry of Finance www.fin.ee

TAXATION

62

VAT (Value Added Tax)VAT is charged on the supply of goods and services in the course of business activities and the self-supply of goods and services. A taxable person is an individual engaged in business and registered as a taxable person. A taxable person adds the amount of VAT to the taxable value of the goods transferred or services provided, calculates the amount of VAT due to pay, pays VAT, preserves documents, maintains records and issues invoices in accordance with requirements.

The threshold for obligatory registration is 16,000 EUR. The threshold for a taxable person with limited liability in the case of the acquisition of goods is 10,000 EUR. There is no threshold in the case of the acquisition of services.

The taxable period is one calendar month, and VAT returns must be submitted to the tax authority by the 20th day of the month following the taxable period.

The standard rate of VAT is 20%; the reduced rate is 9% and 0% in some cases.




63

Personal Income TaxResidents pay tax on their worldwide income. Taxable income includes, in particular, income from employment (salaries, wages, bonuses and other remuneration); business income; interest, royalties, rental income; capital gains; pensions and scholarships (except scholarships financed from the state budget or paid on the basis of law). Taxable income does not include dividends paid by Estonian or foreign companies when the underlying profits have already been taxed.

Non-residents pay personal income tax only on their income received from Estonian sources. Taxable income in Estonia includes:

» income from work under a labour contract or contractor’s agreement in Estonia;

» income from business carried out in Estonia;

» interest income received from Estonia (only if it is substantially higher than that of similar debt claims);

» royalties;

» income from the lease of assets located in Estonia;

» gains from disposal of assets located in Estonia;

» directors’ fees paid by Estonian enterprises;

» income of a sportsman or an artist from his or her activities in Estonia;

» pensions and scholarships.

The personal income tax is withheld from the employees’ gross salary every month and paid to the tax office by the employer. From 2015, the tax rate of the taxable income is 20%.




TAXATION

64

Other TaxesLand tax is levied on the taxable value of all land (other than that which is specifically exempt) based on an official valuation. The owners of the land are liable for land tax. The annual land tax rate varies between 0.1% and 2.5% of the assessed value of the land. The council of the local authority is authorised to establish the rate of land tax.

Excise duties are levied on tobacco, alcoholic beverages, fuel, electricity and packages.

The heavy goods vehicle tax is paid for the following classes of vehicles which are intended for the carriage of goods: lorries with a maximum authorised weight or gross laden weight of not less than 12 tons; road trains composed of trucks and trailers with a maximum authorised weight or gross laden weight of not less than 12 tons.

A gambling tax is imposed on amounts received from operating games of skill, totalisator, betting and lotteries. Tax is charged also on gambling tables and machines used for games of chance located on licensed premises.




65

Paying TaxesThe tax authority for state taxes is the Tax and Customs Board.

All the taxes in Estonia can be declared via e-tax/e-customs, which is the 24-hour electronic service desk of the Estonian Tax and Customs Board. Via e-tax/e-customs it is possible to:

» submit declarations and notices;

» perform customs operations;

» be aware of one’s tax operations;

» securely communicate with the Tax and Customs Board.

Monthly reporting to the Tax and Customs Board:

» Income tax, social tax, unemployment insurance premiums and funded pension payments have to be withheld, paid, declared and transferred to the Tax and Customs Board by the 10th of every month, following the month of payment;

» A VAT return is filed and the VAT is payable by the 20th of the month following the period of taxation;

» By the 10th of every month, a payer is required to submit a notification file on recipients of dividends or payments made to shareholders of proceeds from liquidations, payments on capital reductions and redemption or return of participation to the regional tax centre of the Estonian Tax and Customs Board only if there was a payment the month before.

Non-residents can choose a tax representative. The tax representative of a non-resident is a person to whom the Tax and Customs Board has issued a corresponding activity licence authorised to represent the non-resident for the performance of obligations arising in Estonia.



Taxation Act goo.gl/hvUMDR

Estonian Taxpayers Association www.maksumaksjad.ee

TAXATION

http://goo.gl/hvUMDR

66

The Legal System The legal system in Estonia is based on the Continental European civil law model and has been influenced by the German legal system. Unlike in common law countries, Estonia has detailed codifications and issues are solved according to those.

Estonian law is basically divided into private and public law. Generally, private law consists of civil law and commercial law. Public law consists of international law, constitutional law, administrative law, criminal law, financial law and procedural law.


Estonian Legislation in English www.riigiteataja.ee/en

Foreign BusinessesForeign investors have equal rights and obligations with local entrepreneurs.

Internal law and international agreements protect foreign investments in Estonia. Estonia has concluded treaties for the protection of investments with 31 countries, including the USA, Germany, France, Finland, Sweden, Norway and Switzerland. Also, agreements for avoiding double taxation have been made with 53 countries, including the EU.

67

Environmental LawAn outline of the provisions of the Estonian environmental law are included in:

» The Estonian Constitution;

» Integrated Pollution Prevention and Control Act (forced 01.05.2002);

» Environmental Supervision Act (forced 07.07.2001);

» Environmental Impact Assessment and Environmental Management System Act (entered into force on 03.04.2005);

» Pollution Charge Act (entered into force on 21.03.1999);

» Nature Conservation Act (entered into force on 01.05.2004).

The Estonian Constitution enacts that natural wealth and resources are national riches and shall be used in a sustainable manner. Everyone has a duty to preserve the environment and to compensate for damage caused by him or her. The Sustainable Development Act enacts principles of national strategies based on principles authorised during the Rio de Janeiro Conference (1992).

Estonian environmental law is dynamic and variable. International environmental standards are transferred to the Estonian legal order, and environmental legislation is often duplicated. Often environmental legislation is in the form of government and ministry regulations.

Estonia has entered into the main international environmental conventions and bilateral environmental agreements. Estonia has acceded with the following conventions: Aarhus (1998), Espoo (1991), Helsinki (1992), Kyoto protocol (1997), Geneva (1979), Vienna (1985), Washington (1973), Rio de Janeiro (1992), etc.

The Environmental Inspectorate, Environmental Board and local government bodies exercise environmental supervision in Estonia. The Environmental Inspectorate has the authority to impose an administrative liability for the violation of environmental laws and standards.


Ministry of Environmental Affairs www.envir.ee

Environmental Board www.keskkonnaamet.ee

Environmental Inspectorate www.kki.ee

TAXATION

68

Planning and BuildingThere are a few documents that one must be acquainted with before starting construction activity. First, the requirements for construction are listed in the Building Act. Second, the detailed plans describe the general limits and possibilities for housing in high-density areas. Building design documentation is also required for construction activities, for both new buildings and changes to existing buildings. Building permission can be obtained from the local government office and this will be the basis for construction supervision. The conclusion of the construction process is marked by obtaining the Permission of Use from the local government.


Building Act goo.gl/kGDbTT

Planning Act goo.gl/MDFWtg

http://goo.gl/kGDbTT

http://goo.gl/MDFWtg

69

The Justice System and Legal AidEstonia has a three-level court system. County, city and administrative courts, situated mostly in the county centres adjudicate matters in the first instance. The courts of second instance, or the circuit courts in Tallinn, Tartu and Jõhvi hear appeals against the decisions of the courts of first instance. The Supreme Court in Tartu is the court of highest instance.

A statement of claim is filed with the court of first instance, an appeal with the court of second instance and an appeal for annulment with the court of third or highest instance. A matter shall be heard in the Supreme Court only after all previous court instances have been passed. The filing of an appeal is governed by respective codes of court procedure.

Disputes arising from private law relationships can also be settled in the Court of Arbitration (of the Estonian Chamber of Commerce and Industry).


Courts www.kohus.ee

Prosecutor’s Office www.prokuratuur.ee

Court of Arbitration www.koda.ee

TAXATION

70

Attorneys at LawIn Estonia, only members of the Estonian Bar Association may provide legal services as attorneys. The Estonian Bar Association is a self-governing professional association acting on the administrative principles of local government established on 14 June 1919 for the organisation of the provision of legal services in the private and public interest and defence of the professional rights of attorneys. Since 1992, the Estonian Bar Association has been a member of the International Bar Association (IBA), and since 1 May 2004 a full member of the Council of Bars and Law Societies of Europe (CCBE).


Estonian Bar Association www.advokatuur.ee

71

TAXATION

Chambers of CommerceCompanies operating in Estonia are free to join the chambers of commerce. The Estonian Chamber of Commerce is the largest business chamber with more than 3,000 members. Various international chambers of commerce have offices in Estonia and can therefore provide opportunities for contacts and networking. Being a member of a chamber of commerce can also provide additional credibility and be a source of new clients.


Estonian Chamber of Commerce and Industry www.koda.ee/en

American Chamber of Commerce in Estonia amcham.ee

British-Estonian Chamber of Commerce www.becc.ee

Norwegian-Estonian Chamber of Commerce www.necc.ee

Finnish-Estonian Chamber of Commerce www.fecc.ee/en

Danish-Estonian Chamber of Commerce www.decc.ee

German-Baltic Chamber of Commerce www.ahk-balt.org

Swedish Chamber of Commerce in Estonia www.swedishchamber.ee

Foreign Investors’ Council in Estonia www.fice.ee/

http://amcham.ee

72

LIVING IN ESTONIA

Although small, Estonia offers many surprises. In addition to being one of the forerunners among advanced e-societies, it offers a vibrant cultural life and sufficient opportunities for recreational activities.

Expats in Estonia emphasise the general simplicity of living in Estonia - life is not over-regulated, streets are safe, unspoilt nature is a maximum of half an hour’s driving distance. Furthermore, the high level of English language skills means that foreigners never feel helpless, whether at the doctor’s, on the street or visiting official institutions. As public services are digitalised, everything in Estonia takes place quickly and painlessly. Last but not least, there’s no shortage of fresh food and air, as the level of pollution is very low even in the biggest cities.

Inspiration can be drawn from our Relocation Guide http://goo.gl/3BtYeV or Work in Estonia website http://www.workinestonia.com/living-in-estonia

73

LIVING IN ESTONIA

74

Cost of LivingLiving in Estonia is cheaper than in other countries of the Nordic region. According to the www.xpatulator.com database, Tallinn is 357th out of 780 cities. Copenhagen is ranked 23rd, Stockholm 59th, Helsinki 71st and St Petersburg 360th.

In Mercer’s 2014 Cost of Living Ranking, Tallinn is in 110th place, compared to Copenhagen in 15th, Stockholm in 38th, Helsinki in 42nd and Riga in 75th.


Mercer’s Cost of Living Index www.mercer.com/costofliving

Xpatulator.com www.xpatulator.com

http://www.xpatulator.com

75

Education SystemIn Estonia, education is provided free by the state from basic to higher education. The overall level of the basic and secondary education is very high, as confirmed by the PISA test www.oecd.org/pisa

Basic education is compulsory in Estonia. All children living in Estonia, including children from other countries, are required to attend school from age 7 until grade 9 or age 17. This is the minimum general education that provides the right to acquire senior secondary education or to enter working life.

Senior secondary education is based on basic education and is divided into general senior secondary education and vocational secondary education. General senior secondary education is acquired within three school years in a senior secondary school. Vocational secondary education is acquired at a vocational education institution, on the basis of either a basic school or general senior secondary education.

Schools where the language of instruction is English:

Tallinn

International School of Estonia (IB programme)

www.ise.edu.ee/et

Tallinn European School (EB programme)

www.est.edu.ee

Tallinn English College (IB programme)

www.tik.edu.ee/en

EBS High School (only secondary education)

www.ebs.ee/en/

Tartu

Tartu International School

www.istartu.ee

Miina Härma Gümnaasium (IB programme)

mhg.tartu.ee/

LIVING IN ESTONIA

http://mhg.tartu.ee/

76

Higher education may be acquired as professional higher education or academic higher education. All students with senior secondary education or equal foreign qualifications have the right to apply for a place in a higher education institution.

Professional higher education is provided by institutions of professional higher education or at university colleges. The standard period of study in professional higher education is three to four years.

At a university, higher education can be acquired at three levels: Bachelor’s, Master’s and Doctoral study. Bachelor’s study is three to four years, Master’s study is one to two years, and Doctoral study is three to four years.

Universities in Estonia:

University of Tartu www.ut.ee

Tallinn University www.tlu.ee

Tallinn University of Technology www.ttu.ee

Estonian Academy of Arts www.artun.ee

Estonian Academy of Music and Theatre www.ema.edu.ee

Estonian Business School (private university) www.ebs.ee

Estonian University of Life Sciences www.emu.ee

77

Health Care ServicesThe Estonian health care system is built on solidarity-based health financing. The medical service does not depend on the amount of social tax paid.

Estonia has obligatory health insurance funded via social tax, which in total is 33% of the gross salary of an employee and is paid by the employer. Health insurance is organised by the Estonian Health Insurance Fund (Eesti Haigekassa).

An insured person is a permanent resident of Estonia or a person living in Estonia on a temporary residence permit or on the basis of permanent residence who pays social tax for him/herself or for whom the social tax is paid. Children under 19 years of age and pregnant women have equal status to insured persons. It is also possible to obtain private health insurance from Estonian insurance companies.

In Estonia, everyone has the right to receive emergency medical care regardless of whether they have health insurance or not.

Everybody has a right to choose a family physician. He/ she is the first person consulted in the case of illness.

The family physician:

» sends the person to a medical specialist;

» gives advice concerning prevention of diseases;

» takes preventive measures and issues health certificates, as well as certificates of incapacity to work;

» issues prescriptions. Doctors can prescribe medications and forward them electronically to the national database. An e-prescription is then immediately accessible in any pharmacy at the patient’s request.


Estonian Health Insurance Fund www.haigekassa.ee

Medicine Estonia www.medicineestonia.eu

National Health Plan goo.gl/N4STQb

LIVING IN ESTONIA

http://goo.gl/N4STQb

78

Residence Permits

For Citizens of the EU, EEA and Swiss Confederation

A citizen of the EU may stay in Estonia without a residence permit on the basis of a valid travel document or identity card for up to three months.

In order to stay longer, a citizen must obtain the right of temporary residence. An EU citizen must register his/her stay at the local government authority nearest to his or her residence within three months from the date of entering Estonia. The right of temporary residence is granted for a period of five years.

Generally, an EU citizen who has resided in Estonia permanently for five successive years on the basis of the right of temporary residence obtains the right of permanent residence.

79

For Third Country Nationals

A residence permit may be temporary (with a validity period of up to five years) or long-term.

A temporary residence permit may be issued to an alien:

» for settling with a spouse or close relative permanently residing in Estonia;

» for study;

» for work;

» for business;

» in case of substantial public interest;

» as an extension of a residence permit in existence of legal income.

LIVING IN ESTONIA

80

Temporary residence permit for business

A foreigner from outside the EU may apply for a residence permit for business if he or she owns shares in a company or acts as a sole proprietor, and:

» has invested in Estonia at least 65,000 EUR under his/her control in the case of a company;

» has invested in Estonia at least 16,000 EUR under his/her control in the case of a sole proprietorship.

The equity capital of a company, subordinated liability and registered fixed assets value may be considered as investment.

The company must be registered and have economic activity in Estonia for at least four months prior to application.

More detailed information can be found in the Aliens Act §192.

81

A long-term residence permit may be issued to an alien who:

» has stayed in Estonia permanently on the basis of a temporary residence permit for at least five years;

» holds a valid temporary residence permit;

» has registered residence, health insurance and permanent legal income for subsistence in Estonia;

» and has knowledge of the Estonian language at least at a basic level.

LIVING IN ESTONIA

82

Work PermitsForeigners with residence permits are generally allowed to work in Estonia. Short-term employment in Estonia is also permitted. The only occasion when residence permits do not automatically allow residents to work is when the basis of the residence permit is legal income, which is a specific type of residence permit.

Terms for employment in Estonia for foreigners from outside the EU staying in Estonia on the basis of a visa or visa free:

» Foreigners are allowed to work in Estonia if their short-term employment has been registered with the Police and Border Guard Board. The registration of short-term employment shall be applied for by the employer.

» Foreigners may carry a managerial or supervisory role as a member of a management body of a legal entity registered in Estonia.

A citizen of a member state of the European Union or European Economic Area or Swiss Confederation (hereinafter an EU citizen) may reside and work in Estonia without registration of his/her right of temporary residence for up to 3 months.

An alien family member of an EU citizen is entitled to work in Estonia only if a valid temporary/permanent residence permit has been granted to him or her.

83


Police and Border Guard Board www.politsei.ee

Aliens Act goo.gl/VijFMg

Work in Estonia www.workinestonia.com

http://goo.gl/VijFMg

84

e-Estonia“e-Estonia” is a term commonly used to describe Estonia’s emergence as one of the most advanced e-societies in the world – a success story grown out of the partnership between forward-thinking government, a pro-active ICT sector and a switched-on, tech-savvy population.

For citizens of Estonia, e-services have become routine: e-elections, e-taxes, e-police, e-healthcare, e-banking and e-school. The “e” prefix for services has become widely used as a normal part of daily language.

e-services for Citizens:

» e-Elections – the opportunity to vote electronically from anywhere in the world, using ID-card or Mobile-ID www.valimised.ee;

» e-Tax Board – the possibility to declare income taxes electronically; declarations are pre-filled based on salary and tax records www.emta.ee;

» e-Business – establishing a company via the internet ettevotjaportaal.rik.ee;

» e-Banking – Internet banking has become a norm for companies and private customers alike;

» e-Ticket – virtual transport tickets registered via your personal ID card www.pilet.ee

http://ettevotjaportaal.rik.ee

85

e-services in Healthcare

» digital prescription – electronic medical prescriptions sent to the prescription centre and activated via your ID code, rather than on presentation of a paper document www.e-tervis.ee;

» e-Health record – a medical information system where people can view their own digital medical history www.e-tervis.ee. People’s healthcare history is therefore available in every hospital in Estonia.

e-services in Education

» e-School – web-based school-home communication environment, which enables parents to keep track of their children’s grades and attendance www.ekool.ee;

» university via internet – a system uniting higher-education databases with student exam results. www.sais.ee exists to make it easy to apply to different universities and colleges from one place.

LIVING IN ESTONIA

» investinestonia.com

CONTACT US:[email protected] Investment Agency / Enterprise EstoniaLasnamäe 2, Tallinn 11412, EstoniaTelephone: +372 627 9700

www.e-estonia.comwww.workinestonia.com

www.visitestonia.com

Investment Guide 2015

Documents

Transcript of Investment Guide 2015