Estonia: Investing

FDI in Figures

Estonia is open to foreign direct investments. According to UNCTAD's World Investment Report 2024, net FDI inflows peaked at USD 4.57 billion in 2023, up from 1 billion one year earlier. At the end of the same period, the total stock of FDI was estimated at USD 40.49 billion. One of the most notable foreign investment developments of 2023 was Ericsson's decision to establish a new technology and development centre in Tallinn. The project, valued at EUR 155 million, is expected to employ 2,200 people. Another significant project is by the Swedish company Smart Power Farm SPF AB, which plans to construct an innovative 40,000 m² organic production complex in Tootsi. According to the national investment agency Invest Estonia, most of the FDI stock is concentrated in financial and insurance activities (30%), real estate activities (18%), professional, scientific, and technical activities (16%), manufacturing (10%), wholesale and retail trade (10%), and information and communication (5%). The main investing countries are Luxembourg (24%), Finland (20%), Sweden (11%), Latvia (8%), Belgium, and Lithuania (4% each). The latest figures from the OECD show that FDI inflows stood at USD 565 million in the first half of 2024, compared to 969 million in the corresponding period one year earlier.

As with other small-scale open economies, Estonia requires a constant flow of foreign investment in order to maintain its economic expansion. Estonia is among the leading countries in Eastern and Central Europe regarding FDI per capita. The country has a very pro-business legislative framework and, more broadly, the Estonian society has a business-friendly attitude which is the expression of the country's perfect integration into the northern circuit of production, in which the Estonian subsidiaries often function as outsourcing sites for Scandinavian parent companies. Estonia is highly developed in the FDI-attractive fields of IT, biotechnologies, and green industries. A balanced budget (constitutionally protected), a free trade regime, a fully convertible currency, a competitive banking sector, and an investment-favorable environment have all contributed to the success of the country, which ranks 16th among the 133 economies on the Global Innovation Index 2024 and 8th out of 184 countries on the latest Index of Economic Freedom. A new FDI regime in Estonia, effective September 1, 2023, scrutinizes direct and indirect investments by non-EU entities in critical sectors. This includes areas such as military goods, dual-use items, geological exploration, oil extraction, and companies providing vital services, media, or transport infrastructure. Failure to obtain prior authorization for foreign investments may prompt the CPTRA (Consumer Protection and Technical Regulatory Authority) to enforce corrective measures like share transfers or transaction reversals. Foreign investors must obtain licenses to participate in several sectors, including mining, energy, gas and water supply, railroad and transport, waterways, ports, dams, water-related structures, and telecommunications networks. The Estonian Financial Supervision Authority oversees licensing for foreign entities aiming to invest in or establish banks. Furthermore, the Estonian Competition Authority examines transactions for potential anti-competitive issues. Governmental reviews and licensing procedures adhere to standard practices and are non-discriminatory.

What to consider if you invest in Estonia

Strong Points

The main advantages of the country are:

• One of the most liberal economies in the world (it ranked 18th out of 190 in the Doing Business report in 2020).
• Public accounts at equilibrium with a very low level of indebtedness
• A very favourable business environment enriched by independent and stable institutions
• All reinvested corporate profits are exempt from income tax
• A geographical position that places it at the crossroads of Europe and Russia
• Effective international relations strengthened by the country's membership in the European Union.

Weak Points

The main weaknesses of the country are:

• The small size of its domestic market makes it particularly sensitive to external shocks
• High energy dependency on Russia and its imports from Finland and Sweden
• Lower purchasing power than in other countries in the region
• Declining workforce and lack of skilled workers
• Limited ground connections with the rest of the European Union

Government Measures to Motivate or Restrict FDI

In terms of investment, trade, government intervention and property rights, Estonia has developed policies that are amongst the most liberal in Europe. The company tax rate is relatively low compared to other Nordic countries, a fact which is one of the country's strong points. In order to encourage companies and attract foreign direct investment, all reinvested corporate profits are exempt from income tax. In addition, the government has decided for the period 2015-2020 to focus particularly on entrepreneurship and seeks to create a highly competitive environment where it is easy to create and develop its businesses.

According to the World Bank, Estonia is considered one of the most liberal countries in the world. Its 18th place in the Doing Business report in 2020 attests to this.

Procedures Relative to Foreign Investment

Obligation to Declare

Estonia does not apply any restrictions or limitations on foreign investment. However, certain activities (mainly those linked to medicine and safety) remain subject to an "activity license".

Competent Organisation For the Declaration

Estonian Investment Agency

Requests For Specific Authorisations

Estonia has no exchange controls or restrictions on foreign investment. The amount of foreign capital invested in Estonian business enterprise is unlimited and companies can be in full foreign ownership. Foreign companies enjoy equal rights with local ones. A license should be obtained for activities in the following areas: mining, public utilities, reconstruction of railways, airports, ports and dams, long distance telecommunications, retail sales of pharmaceuticals, production of alcohol and tobacco, gambling, banking. The basic rules for licensing are included in the Regulation of the Estonian Government from May 8, 1990 on Issuing Statutory Activity Licenses.

Investment Opportunities

Investment Aid Agency

Invest in Estonia

Tenders, Projects and Public Procurement

Tenders Info, Tenders in Estonia
Ted - Tenders Electronic daily, Business opportunities in EU 27
Globaltenders, Tenders & Projects from Estonia
DgMarket, Tenders Worldwide

Other Useful Resources

Estonian Chamber of Commerce and Industry

Any Comment About This Content? Report It to Us.