A guide for E-Residents and Digital Nomads

Estonia offers a favorable environment for entrepreneurs, including e-residents and digital nomads, to establish and operate businesses. One accessible form of business is the sole proprietorship, known in Estonian as “Füüsilisest Isikust Ettevõtja” (FIE). This article provides an overview of establishing an FIE, available support services, and tax obligations.

Establishing a Sole Proprietorship (FIE) in Estonia

An FIE is a natural person engaged in business activities. Individuals aged 18 or older can register as an FIE. Minors aged 15 to 17 may also register with parental consent or court approval.

To establish an FIE, follow these steps:

1. Registration: Submit an application to the Commercial Register via the e-Business Register portal. Use an Estonian ID card, Smart-ID, or Mobile-ID.
2. Business Name: The business name must include the individual’s first and last name.
3. Business Address: Provide a physical address in Estonia where the business operates.
4. Contact Information: Include at least an email address; a phone number is optional.
5. Principal Activity: Specify the main business activity according to the Estonian Classification of Economic Activities (EMTAK).

Note that an FIE and its business are not separate legal entities; the individual is personally liable for business obligations.

Support Services for Entrepreneurs

Estonia provides various support services for entrepreneurs:

• E-Residency Program: Allows non-residents to establish and manage an Estonian company online.
• Startup Estonia: Offers resources and support for startups and entrepreneurs.

These services help establish and manage businesses in Estonia. This makes it an attractive destination for digital nomads and e-residents.

Tax Obligations for FIEs

As an FIE, you are subject to several taxes:

• Income Tax: The personal income tax rate is 20%.
• Social Tax: A 33% tax on business income, covering health insurance and pension contributions.
• Value Added Tax (VAT): If annual taxable turnover exceeds €40,000, VAT registration is mandatory. Voluntary registration is possible below this threshold.

For VAT registration, access the application form and additional information on the Estonian Tax and Customs Board’s website.

Additional Considerations

• Separation of Assets: Distinguish between personal and business assets. For jointly owned property, it’s crucial to determine who acquired the asset. Only expenses incurred by the FIE can be deducted from business income.
• Partial Business Use of Assets: If assets are partially used for business, determine the proportion attributed to business use. This ensures accurate tax reporting.

Establishing an FIE in Estonia is a straightforward process. It is supported by a robust digital infrastructure and a clear regulatory framework. This makes it an appealing option for e-residents and digital nomads. They seek to conduct business within the European Union.