Estonia's business reputation comes from one fact: you can create a company in an afternoon, online, with a digital signature. That is true. The less advertised side is that your first obligation arrives before your first client, and that the legal form you choose decides your tax in the first year. The choice between a sole trader, a company and the small business account matters more than the registration speed.
This guide to starting a business in Estonia compares the three forms with the 2026 figures.
What are the business forms in Estonia?
FIE (füüsilisest isikust ettevõtja). You trade under your own name. You deduct expenses, and you are liable for debts with your own assets. Registration costs €20.
OÜ (osaühing). A private limited company with capital, articles of association and an annual report. Registration costs €265 and the minimum capital is €0.01 per share holder. Corporate income tax is only due when profits are distributed.
Business account (ettevõtluskonto). For services or sales without major costs: lessons, childcare, cleaning, platform work, short-term rental. No accounting and no monthly declarations: the bank withholds the tax. Costs are not deductible. At the moment, the only bank offering it is LHV Pank.
How do you register a business in Estonia?
- Settle first. Registered address, personal code and Estonian ID card (moving to Estonia: the step-by-step guide). The company portal only accepts the Estonian ID card (e-resident cards included), Smart-ID and Mobile-ID (Estonian digital ID).
- Pick the form (above).
- Register on the company registration portal of the RIK: a FIE, or an OÜ with its articles, capital and legal address. You can also reserve a company name up to six months before creation.
- Open a business bank account for the OÜ (bank account in Estonia).
- Register for VAT once your taxable sales in Estonia exceed €40,000 since the start of the year.
- Meet yearly duties: the E form for the FIE, by 30 April; the annual report for the OÜ, within six months after the financial year ends.
Torn between a FIE, an OÜ or the business account for your freelance work? Moovy can lay out the questions that decide it and prepare what to ask an accountant, in plain English.
What taxes will you pay as a FIE?
In 2026 the FIE pays 33% social tax and 22% income tax on business profit (revenue minus business expenses). The social tax is calculated first and is deducted from the base of the income tax, according to the tax board. The income is declared once a year on form E, with the personal return (form A), and income tax advance payments fall on 15 September and 15 December from the second year, unless each would be €300 or less. For social tax, the minimum is calculated on a 2026 monthly base of €886, hence a minimum advance of €877.14 a quarter, due on 15 March, 15 June, 15 September and 15 December, pro rata to registration days. It is lower if an employer already pays social tax for you. The 2026 annual cap given by the tax board is €36,867.60.
The trap: that advance is due even with no turnover once you are registered. Check your position with the tax board before registering.
What taxes does an OÜ pay?
The OÜ pays corporate tax only on distributed profit: 22/78 of the net dividend in 2026, which is 22% of the gross amount. The reduced rate of 14/86 disappeared on 1 January 2025. Profits kept in the company are not taxed.
Salaries paid by the OÜ carry 33% social tax (minimum base €886 a month, or €292.38), 0.8% unemployment insurance for the employer and 1.6% for the employee, and 22% income tax. The annual report is mandatory within six months of year-end, even with no activity, and late filing can mean fines and eventual removal from the register.
How does the business account work?
The business account is taxed at 20% of every amount received (22%, 24% or 26% if you contribute to the second pension pillar). Above €40,000 received in a year you must register as a FIE or OÜ and for VAT. To be covered by health insurance on this income alone, the tax board gives a figure of €2,436.50 received a month in 2026.
What about VAT?
The standard rate is 24% (since 1 July 2025), with 13% for accommodation, 9% for books and the press, and 0%. Registration threshold: €40,000 of taxable sales in Estonia since 1 January. Filing and payment on the 20th of the following month.
Start a business in Estonia: which form suits which activity?
- A few clients, simple services, no big costs: the business account, with 20% withheld from each payment and no accounting. It suits tutors, cleaners, platform workers and small rentals.
- A solo activity with real costs to deduct: a FIE, which deducts expenses but exposes your personal assets and requires social tax advances.
- A growing activity, partners, reinvestment or an employee: an OÜ, where profit is not taxed until distributed.
If you plan to start a business in Estonia and keep your job, ask whether an employer already pays enough social tax for you, because that reduces the FIE's advance.
Start a business in Estonia from abroad: e-Residency, address and contact person
To create an OÜ from abroad you need a legal address in Estonia and usually a contact person, which approved service providers supply. The e-Residency programme quotes around €200 to €400 a year for both. You also need an Estonian bank account for the company, and each bank decides (bank account in Estonia).
Pay for a tax adviser in your home country before you invoice through the company: the pay of a board member is subject to Estonian income tax wherever the person works, and to Estonian social tax unless they hold an A1 certificate from their own country, and your home country may tax the company if it is actually managed there (Estonia e-Residency explained). None of the official pages we reviewed makes an accountant compulsory, and the e-Residency programme quotes services from about €50 a month, but confirm this for your case.
What mistakes should you avoid?
- Ignoring the FIE's fixed advance. It is due without turnover.
- A dormant OÜ with no report. Fines, then removal.
- Paying yourself in dividends without thinking. A dividend triggers 22/78; salary triggers social tax. The right mix needs an accountant.
- Exceeding €40,000 on the business account.
- Thinking the company pays your personal tax. Your salary and dividends are taxed according to your tax residence (income tax in Estonia for new residents).
- Trusting rate rumours. The 2026 rises to 24% and 22% were cancelled at the end of 2025.
What changes by nationality?
EU, EEA and Swiss citizens can set up an activity without any other permit. British citizens living in Estonia need a residence permit that allows the activity, issued by the Police and Border Guard Board, which explains the options (moving to Estonia from the UK). If you live outside Estonia, you can create an OÜ remotely with e-Residency, but tax can apply in your country (Estonia e-Residency explained).
Starting a business in Estonia is easy. The skill is in choosing the form that matches what you actually do, so have your choice confirmed by an Estonian accountant or tax adviser before you register.