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Is Economic Freedom in Estonia Greater Than in the United States?

Finance

February 12, 2025

Estonia may not be the first country you think about in terms of free market economies, yet the country has a lot to offer entrepreneurs. Best of all, it’s still on the rise. 

Sitting on board the two-and-a-half-hour ferry ride from the least Eastern European-feeling Baltic state to Finland, you realise just how connected the EU is.

You also realise that all the smartest, most talented Estonian kids have to do is hop on this very ferry and set sail for Helsinki, where wages increase almost exponentially. 

That’s the benefit of EU membership.

You can thank Finnish tourism for raising the prices and wages in Estonia, but similarly for causing a brain drain from Estonia. 

While people throughout the Baltic states have complained of the loss of talent – with one publication in Lithuania going as far to say it has resulted in ‘nothing but psychopaths waiting tables’ – Estonia has a particularly interesting situation.

While Tallinn may be considered rather boring as a place to live, you can’t deny that Estonia is becoming a free economy by global standards. 

The economic and business opportunities in Estonia have resulted in a very exciting entrepreneurial environment.

In this article, we’ll explore economic growth in Estonia and outline some major opportunities for entrepreneurs looking at this land of Baltic opportunity.

What Makes the Estonia Economy Attractive for Business?

Each of the Baltics has its unique advantages.

Latvia is a great place to live (along with a straightforward residency program) and has a fast-growing offshore banking sector that some are worried is attracting a little too much Russian cash. 

Lithuania is potentially on the verge of a real estate boom.

Estonia, on the other hand, now caters to businesses and investors. 

Previously, we’ve shared how starting Estonian corporations allows businesses to pay zero tax on undistributed earnings, allowing startups to plough all of their capital back into the company until they actually want to pay out a dividend.

That’s just one of the ways Estonia is excelling these days.

Estonia is one of the best places to start and grow a business in the EU due to its low taxes, digital-friendly government and strong startup ecosystem. 

The country has a flat 22% corporate tax rate, with no tax on reinvested profits. Setting up a business here is quick and easy, thanks to Estonia’s e-Residency program, which allows foreigners to start and manage companies remotely.

Beyond taxes, Estonia offers a supportive startup environment, with access to EU markets, a strong network of investors and a thriving tech scene. 

The country has produced several unicorns, including Skype and Bolt, and ranks among Europe’s best startup hubs. 

With its pro-business policies, digital services and open economy, Estonia is a great choice for entrepreneurs looking to build and scale a company. It’s safe to say the Estonian economy is on the rise.

Estonia Economic Growth

We often reference the Heritage Foundation’s Index of Economic Freedom when looking into a country’s economy.

It’s been interesting to see how economic freedom in the United States has deteriorated over the years. In fact, the latest report sees the US sitting down the list at number 25.

That’s far behind, you guessed it, Estonia, which is ranked eighth.

Other Baltic states, such as Lithuania and Latvia, also rank comfortably above the US.

Unlike the US, Estonia is moving in the right direction, with consistent improvements in each year’s survey results. 

Over the last two decades, Estonia has made very impressive gains in freedom, moving from ‘moderately free’ – along with most Western European countries such as France – to offering one of the freest economies in the world. 

Today, economic freedom in Estonia is alive and well.

Property rights, monetary freedom and financial freedom have all increased. Plus, the openness of free markets in Estonia has ‘been enhanced significantly’ according to the survey.

However, while economic growth in the country is slower right now, on the broader global scale, Estonia is certainly moving in the right direction.

Starting a Business in Estonia

Starting a business in Estonia is relatively straightforward, with cross-border trade and freedom from government corruption ranking well. 

Contracts are easily enforced and property rights are highly secure here.

If you do start a business here, it only takes about one week to get up and running. 

Income taxes here are a flat 20%, which, while not at tax haven levels, is very reasonable for Europe.

And, unlike most Western European countries and the US, Estonia is moving in the right direction.

The laws around firing employees are being dramatically loosened to lower labour costs. The government, which once subsidised green energy companies by tracking a subsidy onto consumers’ bills, is cutting it off.

For trade throughout Europe, tariffs are very low in Estonia. The government has also excluded itself from much of the workings of the banking sector’s workings. 

While we don’t see a bank on every corner here the way you do in some European capitals, the market seems competitive.

And according to the accounts we know, Estonian banks are healthier than their American counterparts.

Business Opportunities in Estonia

Estonia offers a wealth of business opportunities, especially in its thriving startup ecosystem. 

The country is home to a strong network of incubators, venture capital firms and government-backed programs that support innovation. 

The tech sector, particularly in FinTech, cybersecurity and AI, is booming, with successful unicorns like Wise emerging from Estonia. 

The country’s digital-first approach, including e-residency, makes it easy for entrepreneurs worldwide to start and manage a business remotely.

Beyond tech, Estonia has growing opportunities in CleanTech, logistics and industrial R&D, benefiting from its strategic location. The country also excels in e-commerce, biotech and smart city solutions. 

With a business-friendly tax system, minimal bureaucracy and access to the European market, Estonia is an excellent destination for businesses looking to expand.

Moving to Estonia

Thinking of taking advantage of Estonia’s economy and business environment? 

The country offers several pathways for residency and potential citizenship, which makes it an attractive destination for entrepreneurs. 

The easiest option for business owners is the e-Residency program, which allows non-residents to start and manage an Estonian company remotely, though it does not grant physical residency. 

For those wanting to live in Estonia, the temporary residence permit for business requires an investment of at least €65,000 (€16,000 if self-employed) in an active company. 

Startups with innovative business models can apply for the Startup Visa, which grants residency without a minimum investment requirement. 

There’s also a Digital Nomad Visa for remote workers who want to stay in Estonia for up to a year.

For long-term residency, entrepreneurs can apply as large-scale investors, requiring a minimum €1,000,000 investment in the Estonian economy. 

After five years of temporary residence, you can apply for permanent residency, and after eight years (including five years as a permanent resident), you can apply for citizenship – provided you meet language and legal requirements. 

Estonia Economic Growth: FAQs

Does Estonia have a good economy?

Estonia has a strong and open economy and is ranked among the freest in the world. It has a thriving tech sector, low corporate taxes and a business-friendly environment that supports entrepreneurship and investment. How big is the economy of Estonia?

Estonia’s economy is relatively small compared to that of major European nations, with a GDP of around US$40 billion. However, it has a high GDP per capita and steady economic growth driven by technology and digital innovation.

How did EU membership affect Estonia’s economy?

Joining the EU gave Estonia access to a larger market, increased foreign investment and improved economic stability. However, it also led to a brain drain, as many skilled workers moved to higher-paying jobs in countries like Finland.

Does Estonia have a free market?

Yes, Estonia has one of the freest economies in the world, with minimal government intervention, strong property rights and a competitive business environment. Estonia ranks significantly higher than the US in terms of economic freedom.

What are the biggest business opportunities in Estonia?

Tech startups, especially in FinTech, cybersecurity and AI are booming. Other promising sectors include e-commerce, logistics, CleanTech and industrial R&D, thanks to Estonia’s digital-first approach and EU access.

How do I start a business in Estonia?

Starting a business in Estonia is fast and simple, often taking just a few days. Entrepreneurs can register a company online via the e-Residency program, which allows non-residents to manage their businesses remotely.

Is the Estonia Economy Right for Your Business?

One area where Estonia is criticised is government spending. 

However, we hardly consider its public debt levels to be out of line, given how the Western financial media loves to smooth over the US$36.17 trillion of red ink in the most bankrupt country on earth.

So, with all the potential that Estonia offers, it’s no surprise that many entrepreneurs are actively choosing to move their lives and businesses there.

Bobby Casey, who spoke at a past Nomad Capitalist conference, lives in Latvia but started off in Tallinn. He’s an example of why a growing number of expat entrepreneurs are relocating to this part of Eastern Europe for greater opportunities.

Interested in setting up your life or business in Estonia? We can help. 

At Nomad Capitalist, we help thousands of high-net-worth entrepreneurs and investors go where they’re treated best, whether that’s through offshore advice, helping with second citizenships, banking in a new country or more. To see how we can help you, get in touch

Rupert Heather
Written by Rupert Heather
Fact-checked by:
Joe Elvin
Reviewed by:
Kevin MacDermot

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