Estonian labor law regulates the labor relationship between an employer and an employee. Here are some of the main aspects of Estonian labor law:

1. Labor rights: Estonian legislation guarantees employees a number of rights, such as the right to equal working conditions, the right to rest and vacation, the right to remuneration, the right to social security, and others. Trade unions play an important role in protecting employees' labor rights.
2. Minimum wage: The current minimum wage in Estonia is 820,00 euros per month in 2024.
3. Employment contract: The employment contract is the main document that regulates the relationship between the employer and the employee. It should contain working conditions, salary, work schedule, terms of dismissal and other details.
4. Working hours: Legislation defines the maximum working hours and sets restrictions on working at night, weekends and holidays. There are also regulations on rest and breaks during the working day.
5. Vacation: Employees are entitled to vacation time, which depends on their length of service. It is usually an annual vacation of 28 calendar days.

Can Canadian citizens start a business in Estonia?

Yes! The Estonian government is very supportive of entrepreneurs and business owners, so starting a business in the country is easy and straightforward. The process of starting a business in Estonia is simplified and you can do it all online without even visiting the country.

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What you need to know before starting a business in Estonia?

Before starting a business in Estonia, you need to obtain an e-residency. Although it sounds like it involves living in Estonia, it is not a residence permit and does not give you Estonian citizenship. Rather, it is a digital tool that you can use to open a company, manage your business, and pay taxes.

It is worth noting that you do not have to obtain e-residency. Instead, you can apply for a visa to become an actual resident of Estonia, but it costs more and takes longer.

1. Apply for e-residency

The first step is to become an e-resident. It takes about 15 minutes to complete the online application. You will need to briefly explain why you want to open a company in Estonia using e-residency and pay a fee of 100 euros, as well as a fee for receiving documents of 20 euros. The government promises to provide an answer within 30 days, but it usually happens faster.

2. Receive your digital e-residency certificate

After your application is approved, you will receive an e-residency starter kit at one of the nearest offices. You can choose your preferred location online during the application process.

The kit includes

• A digital e-resident ID card that you can use to register your business, pay taxes, etc. online;
• A digital USB card reader, access codes, and a USB flash drive so you can use your card to prove your identity and conduct business online.
• Receive your e-residency
• When you receive the kit, the official representative will also take your fingerprints as part of the anti-fraud measures Estonia is taking to prevent fraud.

3. Identify a local address and contact person

After obtaining e-residency, you can apply to start a business in Estonia.

Before applying, you will need

• A physical address in Estonia, which cannot be a residence address
• A local contact person
• Prepare a local address

There are many service providers who will do this for you. Choose one of them on the Estonian e-residency marketplace. It usually costs around 30-150 euros per month, depending on additional services such as accounting and bookkeeping.

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What types of companies can be registered when you start a business in Estonia?

Estonian law recognizes the following types of company registrations:

• Private limited liability company
• Joint stock company
• Sole proprietorship
• General partnership
• Limited partnership
• Commercial association

Private limited liability company

This is the most popular type of company because it is flexible, limits risk and does not require a lot of capital. In Estonian, a limited liability company is called osaühing, but is usually abbreviated as OÜ. It is suitable for contractors and freelancers who work alone, as well as for small groups of people who do business together.

An OÜ must have a board, but it can consist of only one member, and that member can be you! Many OÜ companies in Estonia have only one employee and a board member, which is why they are so popular among contractors and self-employed entrepreneurs.

Limited liability company

You have to promise to invest at least 2,500 euros in your OÜ, but you don't have to pay this amount when you open the business, you just have to promise to invest it for 10 years.

With an OÜ, you are only liable for the amount of capital invested, so your personal assets are not at risk if your business is not successful. This is very attractive for entrepreneurs who want to try a business idea without putting all their finances on the line.

Public joint-stock company

It is similar to a private limited liability company, but it is public and the minimum authorized capital is 25,000 euros. In Estonian, this company is called aktsiaselts, but it is usually shortened to AS.

An AS is a good choice if you already have a successful business with a reliable turnover and a large number of business partners, and you want to expand your activities in the EU.

Individual entrepreneur

If you run a business on your own or are a freelancer, you can register as a sole proprietor (FIE). But most entrepreneurs in Estonia register as a private limited liability company because it is very simple and protects them from risks. If you are a sole proprietor, you are personally liable for all business-related obligations.

General partnership

A general partnership is a business that you run together with one or more partners. Each of you must be an e-resident. In a general partnership, all partners are personally liable for any debts of the business.

Limited liability company

A limited liability company is very similar to a general partnership, but it limits your liability to the amount of capital you have invested in the business. This makes it more popular than a general partnership.

Commercial association

A commercial association is a type of company that allows all the founders and members to work together to achieve common interests. The commercial association is rarely used to start a business in Estonia.

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How to register a company in Estonia as a Canadian citizen?

After obtaining a residence permit, registering a company in Estonia is very simple and fast. Here are the steps you will need to take:

1. Decide what type of business you want to start
2. Go to the Estonian e-business register and fill out the online form
3. Digitally sign your documents using an e-resident digital ID card

Before starting the company registration process, make sure you have

• An e-resident ID card
• a copy of your passport for anti-money laundering purposes
• local physical address and contact person

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What are the VAT tax obligations if you own a business in Estonia?

Estonia is not a tax haven, so you will have to pay corporate taxes. But its tax legislation is simple and reasonable, so keeping records will not be burdensome.

VAT.

If your business has an annual income of more than EUR 40,000, you will need to register as a VAT payer, issue invoices and pay VAT to the Estonian budget. This applies to all types of companies registered in Estonia.

Corporate income tax

The corporate income tax rate in Estonia is 20%, but this only applies to profits that you withdraw from the company. If you reinvest your profits in the business, you don't have to pay tax at all.

Social tax

Estonia levies a social tax of 33%, similar to social security in the United States. If you are a sole proprietor or director of a private limited liability company, you will have to pay this tax.

Personal income tax

Income tax in Estonia has a flat rate of 20%, but you get a 500 euro exemption if your gross monthly income does not exceed 1200 euros. The exemption is gradually reduced until your gross monthly income reaches 2,101 euros, at which point you will have to pay the full amount.

If you are a tax resident of another country, you probably won't have to pay income tax in Estonia. Estonia has tax treaties with 57 countries to avoid double taxation.

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Opening a business bank account in Estonia for non-residents

You will need a business account so that you can easily send payments to local suppliers or remote employees in Estonia, pay tax obligations, and receive payments from local and international clients.

First, choose between a traditional bank, digital banks, or online payment service providers that function like a bank account. Whichever bank you choose, you will usually need to provide personal data and documents to prove your identity and the authenticity of your business.

If you are using a traditional bank, you will probably have to visit the bank in person to verify your identity. Estonian banks require a face-to-face meeting to avoid money laundering risks, so digital banks and online payment solutions are usually the better choice for digital nomads or those who want to do business in Estonia from a distance.

Here are some things to look for when choosing a bank for your business account:

• Support for multiple currencies so you can easily receive payments and pay bills in Estonia in euros, as well as withdraw money in the local currency
• Mobile payments and online banking so you can manage your business account wherever you are
• Low fees, competitive currency conversion rates and transparency of fees and costs
• Integration with billing and invoicing software to facilitate accounting processes

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Startup visa for founders from non-EU countries

A startup visa gives foreign entrepreneurs the opportunity to settle in Estonia for up to 18 months to establish their startup. A start-up visa can be issued for a period of up to 365 days and extended for up to 183 days.

Potential startup entrepreneurs who have established their startup in Estonia and wish to stay longer can apply for a residence permit for business activities.

For start-ups, the general investment requirement (EUR 65,000) for applying for a residence permit for entrepreneurial activities does not apply. A residence permit for entrepreneurial activity can be issued for a period of up to five years.

More information on applying for a startup visa can be found on the Startup Estonia website

1. Language skills: Depending on the job position, knowledge of English may be a requirement. Additional knowledge of Estonian can be a big plus. 
2. Job search: Use online job portals and specialized resources to search for jobs in Estonia. Subscribe to newsletters, follow updates, and respond to jobs that match your skills and interests.
3. When hiring, the employer is obliged to sign a written employment contract with you, which will specify the terms of work and remuneration. Do not agree to work without signing a written contract. Without a signed contract, you are working illegally, and you are deprived of the legal rights that arise from legal employment.
4. In Estonia, employers offer favorable working conditions for employees. Usually, in case of long-term employment, the probationary period lasts 3-4 months, and the contract is concluded indefinitely. Full-time work is 40 hours per week, or 8 hours per day. Overtime work and work in Estonia on holidays are paid at a higher rate.