Even if it is a small country, Estonia attracts foreign investors through its pro-business legislation. The Estonian economy is based on the taxes levied on companies which is why the government offers incentives that are meant to draw businessmen from other countries.The most appealing investment fields in Estonia are the IT sector, the bio technology sector and regenerative industry.
The Estonian business environment draws investors mainly because foreign companies benefit from the same treatment in matters of incorporation as Estonian companies. Other advantages of investing in Estonia are:
The Estonian government encourages foreign investment through liberal regulations for exports. The government is seeking to attract foreign investments in Estonia by allowing 100% foreign ownership, but maintaining some regulation for certain industries. Estonia has switched to Euro in 2011 which led to market liberalization thus making investment more accessible for foreigners. According to the country’s conversion and transfer policies there is no restriction for transferring or converting currencies. Dividends can also be repatriated without any restrictions and so can be all the assets of a company that stops its activity in Estonia.
Foreign investors have the right to own properties in Estonia and expropriation is possible only in cases of buildings important for public interests with the appropriate compensation.
Dispute settlements are also available as the Estonian judicial system does not depend on the government and allows arbitration tribunals that facilitate dispute resolutions. Estonia has also adopted the Bankruptcy Act in 2004 that eases the process of company liquidation.
One of the key points of the Estonian taxation system is that there is no corporate tax therefore foreign companies are only subject to the income tax of 21% when it comes to distributed profits. Starting January 2009 dividends sent to foreign shareholders are not subject to any withholding tax. Gifts, inheritances and real estate are not subject to taxes with few exceptions. Estonia has also signed double taxation agreements that enable the country to attract foreign investors.
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