There are many ways to become a freelancer in Estonia. Any business concept can be used by freelancers to generate the income you need. Freelancing offers a lot of perks in terms of flexibility and freedom, but there are also ways to maneuver the taxation system so that you can focus on running your business smoothly. Whether you decide to convert a hobby into a business idea or just freelance for extra income on the side, this guide will help you to become a successful freelancer in Estonia.
How to Register as a Freelancer in Estonia
Estonia is a place that offers several types of business formations. Most of the new businesses that will be formed in Estonia will elect to become a private limited company (OÜ). Remote companies are also able to form, and these businesses aren’t required to have any overhead expenses. This is a viable option for many freelancers who wish to remain small and flexible. Another legal form option is sole proprietorship which requires no share capital and board members. However, sole proprietors are fully liable for any incurred debts or fines and the taxes are also higher so it makes more sense to open a private limited liability company as a freelancer.
Here's how to register as a freelancer or e-resident in Estonia:
- Collect Paperwork: You’ll need a passport photo, government ID, credit card and statement of motivation, or purpose.
- Estonian Police and Border Guard Board: Get a background check performed, and expect to wait for up to eight weeks for the paperwork to fully process.
- Payment: State fees will cost between 100 and 120 EUR.
- Once your e-residency application is granted, you can select a pickup location for the e-residency kit. There are around 45 different locations available, so one of them should suit your needs.
- Fingerprints will be taken at the physical location, so you must expect to arrive in person.
How Foreigners Can Start Freelancing in Estonia
Getting started freelancing is an exciting prospect; however, you should start by ensuring compliance with the legal system of this country. Foreigners will often elect to take advantage of this country’s unique digital nomad visa, which is very popular with freelancers. If you are a location independent worker, you can apply to live in Estonia for an entire year. Foreigners are allowed to work in Estonia as freelancers, so never let the bureaucratic hurdles dissuade you from pursuing your dreams.
- Apply for the digital nomad visa at the Estonian Embassy or Consulate nearest to your location.
- Apply at the local Police and Border Guard Office if you are located within Estonia.
- Complete the short stay or long stay visa application for your digital nomad visa.
Types of Freelance Businesses in Estonia
The next step is to figure out what type of freelancing business you plan to set up in Estonia. There are many business structures available, but the right one will fit your actual business activities. This might be work that you perform yourself, or you might hire other freelancers. No single solution will be appropriate for every freelancer in Estonia. There are many ways to organize your freelance work; the right solution will always be sensitive to the context of your specific situation.
Common types of freelance work in Estonia include graphic designer, writer, project manager, software engineer, photographer, translation service provider, transcriptionist and other types of work. There are no limits to the kind of freelance services you can provide in Estonia. The key to selecting the right field is to be dedicated to your craft. Create a portfolio of work for clients to review. This will give you an advantage over your competition because customers will be able to instantly evaluate the quality of your work.
Start a EU Business to Freelance in Estonia
The structure of your freelance business in Estonia can determine a lot about your activities and daily life. For example, the size of your freelance business can affect the kind of contracts that you can accept. Import and export companies tend to be more formally organized, but this isn’t always the case. Many freelancers will organize their company as a sole proprietorship to get started. Later, if you decide to expand your business operations, you can always restructure the company at that time.
Xolo Leap tools make it easy to establish your remote EU business identity without succumbing to the overwhelming piles of paperwork that may otherwise be required. Estonian e-residency is one option for those looking to become a freelancer in Estonia; the new Estonian digital nomad visa is another. Some eligibility requirements must be met for this visa, but it can provide remote freelancers with the ability to freelance in Estonia without worrying about compliance issues.
Taxation and Business Structure in Estonia
Taxation is one of the big issues that you must face when you open a freelance business in Estonia. This liability is imposed on companies and individuals doing business in Estonia. Personal taxes must be paid by all residents. However, the tax rules are different for residents and freelancers operating with an e-residency status.
There are also limits in the laws that prevent double taxation for businesses that are formed within Estonia while conducting transactions abroad. Filing a tax return in Estonia is an obligation even if the freelance work or business income isn’t subjected to the taxation laws in this country.
Here is some useful information about the rates and types of taxes freelancers are required to pay in Estonia.
- The VAT tax rate is 20 percent in Estonia; however, a reduced VAT tax rate of nine percent might apply.
- E-residents are not considered tax residents by default; you only pay the flat tax rate when profits are distributed.
- Taxes can be paid by tax residents or e-residents online at the Estonia Tax and Customs Board website.
- Tax consultants can be helpful if you can’t find the answers you need on the website for the Estonian Tax and Customs Board.
How to Freelance in Estonia
Freelancers need to decide what kind of business structure and size to adopt. Many freelancers will prefer to work as a solo contractor, but you can also decide to open a more formal business as well. Registering a company in Estonia as an e-resident will enable you to take advantage of timing your taxes through deferment. In this situation, the taxes won’t apply until dividend payments are issued. This is very helpful when you first open a freelance business in Estonia because cash flows are likely to be strapped.
Dividend payments are never made until the company’s balance sheet is sufficiently solvent. If you are thinking about becoming a freelancer in Estonia, the e-residency option might be a viable path to take. If you decide to use a company structure to freelance in Estonia, you can benefit from the laws that enable you to retain earnings within the company without taxation. Remember, Estonia will only tax your company's earnings if they are distributed as dividend payments.
Here's how to open freelance business in Estonia:
- Create a company identity; this includes a name, brand, logo and mission statement.
- Obtain an address in order to register your company. An E-residency service provider will help you with all the required setup activities, from providing you a physical address, supporting with company formation, to giving you the banking and financial services you need.
- Set up online banking for your freelance business in Estonia.
- Decide how you will manage your chart of accounts and tax planning.
- Create a plan for invoicing your customers, and set up ways to receive their payments.
- Develop a marketing plan to attract new clients or get existing ones to re-order from you.
Advantages of Estonian e-Residency for Freelancers
The Estonian e-residency option is available to freelancers and entrepreneurs. Under normal residency rules, a person can become a resident after providing proof of income regardless of where in the world these revenues were earned. Using the tools from Xolo is very helpful for reducing the amount of administration time you have to spend on various tasks. This increases the viability of establishing your Estonian e-residency status. This is the best way to strike a balance between the flexibility of being a freelancer and the advantages of tapping into Estonia's friendly laws for digital nomads.
Estonia is leading the way in the concept of the e-residency. This is the first nation to offer this particular status as a government-issued identification. Anyone in the EU can take advantage of the e-residency option to start an EU business that is managed from any location in the world. The online management of the enterprise is a benefit for freelancers who are interested in creating an online company that is entirely operated online. The reduction in paperwork is an attractive perk as well.
Navigate Legal Challenges to Start Freelancing in Estonia
Taxes, invoicing and VAT issues will eventually become a concern for those considering working in freelance in Estonia. The automation of the Xolo platform enables business owners and freelancers to conduct various essential tasks. This includes sending and tracking invoices to clients, for example. The VAT will be calculated automatically, which further simplifies your taxes. The reduction in administrative work will improve your quality of life and increase the amount of time available for you to enjoy the rest of your time in Estonia. Xolo Leap will help you set up an Estonian e-resident business and manage it from anywhere. Becoming a freelancer in Estonia is an exciting decision, and you can use Xolo Leap to keep all of your records clean. This will enable you to focus your energy on growing your business. Once you have a vision and action plan for your freelance business in Estonia, the sky's the limit.
