How to Register a Sole Proprietorship (Füüsilisest isikust ettevõtja) in Estonia

Becoming a sole proprietor (FIE) in Estonia is attractive because you benefit from a highly digital government, streamlined registration, and transparent tax rules. Starting up is relatively quick and low-cost compared to forming a company. But you’ll have full personal liability for your business obligations, and you’ll need to stay on top of accounting, social taxes, and VAT if your turnover grows.

The benefits are simplicity, speed, and flexibility; the challenges are risk exposure and ensuring you meet all your tax and legal obligations.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Estonia?

In Estonia, a sole proprietorship is officially called füüsilisest isikust ettevõtja (abbreviated FIE). You might see this also referred to as “self-employed” or “individual entrepreneur.” These all describe a business model where one person owns and runs the business without forming a separate legal entity. As an FIE, your business and you are legally the same person.

How does a sole proprietorship (FIE) work in Estonia?

FIE vs private limited company in Estonia

Here’s how being an FIE compares to forming a company like an OÜ (private limited company) or other structures:

Step-by-Step Guide: How to Register a Sole Proprietorship in Estonia

Step 1: Check if you are eligible

Any natural person can become a sole proprietor (FIE), including minors aged 15 or older if parental consent or legal capacity is granted under Estonian law. Foreigners/non-residents may also register, but you’ll need an Estonian personal identification code and a registered Estonian address.

Step 2: Choose your trade/primary activity and business name

Decide what your main economic activity will be (EMTAK code). Pick a business name that complies with the rules in the Commercial Code — your name, address, and principal activity will need to be clear. If you choose a trade name distinct from your own name, make sure it’s unique.

Step 3: Register with the Commercial Register

Submit an application to the e-Commercial Register portal for entry as an FIE (füüsilisest isikust ettevõtja). The application must include your personal identification code, name, principal activity, address, contact details, financial year start, etc. The application can be signed digitally or via a notary.

Step 4: Register with the Estonian Tax and Customs Board (EMTA)

After registration, or possibly in parallel, you must ensure you are registered with the Estonian Tax and Customs Board to handle your tax obligations. This includes business income tax, social tax, and, if applicable, VAT. EMTA provides forms and tools via its website.

Step 5: Pay registration fee and set up bookkeeping

When you apply to the Commercial Register, you’ll pay a state fee. Once registered, you must maintain accounting records under the Accounting Act even if using simpler or cash-basis accounting for smaller operations. Keep invoices, receipts, and expense records.

Step 6: Handle post-registration obligations

You’ll need to file annual income tax returns reflecting business profit (income minus deductions). Social tax must be calculated and paid. If you exceed the VAT turnover threshold (≈ €40,000), you must register for VAT and submit returns. Also, comply with rules if you hire employees, and update register entries if any details change (address, activity, etc.).

Financial and tax obligations for sole proprietors in Estonia

• Income Tax: Flat rate of 20% on business net income (profits). You’ll report via personal income tax return.

• Social Tax: About 33% on business income. This covers health insurance, pension etc. Some minimum obligations apply.

• VAT (Value-Added Tax): Registration is required if your turnover exceeds ≈ €40,000 per year. Once registered, collect VAT on eligible income, reclaim VAT on eligible expenses, and submit VAT returns.

• Record-keeping: You must keep accounting records in accordance with the Accounting Act. Maintain invoices and receipts. Even with simpler accounting, you must track business income and business expenses.

• Annual Filing: File yearly personal income tax returns, including your business income. Pay social tax. If VAT registered, submit VAT returns periodically.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a FIE in Estonia?
There is none. You do not need to provide or deposit capital to start a sole proprietorship.

Do sole proprietors need to register for VAT?
Only if your annual turnover exceeds the VAT threshold (around €40,000). Below that, VAT registration is optional.

How much are the standard monthly or annual contributions (social tax etc.)?
You pay social tax (≈ 33%) on your business income. The exact amount depends on how much your net business income is after deductions.

Can an FIE hire employees?
Yes. If you want to employ others, you must register as an employer, withhold relevant payroll taxes, and meet employment law obligations.

How long does it take to register as an FIE?
If all documents and digital signatures are ready, the registration via e-Commercial Register is usually very fast — often within a few business days.

Can foreign nationals register as FIE in Estonia?
Yes. Foreign nationals can become FIEs provided they have the required identification (Estonian personal identification code), any required residence permit, and a registered address in Estonia.

Do sole proprietors need a separate business bank account?
Not legally required in all cases, but strongly recommended. Having a separate account helps with bookkeeping, invoicing, and separating personal vs business finances.

What happens if I stop operating as an FIE?
You should formally deregister from the Commercial Register, stop operating business activities, submit final tax returns, and settle any outstanding tax or social contribution obligations.

Are there government incentives or reduced rates for new FIEs?
Estonia offers many digital tools, simplified processes, and sometimes exemptions or simplified accounting for smaller activity levels. However, as of 2025, there is no universal “first year zero tax” reduced rate specifically for new sole proprietors outside of existing tax allowance/deduction rules.

Can I use Deel as an FIE to get paid by international clients?
Absolutely. Deel helps sole proprietors (FIEs) receive payments from clients worldwide, generate invoices that meet Estonian tax requirements, and manage records.

Does Deel generate compliant invoices for FIEs?
Yes. Deel’s invoice tools can include required details like your name and personal code, VAT if registered, and other legal requirements under Estonian regulation.

Can Deel help me with taxes as a sole proprietor in Estonia?
Yes. Deel offers tools and reports that help you keep track of income, expenses, and payments, which you can use when filling out your annual tax and social tax declarations.

Does Deel offer contracts for freelancers and FIEs?
Yes. Deel provides contract templates designed to be compliant with local Estonian law, helping protect both freelancer and client.