What the UK can learn from Estonia as the destination to start a business

The UK lies in 17th place as a country that incubates entrepreneurs. What can Britain learn from No 1-ranked Estonia as a place to launch a start-up?

Estonia has the highest concentration of entrepreneurs in Europe, according to research.

Nearly one in five adults (19.4 per cent) see themselves as either a would-be entrepreneur or owner/manager of a new business in the Baltic state.

Montenegro (14.9 per cent) and Turkey (14.2 per cent) were in second and third place when it comes to the concentration of start-ups, according to tech supplier RS Components.

>See also: What Estonia’s youngest inventor can teach us about entrepreneurship

The UK by comparison ranked in 17th place in Europe with 8.2 per cent of the country being entrepreneurs. In fact, Britain lags behind Kazakhstan and Romania when it comes to entrepreneurial activity.

Top 20 countries with most aspiring entrepreneurs and new business owners

17United Kingdom8.2
Source: RS Components

What can the UK learn from Estonia?

Estonia ranks #1 in ease of its tax system

The International Tax Competitiveness Index measures how easy or not it is to run a business in different countries of the OECD, according to several metrics. Estonia has maintained pole position for several years compared with 25th-ranked Britain.

Digital-first administration

Estonia is recognised as the world leader for digital e-government and that has extended to registering a business remotely in Estonia without having set foot inside the country – which is helpful in an age of digital nomads. You can register your business remotely through the e-Residency programme. However, setting up a business in Estonia is best suited for purely digital businesses, such as Amazon dropshipping intermediaries, which act as a middleman between customers and manufacturers. Estonia is not the place to register a business if you manufacture or physically handle goods yourself.

Low tax rate for company dividends

The tax rate for company dividends drops to just 14 per cent providing the company has been issuing dividends for at least one year. And start-ups do not pay any tax until they have issued their first dividends. (By comparison, UK higher-rate taxpayers pay 32.5 per cent on dividends.)

Further reading

Millennials: which is the best city for your start-up?

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...