Estonia’s tech ecosystem is navigating the current challenges with no signs of slowing down. According to the recent report mentioned by Invest in Estonia, the Baltic Tiger was one of the key performers in the New Nordics’ venture scene in 2023, punching well above its weight. In absolute numbers, Sweden takes the top with €362M of invested capital. Estonia is holding strong with €75M attracted and takes the second place in per capita numbers, behind Iceland.

With a slight adjustment in rounds’ size to the average of €3,7M per deal, the ecosystem is continuing to invest heavily into the next batch of unicorn founders. Energy & climate were the hottest categories in the region, attracting over €195M in total across 23 deals. The Fintech and DeepTech sectors also broke above €100M.

Estonia is well-represented in all top-performing categories and plans to accelerate those R&D niches. The country has an action plan to reach 500 DeepTech startups by 2030, and ranks in the top 10 for effective energy transition, fueling a wave of energy-related innovations, from smart grid management to advanced EV charging.

At the same time, as the 2023 edition of the Tax Competitiveness Index gets published, Tallinn celebrated its 10 years straight on the top, beating other contenders in the OECD at the simplicity and business friendliness of its tax system.

Estonia’s top score in 2023 is driven mainly by four positive features of its tax code:

• It has no corporate income tax on reinvested and retained profits (and a 14-20% corporate income tax rate on distributed profits, to be changed to a unified 22% from January 1, 2025).
• It has a flat 20% tax (22% from January 1, 2025) on individual income.
• Its property tax applies only to the value of land, rather than to the value of real property or capital.
• It has a territorial tax system that exempts 100% of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.