Entrepreneur account, sole proprietor (FIE) or OÜ: which one for a freelancer?

A freelancer in Estonia has three ways to sell services: the entrepreneur account (ettevõtluskonto), a sole proprietor (FIE, füüsilisest isikust ettevõtja) or a private limited company (OÜ). They differ in how much tax you pay, whether you can deduct costs, and whether you risk your personal assets. This page compares the three. For the steps to set up a company, see founding an OÜ.

In short

• The entrepreneur account suits small side income with few costs, mostly from private customers: the bank sends 20 percent of every euro received to the tax authority, and you keep no books.
• An FIE suits a sole trade with real costs: you deduct business expenses, but you pay a minimum social tax and you are liable with all your personal assets.
• An OÜ suits you once you keep profit in the business, sell to companies or carry business risk: retained profit is not taxed, and your liability is limited.
• Above 40,000 euros of taxable supply in Estonia in a calendar year you must register for VAT, and a VAT-registered person cannot hold an entrepreneur account.

What is the entrepreneur account?

The entrepreneur account is a bank account of a natural person on which tax is paid at a flat rate on every amount received for goods or services (Simplified Business Income Taxation Act § 1). Only a natural person can open one. A company cannot.

The tax. The rate is 20 percent of each amount received on the account. If you have joined the funded pension (the second pillar), the rate rises by your pension contribution (§ 4). The bank reserves the tax and transfers it to the Tax and Customs Board by the 10th of the next month, so you file no return for this income (§ 6). You cannot deduct any expenses. You keep no books, because a natural person who is not a sole proprietor is not an accounting entity (Accounting Act § 2(2)).

Where the 20 percent goes. The law splits the tax into an income tax part of 22/55 and a social tax part of 33/55 (§ 8(2)). The social tax part counts as social tax for your health insurance and your state pension (§ 9(1)).

Who cannot use it. A person registered for VAT cannot hold an entrepreneur account. A person who also runs an FIE in the same or a similar field cannot hold one either (§ 2(2)).

The 40,000 euro limit. VAT registration becomes mandatory when your taxable sales in Estonia pass 40,000 euros in a calendar year (VAT Act § 19(1)). Because a VAT-registered person cannot hold the account, the Tax and Customs Board expects you to move to an FIE or a company above that amount (Board guidance).

Health insurance. You are insured for a month only when the social tax part of your account tax reaches the minimum social tax obligation for that month (Health Insurance Act § 5(2), clause 5^1). The social tax part is 12 percent of what you receive (33/55 of 20 percent). The minimum is social tax on the monthly rate set in the state budget, which is 33 percent of that rate (Health Insurance Act § 5(2), clause 4; Social Tax Act § 2^1 and § 7(1)). In 2026 that is 292.38 euros, so you need receipts of about 2,436.50 euros in the month, according to the Tax and Customs Board for a person without a funded pension contribution. Social tax that a client pays for you under a contract for services counts toward the same minimum. Cover starts after the social tax part has arrived, and it is suspended one month after the due date when the minimum was not reached in a month (Health Insurance Act § 8).

Selling to companies. The Tax and Customs Board treats a payment from an Estonian company to an account holder, made in place of an employment contract or a service contract, as an expense unrelated to the company's business. The paying company then owes income tax of 22/78 on it and declares it on its TSD return. The Board applies no extra charge to a sale of goods, and it expects you to tell the paying company that you work through an entrepreneur account (Board guidance). Read that guidance before you use the account for work for companies.

How is a sole proprietor (FIE) taxed?

An FIE pays tax on profit, which is income minus business expenses, and the combined burden is about 41 percent of that profit.

Registration. You must apply to the Commercial Register before you start (Commercial Code § 3(2)). The state fee is 20 euros (State Fees Act § 62(1)). The business name must contain your given name and surname (Commercial Code § 8(1)).

The tax. You deduct your business expenses from your business income. The result is divided by 1.33, and both social tax and income tax are charged on that amount (Income Tax Act § 14(5^3)). Social tax is 33 percent (Social Tax Act § 7(1)). Income tax is 22 percent, after the basic exemption (Income Tax Act § 4(1)). Social tax is charged on at most ten times the annual minimum wage (Social Tax Act § 2(1), clause 5).

The minimum social tax. An FIE pays social tax on at least 12 times the monthly rate of the state budget each year, even with a small profit or a loss (Social Tax Act § 2(5)). Exceptions exist. Social tax that an employer already pays for you counts toward the minimum, so only the total must reach it (§ 2(7)). A person who received a state pension, had partial or no work ability, or was a student treated as insured for the whole year pays no minimum. The minimum is prorated in the year you register or close, in the year such a status starts or ends, while your activity is suspended, and for days of temporary incapacity for work (§ 2(5), (6), (8) and (10)).

Advance payments. Social tax advances are due by the 15th day of the third month of each quarter (Social Tax Act § 9(3)). Income tax advances are one quarter of last year's tax on business income, paid by 15 September and 15 December. You pay none in your first year, and none when a quarterly payment would be 300 euros or less (Income Tax Act § 47).

Liability and timing. An FIE is not a separate legal person, so you answer for business debts with all your personal assets. Profit is taxed in the year you earn it, even when you leave the money in the business.

How is an OÜ taxed?

An OÜ pays no income tax on profit it keeps. It pays 22/78 of the net amount only when it distributes profit, for example as a dividend (Income Tax Act § 4(1^1) and § 50(1)). The guide to the corporate income tax explains how that works.

A shareholder is not personally liable for the company's obligations (Commercial Code § 135(2)). The cost is more administration: double-entry bookkeeping, an annual report, and payroll taxes if you take a salary. You choose how to pay yourself: a salary, a board member fee or dividends. See paying yourself as a founder.

Which one should you choose?

Choose by your costs, your clients and what you do with the profit.

• Entrepreneur account: side income with few costs, under 40,000 euros a year, and no need for VAT registration.
• FIE: a sole trade with real costs, when you spend the profit as you earn it.
• OÜ: when you reinvest profit, sell to companies, or carry business risk. See VAT registration for when an OÜ must register.

General information, not advice for your situation. The law as in force on 30.09.2026.