EXECUTIVE SUMMARY – INVESTORS’ RESIDENCE SCHEMES IN ESTONIA

General background

Estonia established a residence by investment scheme on 1 May 2003. The requirements and
procedure for issuing a residence permit for an investment are mainly regulated in the Aliens Act that
provides for the “residence permit for enterprise”. This encompasses a number of investment
schemes that have developed over the years. First, a general scheme and scheme for sole
proprietors were created, which required an investment of at least EUR 65,000 (1 million kroon in
2003) and of at least EUR 16,000 (250,000 kroon in 2003) respectively. In 2017 an investment
scheme for major investors was introduced, which requires an investment of EUR 1 million to be
granted a temporary residence permit.

The general aim of the residence permit for an investment is to attract more foreign investments
and to boost the Estonian economy. This is one of the policy priorities stated in the Competitiveness
Plan “Estonia 2020”.1 The Aliens Act2 stipulates the financial thresholds that the investment has to
meet and, in addition, requires that the investment significantly contribute to the development of the
Estonian economy. The criteria to determine such significant contribution are, however, not
established by the law, safe for the level of investment to be made. This assessment is left to the
decision maker, which is the Police and Boarder Guard Board (Board). As the Board might not
have the knowledge to assess all the residence permit requirements, e.g. the impact on the Estonian
economy, the Board can consult other entities on the fulfilment of these requirements. Economic
experts (e.g. from Estonian Unemployment Fund, Enterprise Estonia, Estonian Chamber of
Commerce and Industry)3 might be involved to help the case-officer to assess these requirements.
However, they have an advisory role and the final decision regarding residence permit application is
made by the Board.

Conditions and procedure

Conditions
All investors should meet the general and special requirements of the specific scheme. The general
conditions are:

1) the application meets the aim of the residence permit;

2) the applicant has an actual place of residence in Estonia (this does not apply to major
investors and their family members);
3) the applicant has sufficient income for his/her subsistence and that of his/her family members;
4) the applicant must hold a medical expenses insurance contract.

In addition, general scheme applicants must have a holding in a company entered into the
commercial register of Estonia, in which they have invested a minimum capital of EUR 65,000 and
which is invested in business activity in Estonia. Furthermore, the applicant should have sufficient
financial resources for engaging in enterprise in Estonia and submit a business plan.

These special conditions also apply to sole proprietors, with the difference that the applicant must
have capital of at least EUR 16,000, which is invested in business activity in Estonia.

Major investors must prove that they have made a direct investment of at least EUR 1 million in a
company registered in the Estonian commercial register, investing primarily in the Estonian economy,
or that they have invested in an investment fund, which, pursuant to its investment policy, invests the
resources of the fund primarily into companies in the Estonian commercial register.

1
Available at https://riigikantselei.ee/et/konkurentsivoime-kava-eesti-2020
2
Articles 191, 1972 of the Aliens Act
3
EMN Focussed Study, 2014, ‘Admitting third-country nationals for business purposes National Report of Estonian NCP’,
available at www.emn.ee.

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Under all schemes, applicants must pay a state fee of EUR 180 (if the application is submitted at the
foreign mission) or EUR 160 (if the application is submitted at the Board).

Regarding the physical presence of the foreign investor in Estonia, as of 18 January 2017, the Aliens
Act abolished the concept of permanent residence of 183 days in a year in Estonia to hold any
type of temporary residence permit, including for investors to facilitate and expedite the procedure.
The length of residence was replaced with the obligation to use the residence permit for the purposes
for which it was issued. Despite that, a general criterion of issuing a residence permit (except for
major investors and their family members) is that the applicant must have a place of residence in
Estonia. Within one month of issuing the permit, the applicant must register his/her place of
residence in the Population Register, not doing that might be a reason for revoking the permit. These
circumstances, lead to conclude that only the ‘formal’ presence of the investor is required, rather than
an effective, physical presence.

Procedure
Investors may apply a residence permit for enterprise if they fulfil the requirements set in the
Aliens Act. Applications for residence permits are submitted in person to a foreign representation of
the Republic of Estonia, which sends the application to the Board or in case the applicant is already
legally staying in Estonia, the application can be submitted directly to the Board. The application is
filled in and all the supporting documents must be in English, Estonian or Russian, except the
business plan, which must be in English or Estonian. By signing the application, the applicant
confirms that copies appended to the application comply with the original document, and the
documents do not contain false data and are not forged. In addition, by signing the application,
applicants confirm that they have health insurance and sufficient income. If necessary, the case officer
can request supporting documents proving these statements.

The application is processed and the decision is made by the Board within two months from the
acceptance of the application. In case of a positive decision, a residence permit for enterprise is
granted for up to five years. However, these periods may be reduced under the national legislation
leaving it to the discretion of the competent authority.

The residence permit may not be granted or may be revoked in case the person is a threat to
security or public order. If the residence permit is refused, a written objection can be submitted to the
Board or an appeal can be filed with the Tallinn Administrative Court within 10 days of the
decision.

Estonia has an annual immigration quota of 0.1% of the permanent population (i.e. around 1,300
persons), which applies to third-country investors, except for major investors and family members
of investors. However, as the number of applications for a residence permit for enterprise is low, the
quota is not a hindrance to the investor’s scheme.

For the renewal of the residence permit, the same conditions that were required to issue the first-
time permit must still be active and fulfilled by the investor at the time of renewal (e.g. the
applicant must hold a place of residence in Estonia, which must be registered – except for major
investors, the investment must continue to be active, etc.). Thus, for renewal there is no need to make
a new economic disbursement. However, in the case of the general scheme, the requirement for the
investment to still be active can be waived if at least one of the following conditions is met: (a) the
sales revenue of a company is at least 200,000 euros per year; or (b) the social tax paid in Estonia
monthly for the persons employed by the company is at least equal to the social tax paid in Estonia
monthly for the remuneration equalling fivefold Estonian annual average gross wages. 4 The procedure
for renewal is the same as that for the initial permit and, if granted, the permit is extended for up to ten
years. However, as with the initial permit, this period can be shorter if so agreed by the competent
authorities in view of the specific circumstances of the case.

4
Articles 194 (1), (2), of the Aliens Act.

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Security and ex-post checks
General security checks are carried out by the Board through different national and international
databases. The Security Police’s opinion can be obtained in relation to national security concerns.
Checks on the origin of the money used for the investment are also carried out. These checks
consist in examining the evidence provided by the applicant on the trustworthiness of the business
associates or financial resources of the investment. The Aliens Act does not list the documents to
prove this. However, although the Aliens Act does not cross-refer directly to the anti-money
laundering law,5 the residence permit application can be refused if the applicant is involved in
financing or supporting terrorism (Article 124(2) Aliens Act). Therefore, it is deemed that the due
diligence measures of such law to ensure that the funds used in the investment are not aimed at such
purposes will be carried out. To this end, the obliged entities (e.g. credit and financial institutions,
legal professionals, real estate agents) will be compelled to examine the funds used by the investor
(e.g. bank deposit, bank statements). In addition, investors must present a business plan where the
nature of the capital and the capital movements are specified. This business plan is also examined at
the application phase and, again, at the time of renewal, to take the corresponding decision. In case
there is any doubt the Board can ask for extra proof of the origin of the finances from the applicant
(e.g. income tax declaration, financial statements of the company, balance sheets), including
interviewing him/her, and the Board can also consult security institutions (e.g. Security Police).

Family members
The spouse, minor children, adult children (if they are dependant due to health reasons or a disability)
and a person subject to the legal guardianship of the foreign investor may apply for family
reunification. The parents and grandparents can also apply when the foreign investor has a long-term
residence permit and the parent/grandparent needs the care of the investor (e.g. due to health reasons).

Applications for family reunification may be submitted at the same time as the sponsor’s
application for a residence permit. Applications are submitted personally (legal representative for a
minor child) at the foreign missions of Estonia, which then sends the applications for processing to
the Police and Boarder Guard Board. If the family is already legally in Estonia, they may submit the
application directly to the Board. The application for family reunification is processed and decision
is made within two months. If the decision is positive, the residence permit is issued up to five
years, but not for longer than the validity of the permit issued for the sponsor.

There is no obligation to have a registered place of residence and actual dwelling for the issue of a
temporary residence permit to settle with the spouse. However, within one month, family members
under the general scheme need to register place of residence in the Population Register. This is not a
requirement for the family members of major investors and they do not need to register their place of
residence anywhere. Family members are not subject to annual immigration quota.

Monitoring of the proceedings and the authorities involved

There is no system of scrutiny by the Parliament or other bodies in Estonia. However, the law
provides for a certain degree of monitoring by the Board. This monitoring is ensured, by the fact
that the third country national and other persons concerned must notify the Board of any change in
facts relevant to the granting, possession, extension and revocation of the legal basis for temporary
stay, residence and employment in Estonia. Furthermore, holders of residence permits issued under
the investor schemes must also inform of difficulties in the performance of the assumed duties or of
the impossibility to perform the assumed duties. The Board might also carry out ad-hoc checks to
verify whether the permit conditions are still met during its validity period. Otherwise, the monitoring
of the fulfilment of the residence permit conditions is made in the renewal process.

Rights
The residence permit issued for enterprise entitles the beneficiaries and their dependants to settle,
reside and work in Estonia without needing a separate work permit. They can move freely in the

5
Money Laundering and Terrorist Financing Prevention Act, Rahapesu ja terrorismi rahastamise tõkestamise seadus, RT I,
17.11.2017, 2, available at https://www.riigiteataja.ee/en/eli/517112017003/consolide (in English) and
https://www.riigiteataja.ee/akt/117112017002 (in Estonian) transposing Directive (EU) 2015/849.

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Schengen Area (visa free for up to 90 days within the period of 180 days). Furthermore, all third-
country nationals who hold a valid residence permit in Estonia have access to social6 and
employment7 services and benefits. Investors and their family members are not automatically
covered by national health insurance. However, if they work and social tax is paid from their salary
they receive national health insurance. Children under the age of 19 and pregnant women are covered
automatically by national health insurance. Children have access to education on the same
conditions as Estonian citizens. Furthermore, all investors and their family members can opt to
participate in the adaptation programme (80 hours of Estonian language course + 1-day specific
module) offered by the State to integrate foreigners into Estonian society.

Other matters

Link to citizenship
Investors and their family members can obtain citizenship through the same routes as any other
foreigner - they must fulfil the same criteria as other migrants to be naturalised 8 (to be at least 15
years of age; to hold a long-term residence permit; 9 prior to the date on which s/he submits the
application for Estonian citizenship, to have lived in Estonia for at least eight years on the grounds of
a residence permit or by right of residence, of which at least five years on a permanent basis; to have a
registered place of residence in Estonia; to be proficient in the Estonian language in level B-1; to
know the Constitution of the Republic of Estonia and the Citizenship Act; 10 to have a permanent legal
income; to be loyal to the Estonian State; to take an oath).

Statistics and economic impact

There are no studies assessing the economic and financial efficiency of the residence scheme, thus
it is difficult to assess the real impact. The residence permit for enterprise constitutes the lowest
migration flow to Estonia. Around one per cent of the applications submitted per year are for
investment reasons. For example, in 2017, 98 applications were submitted, which is the highest
number since 2012. Residence permits for enterprise were issued to 68 persons, out of which four
were major investors. As the numbers are low, the impact on the Estonian economy has not been as
substantial as presumably intended. When the introduction of the scheme was analysed, the aim was
to have 50 to100 major investors per year.

On the basis of statistical information available, it may be calculated that, as a result of the major
investor scheme, at least EUR 4 million were invested in Estonian companies last year (2017). When
looking at the number of residence permits issued for other investors (i.e. sole proprietors and general
6
EMN 2013 Main Study, Migrant access to social security and healthcare: Policies and Practice. Estonian National Report.
available at http://emn.ee/wp-content/uploads/2016/04/07.estonia_national_report_social_security_en_version.pdf
7
Article 9 of the Labour Market Services and Benefits Act, available at: https://www.riigiteataja.ee/akt/121122010016
8
Article 6 of the Citizenship Act (Kodakondsuse seadus), RT I, 3 January 2017, available at
https://www.riigiteataja.ee/en/eli/513012017001/consolide.
9
Under Article 62(2) of the Aliens Act, a long-stay visa can be issued when the alien meets the following requirements:
1) the alien holds a valid travel document;
2) if the purpose and reason of his or her planned stay in Estonia have been proved and these are in accordance with the
provisions of the legislation regulating the temporary stay in Estonia of an alien;
3) if it is proved that his or her accommodation and staying expenses are covered during his or her stay in Estonia;
4) if he or she proves the intention to leave Estonia at the latest upon termination of the period of stay;
5) if it is proved that the costs relating to his or her return to his or her country of origin or departure from Estonia into
another country into which he or she has a legal basis to enter are covered and;
6) who has a valid health insurance policy guaranteeing that any costs related to his or her medical treatment as a result of
illness or injury during the period of validity of the visa shall be met, in case of a multiple-stay visa until the expiry of the
period of the first planned stay.
As explained, since January 2017, Estonian law does not require a certain length of the residence, but instead focuses on the
purposes for which the permit is issued.
10
A person who wishes to acquire Estonian citizenship must know: the general principles of the Estonian constitutional
order; the fundamental rights, freedoms and duties of every person; the powers of the Riigikogu, the President of the
Republic, the Government of the Republic and the courts; the conditions and procedure for acquisition, restoration and loss
of Estonian citizenship as provided in the Citizenship Act. Knowledge of the Constitution of the Republic of Estonia and the
Citizenship Act is assessed by way of examination which is held in Estonian.

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scheme investors), there were 64 successful applications in 2017. Taking into account the minimum
sum of EUR 65,000 or 16,000 that investors must invest into the company, then these two schemes
generated around EUR 2,6 to 4 million. Besides that, there is a revenue from the state fees (EUR 180
per application, i.e. around EUR 17,000 in 2017).

Apart from the direct benefit resulting from foreign investment as described above, foreign
investment also has indirect effects, such as the growth of the companies' productivity, the growth of
export potential, the increase of the value added to products, the opening of new market opportunities
and the creation of more jobs. As a result, Estonia will also become more attractive to foreigners in an
entrepreneurial environment, which in turn diversifies and strengthens Estonia's competitive position.

There is a will from the employers, who are represented by the Estonian Chamber of Commerce, to
keep modifying the investors’ residence scheme as so far it has not been so successful in attracting
investors.11

11
Estonian Chamber of Commerce, ‘The intention of drafting the Bill on Amendments to the Aliens Act and Other Acts’
(Välismaalaste seaduse ning teiste seaduste muutmise seaduse eelnõu väljatöötamise kavatsus), 28. February 2018, available
at https://www.koda.ee/sites/default/files/content-type/content/2018-03/V%C3%A4lismaalaste%20seaduse%20muudatuste
%20v%C3%A4ljat%C3%B6%C3%B6tamiskavatsus.pdf.

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