Labour shortages are forcing action: Estonia is creating a growth company visa programme
From next year, technology companies that have been operating in Estonia for more than ten years will be able to use the growth company visa programme to recruit workers from abroad.
An amendment to the Aliens Act approved by the Riigikogu will allow IT and technology companies to recruit the staff they need for business development and rapid growth from non-EU countries, even if the age of the company has exceeded the agreed limit of ten years that has been in effect up to now. The growth company visa programme will be modelled on the Startup Visa programme that has proven successful so far.
Annika Järs, Head of Startup Estonia’s Startup Visa Programme and External Relations, said that this decision has been much-awaited on the market. ‘The Startup Visa programme, launched in 2017, was one of the most important steps the Estonian state has taken to support the development of local IT and technology companies, enabling them to recruit foreign talent with specific skills. By today, however, it had become clear that we needed to take the next step, as more and more Estonian technology companies are maturing, i.e., crossing the agreed ten-year limit, and for this reason alone they can no longer benefit from the programme,’ Järs explained.
The possibility to recruit foreign talent is important for Estonian tech companies, as the local labour market has a shortage of workers who are suitably qualified for both developing business and growing rapidly. The concerns of IT and technology start-ups were all the more serious, as a third of start-ups in Estonia are now more than five years old. ‘This has created a risk that our successful technology companies, including several Estonian unicorns, will not be able to recruit any more staff in the near future with the help of the Startup Visa programme and, in the worst case, they will be forced to move their headquarters and development units abroad,’ Järs added.
The Estonian technology sector is becoming an increasingly important employer and taxpayer, and it is important for the state to encourage start-ups and technology companies to have their headquarters in Estonia, allowing them to create new jobs in Estonia and keep the associated taxes in the state budget. The growth company visa programme, modelled on the Startup Visa programme, will thus create the indispensable prerequisites for technology companies that have successfully established themselves in Estonia to grow and develop here, and for their development units and headquarters to remain in Estonia in the future, as well.
The Startup Visa programme has proven its effectiveness and success over the years. With the help of the programme, Estonian start-ups have recruited 4,000 foreign talents, 868 of whom were founders of technology companies. 515 Estonian start-ups have used the Startup Visa to hire talent, and 248 start-ups have been founded in Estonia by foreign Startup Visa holders.
According to the Estonian Tax and Customs Board, Estonian start-ups paid a total of 125 million euros in labour taxes last year, which is 29% more than a year earlier. The start-up sector as a whole has been growing at around 20–30% a year for the past five years, and is expected to continue growing at the same rate in the coming years. In 2021, Estonian start-ups also attracted a record 928 million euros in investments, which is more than double the amount invested a year earlier. In addition, both the number of companies attracting investments and the size of transactions have increased – last year, 47 start-ups made transactions that exceeded one million euros.
Startup Estonia connects and supports Estonian start-ups. Startup Estonia collects data in cooperation with start-ups and the published statistics are based on data from start-ups, the Estonian Tax and Customs Board, and Statistics Estonia. Startup Estonia is a national programme to develop Estonia’s start-up ecosystem, boosting the emergence of start-ups and international success stories. The programme of Startup Estonia is carried out by the KredEx and Enterprise Estonia joint organisation. Startup Estonia’s research accelerator activities are carried out by SmartCap.
The Startup Estonia programme (project number EU50651) is financed using funds from the European Regional Development Fund.