Estonia has successfully attracted a large number of joint ventures with Western companies, benefiting from a well-developed service sector and links with Scandinavian countries. The foreign investment act passed by the Supreme Council in September 1991 offers tax relief to foreign investors. Property brought into Estonia by foreign investors as an initial capital investment is exempt from customs duties, but is subject to value-added tax. A foreign investor is legally entitled to repatriate profits after paying income tax.
In 1998, foreign direct investment (FDI) inflows peaked at $580.6, up from $266.7 million in 1997. FDI inflow averaged $346 million in 1999 and 2000, but increased to $538 million in2001. Estonia's share of world FDI flows from 1998 to 2000 were 2.3 times its share of world GDP, making it 16th among the 140 countries ranked on FDI performance by UNCTAD.
Industry accounts for 46% of the total foreign investment, primarily in the pulp and paper, transportation, and services sectors. Wholesale and retail trade accounts for 27% of foreign investment; transport, 14%. Estonian agribusiness is an area of growing interest to foreign investors.