How Abillio in Estonia Differs From LHV, OÜ, and FIE

Estonia offers several ways to work as a freelancer or independent professional, but each comes with different trade-offs. Some prioritize simplicity, others flexibility, and some are designed for long-term business building.

Below is a practical comparison of the four main models: Abillio, LHV entrepreneur account, FIE (sole proprietor), and OÜ (private limited company) that can be used for freelancers with Estonian tax residency.

Feature	Abillio (Authorization Model)	LHV Entrepreneur Account	FIE (Sole Proprietor)	OÜ (Company)
Setup required	✅ None	✅ None	⚠️ Simple registration	⚠️ Full company setup
Legal structure	Work through Abillio OÜ	Personal entrepreneur account	Individual business activity	Separate legal entity
Who invoices clients	Abillio	Freelancer	Freelancer	Company
Tax handling	✅ Handled by Abillio	✅ Auto-deducted	⚠️ Self-managed	⚠️ Self-managed
Accounting required	❌ No	❌ No	⚠️ Basic accounting	⚠️ Full accounting
Income tax	Automatically withheld	20% flat tax	22% on profit	0% retained / 22% distributed profits
Social tax	Included when applicable	Partial component included	Paid on profit	Paid on salary
Health insurance	✅ Available if minimum threshold is met	⚠️ Only at higher income levels	✅ Yes, if social tax paid	⚠️ Only through salary
State pension	✅ Included through social tax	✅ Included in tax	✅ Included	⚠️ Included through salary
2nd pillar pension	Optional	Optional	Optional	Optional
Unemployment protection	⚠️ Depends on structure/contributions	❌ Not included	❌ Not included	⚠️ Only if salaried
Expense deductions	❌ No direct deductions	❌ Not allowed	✅ Yes	✅ Yes
Income limit	❌ None	⚠️ €40,000/year	❌ None	❌ None
Liability	✅ No personal company liability	⚠️ Personal	❌ Unlimited personal liability	✅ Limited liability
Admin complexity	✅ Very low	✅ Very low	⚠️ Medium	❌ High
Best for	Professionals wanting low admin and compliant structure	Small side income	Small local activity	Scaling and long-term business building

LHV: Simple, But Limited

The LHV entrepreneur account is easy to start with, but it comes with important limitations:

• €40,000 annual income limit
• No automatic social protection
• Health insurance only becomes available at relatively high income levels (~€2,450/month)
• No expense deductions allowed

Best suited for low-volume side income.

FIE: Flexible, But Personally Risky

FIE offers:

• Expense deductions
• Straightforward self-employment

However:

• Personal liability remains unlimited
• Social tax still needs to be paid
• Administrative work is still required

Best for small-scale local activity.

OÜ: Powerful, But More Involved

An OÜ is the most scalable structure and works well for long-term business building.

Advantages:

• 0% tax on retained profits
• Flexible income planning
• Strong structure for international business

Trade-offs:

• Requires accounting and compliance
• Social protection only comes through salary payments
• Active owners are generally expected to pay themselves a reasonable salary

Best for scaling and long-term business operations.

How Does Abillio Work in Estonia?

Abillio operates through a käsundusleping (authorization/service agreement).

Instead of creating your own company or registering as self-employed:

• You authorize Abillio to act on your behalf
• Abillio invoices clients through its legal entity
• Abillio handles invoicing, tax withholding, and compliance
• You receive net payouts after taxes

What makes it different:

• No company setup
• No accounting
• No tax filings
• Access to social protection when minimum contribution thresholds are met

This creates a middle ground between traditional freelancing and employment, giving independent professionals a simpler and more structured way to work with both local and international clients.

Frequently Asked Questions (FAQ)

What is the difference between Abillio and an OÜ in Estonia?

Abillio allows freelancers to work without creating a company, while an OÜ is a separate legal entity that requires accounting and compliance.

Is the LHV entrepreneur account good for freelancers?

The LHV entrepreneur account works well for small side income, but it has a €40,000 annual limit and limited social protection.

Can freelancers get health insurance in Estonia?

Yes. Health insurance availability depends on the structure used and whether sufficient social tax contributions are paid.

Does Abillio handle taxes in Estonia?

Yes. Abillio handles invoicing, tax withholding, and compliance on behalf of freelancers.