Comparative legal analysis of associations laws and regimes in the EU. Country Report: Estonia
A non-profit association is a voluntary association of persons which means that the objective or main activity shall not be the earning of income from economic activity. The income of a non-profit association may be used only to achieve the objectives specified in its articles of association.
A non-profit association shall not distribute profits among its members. Transformation of a non-profit association into a legal person of a different class is prohibited.
Non-Profit Associations Act regulates the establishment and dissolution of a non-profit association, its membership, registration and management. The legal capacity of a NPA commences as of entry of the non-profit association in the non-profit associations and foundations register (register) and terminates as of deletion of the non-profit association from the register (§ 2 of the NPA Act).
A primary source of law with relevance to the associations under Estonian legislation is the Non-profit Associations Act1. Other regulatory documents with relevance to the associations and especially liability, reporting and transparency are Income Tax Act2, Value Added Tax Act3, Law of Obligations Act4, Accounting Act5, General Part of the Civil Code Act6.
In addition to the laws on non-profit associations and foundations, several sub-categories of non-profit organizations also have their own laws, e.g. churches, creative unions, trade unions, political parties and various cooperatives.
According to the Non-profit Associations Act, a non-profit association is a legal person in private law. The passive legal capacity of a non-profit association commences as of entry of the non-profit association in the non-profit associations and foundations register and terminates as of deletion of the non-profit association from the register.
The Associations in Estonia are governed by a General meeting and a Management Board.
The administration fees as of 2022 are as follows7: 30 euros for entry in the register of the association; 10 euros for changing the data entered in the register; 70 euros upon filing an appeal against a court ruling.
According to the Non-profit Associations Act a non-profit association is a voluntary association of persons the objective or main activity of which shall not be the earning income from economic activity. The income of a non-profit association may be used only to achieve the objectives specified in its articles of association.
In the case of Estonia, NPAs are quite similar to usual businesses regarding taxation rules. For all legal entities including NPAs: a social tax that is 33%, and an income tax is 20%. NPAs do not have to pay any corporate income tax on any income, including donations. VAT rules are the same for companies and NPAs too. An NPA becomes VAT liable (obliged to get a VAT number) as soon as it earns more than €40,000 annually. NPAs have several non-taxable expenses such as accommodation, transport, entertainment, and tax-free limits for some types of expenses.
According to the Business Register, there were 23 337 non-profit associations in 2021, which is 7,27% of the total number of legal persons. The number of partnerships and other groups is unknown.
As February 2022, the list of charitable or income tax-exempt non-profit associations, foundations and religious associations maintained by the Estonian Tax and Customs Board (ETCB) includes 2,590 associations, the largest group of which are sports associations and religious associations (the latter totaling approximately 700 in Estonia).
Although the total turnover of the non-profit sector is reported to be 600-700 million EUR per year and the declared donations over 40 million EUR per year, most of the associations are small organizations, e.g. less than a fifth have paid employees. About the same amount of organizations receive public subsidies and donations are declared by 1,300 - 1,400 associations. It can be concluded that the average number of active NPAs is in the range of a couple of thousands.
Contents
1.Definition, types of associations and characteristics
2. Sources of law founding associations
3. Formation requirements and constitutive acts and elements
8. Definitions of public interest
10. Economic activities permitted
11. Governance, operating rules and bodies
13. Reporting and transparency
14. Resources and assets management
6. Share between voluntary and paid work
7. Data on cross-border activities
Legal persons are divided into a legal person in private law or a legal person in public law (§ 24 of the General Part of the Civil Code Act). Legal persons in private law are established in private interests and on the basis of the law applicable to the type of legal person. According to Estonian law, a non-profit association is also a legal entity. Exceptions for foundation, activities and dissolution of particular classes of non-profit associations may be provided by law. Such examples of special classes of NPAs are apartment associations, land improvement associations, political parties, building associations, churches and congregations. Non-profit associations also include political parties. There are currently 12 political parties in Estonia. The Estonian Political Parties Act8 defines a political party as a voluntary political association of Estonian citizens, which has been registered pursuant to the procedure provided for in this Act and the objective of which is to express the political interests of its members and supporters and to exercise state and local government authority. A political party is by nature a non-profit association, but the minimum membership requirement applies to its registration - an association registered as a political party must have at least 500 members.
A non-profit association is a voluntary association of persons which means that the objective or main activity shall not be the earning of income from economic activity. The income of a non-profit association may be used only to achieve the objectives specified in its articles of association. A non-profit association shall not distribute profits among its members. Transformation of a non-profit association into a legal person of a different class is prohibited.
Non-Profit Associations Act regulates the establishment and dissolution of a non-profit association, its membership, registration and management. The legal capacity of a NPA commences as of entry of the non-profit association in the non-profit associations and foundations register (register) and terminates as of deletion of the non-profit association from the register (§ 2 of the NPA Act).
Estonian Non-profit associations and foundations provide services and advocacy. They appear as unions, think tanks, institutes, clubs, networks and umbrella organizations.
The largest sectoral groups among NPAs are various sports-related associations (over 3,000), leisure providers (around 2,500), cultural and educational associations (over 2,000 each) and promoters of regional and local life (around 2,000).
Although most organizations are registered in Tallinn, the capital of Estonia, the percentage of registered organizations in the 15 counties in Estonia resembles the percentage of people living in the counties. The largest number of the NPAs (44%) is located in Harju county and the second largest number of them (12%) is in Tartu County in Estonia.
Regional or geographical NPAs mostly operate on local level (82%) or cover most of Estonia. As for their main activity, they claim it to be the promotion of the quality of local life.
Those NPAs that have international scope are mostly older andbiggerones and are equipped with paid staff and operate mainly in or near Tallinn, the capital (54%). Their fields of activities include development and humanitarian aid (100%), national defense (62%), development of civil society(60%), religion (58%), communication and IT (55%), healthcare (54%). International scope is typical for umbrella organizations (50%).
According to the study (2018) fields of activities were as follows:
| Leisure activities and hobbies | 39% |
|---|---|
| Sports and physical education | 23% |
| Culture and arts | 31% |
| Education and science | 19% |
| Local quality of life | 17% |
| Representing interests of social groups | 15% |
| Social services | 9% |
| Religion | 6% |
| Activities of professional associations | 6% |
| Health care | 6% |
| Development of society | 13% |
| Environment | 9% |
| Fishing/hunting | 3% |
| Agriculture | 3% |
| Heritage protection | 2% |
| National defense | 2% |
| Communication/ IT | 1% |
| Activities in support of immigrants | 1% |
| Development and humanitarian aid | 1% |
| Other | 4% |
According to the Constitution of Estonia9 (§ 31) Estonian citizens have the right to engage in enterprise and to form for-profit undertakings and organizations.
The main regulatory document for the NPAs is the NPA Act. According to the Act a non-profit association may be founded by at least two persons. The founders may be natural persons or legal persons. The Act stipulates that ‘the income of a non-profit association may be used only to achieve the objectives specified in its articles of association. A non-profit association shall not distribute profits among its members’. Furthermore, a non-profit association will be dissolved by a court of law if economic activity becomes the non-profit association’s main activity. However, there are NPAs which engage in economic activity that can be considered their main activity. These organizations are social enterprises which do not have a special law in Estonia. The NPA earnings from entrepreneurial activities are acknowledged if they serve public benefit. In practice, it is complicated to determine an NPA’s main goal, whether it is mainly providing services or selling products that generate income or achieving the objectives specified in its Articles of the Association. This clause is in favor of social enterprises by stipulating that associations are free to conduct any economic activity (in any field) provided that the income they generate is reinvested to achieve their statutory social goals.
The formation requirements for associations are prescribed in the Non-profit Associations Act. According to the Non-profit Associations Act a non-profit association may be founded by at least two persons. The founders may be natural persons or legal persons (§ 5). Persons who enter into transactions in the name of such associations are personally and solidary liable for such transactions.
The founders and members may also be foreign nationals. If the whole management board is located abroad, a contact person holding a license to perform the respective activity must be entered in the register.
As Estonian law does not permit a branch of an international organization to be registered as a non-profit association10, a new legal entity must be founded in Estonia according to the NPA Act as a separate organisation. Additionally, a foreign legal entity may carry out its activities in Estonia directly on a cross-border basis without registering a separate branch or founding a new legal entity until its activities comply with Estonian legislation11.
The name of a non-profit association should clearly differ from the names of other non-profit associations entered in the register in Estonia. It should not be misleading with regard to the objective, scope of activity or legal form of the non-profit association.
Before founding a non-profit association a founding meeting with the members must be held and a founding memorandum of association must be entered into and the non-profit association’s articles of association must be drawn up. Upon conclusion of a memorandum of association, the founders shall also approve the articles of association of the non-profit association as an annex to the memorandum of association. A memorandum of association should include the name, registered office, address and objectives of the non-profit association being founded and the obligations of the founders with regard to the non-profit association. The founders need to approve the articles of association of the non-profit association as an annex to the memorandum of association12.
NPAs have the possibility to add the association to the list of associations benefiting from income tax incentives, in case they clearly indicate in the objective and activities of the association that the association operates in the public interest and for charitable purposes.
Once the articles of association and the memorandum of association have been approved at the foundation meeting, the non-profit association must be registered in the Business Register. The approved documents can be submitted electronically in the e-Business Register or via a notary.
The petition for entry in the register can be submitted to the Business Register electronically if all of the founders and members of the management board are able to provide a digital signature.
Registration documents must be submitted via a notary if not all of the founders or members of the management board are able to sign the documents digitally. The authenticity of signatures is verified by a notary.
According to the NPA Act upon submission of a petition to the register, a non-profit association has to specify its planned principal activity and must keep the register informed of any changes to the principal activity. Upon notification to the register of activities and specification of activities in annual reports, the Estonian Classification of Economic Activities is used. Religious associations, political parties and apartment associations are not required to notify the register of their planned principal activity.
The state fee for registering a non-profit association in the e-Business Register is EUR 30. The state fee can be paid by bank transfer as part of the process of preparing a petition for registration.
Founding a non-profit association via a notary entails a state fee of EUR 30 for registry acts, plus any notarial fees. A non-profit association must be registered within 5 business days. If any deficiencies are found, the registrar must report them to the founders and set a deadline for rectifying the deficiencies.
The administration fees as of 2022 are as follows13:
EUR 30 for entry in the register of the association.
EUR 10 for changing the data entered in the register.
EUR 70 upon filing an appeal against a court ruling.
Deleting the association from the register, change of address within the local government and deleting the data of the deceased member of the management board from the register are free of charge.
The notary fees related to the NPA activities are as follows:
EUR 12.75 (plus VAT) for confirming a signature.
EUR 12.75 (plus VAT) for forwarding an application to the registry department.
Preparation of a draft entry application, confirmation of a signature and forwarding the document to the registry department – EUR 35.75 (plus VAT). If there are several applicants, a fee of EUR 6.35 (plus VAT)will be added to the fee starting from the second person.
Confirmation of a copy of a document (incl. A transcript of a digital document) or an extract, as well as a printout - EUR 3.19 (plus VAT) per page, but not more than EUR 31.95 (plus VAT) in total.
The issue of a registration decision or court ruling made to a non-profit association from a notary's office is free of charge.
Submission of the compulsory annual report that has to be submitted in the e-Business Register is free of charge. The annual report and the documents can also be submitted to the court registry’s department electronically in PDF format via the notary or on paper at the notary's office on site. This notarial transaction costs EUR 25.55 (plus VAT).
According to the Non-profit Associations Act (§ 10) the founders of a non-profit association and the members of the management board are jointly liable for damage caused to the non-profit association by submission of incorrect or inaccurate information or breach of other obligations upon the foundation of the NPA. The limitation period for assertion of a claim against a member of the management board is five years unless the articles of association of the NPA or an agreement with the member of the management board prescribes another limitation period. They are similarly jointly liable in case they enter into transactions in the name of a non-profit association being founded before entry of the non-profit association in the register.
Members of the management board who cause damage to the NPA by violating their obligations shall be jointly and severally liable for compensation for the damage caused. A member of the management board shall be released from liability if he or she proves that he or she has performed his or her duties with the due diligence normally expected from a member of the management board (§ 32 of the NPA Act).
The limitation period for assertion of a claim against a member of the management board is five years unless the articles of association of the non-profit association or an agreement with the member of the management board prescribes another limitation period. A claim for payment of compensation to a non-profit association for damage may also be submitted by a creditor of the non-profit association if the assets of the non-profit association are not sufficient to satisfy the claims of the creditor. A bankruptcy of the NPA can be declared if the NPA fails to pay compensations for damage and the assets are not sufficient to satisfy the claims of the creditor. Then a creditor has the right to file the claim against founders and members of the management board.
According to the Non-profit Associations Act a non-profit association is a legal person in private law. The passive legal capacity of a non-profit association commences as of entry of the non-profit association in the non-profit associations and foundations register and terminates as of deletion of the non-profit association from the register.
Associations of persons with non-profit characteristics which are not entered in the register are not legal persons and the provisions for civil law partnerships apply to them.
Among Estonian laws, public interest is referred to, inter alia, the Civil Service Act and the Income Tax Act, but the term itself is not unambiguously defined by any law and belongs to an undefined legal concept. It refers to organisations having broad societal goals, being transparent and acting in the benefit of groups that would not cope on their own. Non-profit organizations may not distribute the economic benefits of their activities for purposes other than those of the public interest which is not used for private consumption, but is accessible to all, such as nature, security, culture, etc. Although many non-profit associations operate in the public interest in practice, only a small minority of them have so far been included in the list of public interest associations approved by the Government of the Republic. Donations made to the associations mentioned there can be deducted by the donor from his/her taxable income.
As for the goals and fields of activities of non-profit organizations, they are forerunners in advocating public interests. However, the Income Tax Act14 does not treat professional organizations, business support organizations, trade unions or political associations as acting in the public interest. Nevertheless, many of them may still operate in the public interest, for example, writers 'and architects' unions are creative and professional associations. Despite the fact that Estonian tax policy does not yet consider political parties to be acting in the public interest, the output of parties, i.e. the exercise of public power, should be directly in the public interest. As can be seen from the above examples, the tax authority has a very wide margin of discretion to furnish the concept of public interest.15
Network of Estonian Nonprofit Organizations is the single and largest Estonian organisation uniting public benefit nonprofit organizations. NENO16 is a membership organization created for the implementation and protection of the common interest of Estonian public benefit non-profits. NENO unites 108 active and operational public benefit non-profit organizations in Estonia from all fields, both associations and foundations. At the same time, their information network involves approx. 4000 organizations. NENO has led to the formation of several Good Practices agreements between non-profits and public sector, namely Good Practice of the Delivery of Public Services (2006), Good Practice of the Funding (2007); NENO was also active in drawing up the Good Involvement Practices (2005). These documents serve as general guidelines to harmonize the principles, from which the public sector institutions and non-profit organizations could proceed in their work.
Every natural person or legal person who complies with the requirements of the articles may be a member of the non-profit association. An NPA should comprise at least two members. The management board decides on membership in an NPA unless this is placed in the competence of the general meeting or some other body by the articles of association. If the management board or a body other than the general meeting denies membership to an applicant, the applicant may demand that the general meeting decide on his or her membership. Membership in a non-profit association or exercise of the rights of a member cannot be transferred and it terminates upon the death of a natural person who is a member or dissolution of a legal person who is a member. A member of a non-profit association has the right to leave the NPA on the basis of a petition. A member may be excluded from an NPA by a resolution of the management board in the cases and pursuant to the procedure prescribed by the articles of association. The articles of association may prescribe that exclusion of members is decided by the general meeting. If a membership terminates during a financial year, the membership fee prescribed by the articles of association shall be paid for the whole financial year unless the articles of association prescribe otherwise. A person whose membership in a non-profit association has terminated shall not have a right to the assets of the association.
According to the Non-profit Associations Act a non-profit association is a voluntary association of persons the objective or main activity of which shall not be the earning income from economic activity. The income of a non-profit association may be used only to achieve the objectives specified in its articles of association. A non-profit association cannot distribute profits among its members. Transformation of a non-profit association into a legal person of a different class is prohibited.
The highest body of a non-profit association is the general meeting of its members (§ 18 of the NPA Act). All members of a non-profit association may participate in the general meeting unless otherwise provided by law. The general meeting adopts resolutions on all management matters of the non-profit association which are not placed within the competence of the management board or another body of the non-profit association by law or the articles of association.
The general meeting can amend the articles of association, appoint and remove members of the management board, decide on conclusion and terms and conditions of transactions with the members of the management board, approve annual reports, decide on dissolution, merger or division of the non-profit association. A member of a non-profit association may participate and vote in the general meeting. A representative should be granted a written authorization document. Each member of a non-profit association has one vote.
On a daily basis, a non-profit organization is represented and managed by the management board elected at a general meeting. Each member of the management board has the right to represent the NPA in concluding all transactions, unless otherwise provided in the articles of association or law. All or some of the members of the management board may represent the non-profit association only jointly.
Members of the management board must perform their legal obligations with the diligence normally expected from a member of the management board.
The management board may have one member (director) or several members. Members of the management board must be natural persons with active legal capacity. The management board calls the general meeting. As a rule, the boards of NPAs have either two (29%) or three (27%) members. 13% of the associations have a one-member board, 17% of the 4-5 board members and 13% of the associations have more than five members. The specifications of the management board and the right of representation of the management board shall be entered in the register.
The residence of at least one half of the members of the management board must be in Estonia, in another Member State of the European Economic Area or in Switzerland.
The management board shall call the general meeting if at least one-tenth of the members of the non-profit association so demand in writing indicating the reason, and the articles of association do not prescribe a smaller representation requirement.
States have a legitimate interest in regulating NGOs so as to guarantee respect for the rights of third parties (whether donors, employees, members or the public) and to ensure the proper use of public resources and respect for the law. In most instances the interests of third parties can be adequately protected by enabling them to bring the relevant matter before the courts; there should generally be no need for a public body to take any other action on their behalf. The resolution of general meeting can be invalidated by a court.
On the basis of an action filed against the non-profit association, a court may declare invalid a resolution of a general meeting which is in conflict with the law or the articles of association. The limitation period for a claim shall be three months as of adoption of the resolution. The management board and every member of the management board can demand the declaration of invalidity of a resolution of the general meeting if the implementation of the resolution would entail criminal offense or misdemeanour or it would apparently bring about an obligation to compensate for damage, and a member of the non-profit association who did not participate in the adoption of the resolution. A member of the non-profit association who participated in the adoption of the resolution may demand the declaration of invalidity of a resolution only if his or her objection to the decision has been recorded. A court judgment for repeal of a resolution of the general meeting applies to all members of the non-profit association and the management board (§ 24 of the NPA Act). With good reason, which above all is the temporary or extended inability of a member of a management board to perform his or her duties, a court may appoint a new member to replace a withdrawn member of the management board at the request of an interested person. The authority continues until the appointment of a new member of the management board by the general meeting or in another manner prescribed by the articles of association (§ 30 of the NPA Act). The NPAs have to be registered in the register of NPAs. The registration departments (registrars) of the county courts maintain a register of non-profit associations located in their jurisdiction (§ 75 of the NPA Act).
According to the Accounting Act17, the NPAs have the obligation to organize their accounts and to prepare and submit annual reports and other financial statements pursuant to the Act.
According to the Income Tax Act18 the NPAs can be registered in the list of non-profit associations, foundations and religious associations benefiting from income tax incentives which are supervised by the Tax and Customs Board.
According to the Non-profit Associations Act the general meeting supervises the activities of other bodies. In order to perform this duty, the general meeting may call for an external review or audit. The management board should organise the accounting of the NPA according to the Accounting Act19. After the end of a financial year, the management board has to prepare the annual report which is submitted to the general meeting. Approval of the annual report shall be decided by the general meeting. At least one-fifth of the members of a non-profit association may request from the non-profit association that the auditor who prepared the sworn auditor's report or the controller who provided the opinion participate in the making of the decision to approve the annual report, and provide explanations concerning the sworn auditor's report or the opinion if the shareholders have submitted the corresponding written request at least five days before the general meeting. Approved annual reports shall be signed by all members of the management board.
The associations operate with the following main types of resources:
membership fees,
public sector appropriations,
grants,
project grants (financed by local and international foundations),
payments for products and services,
donations from private persons and businesses.
Indirect assistance comes in the form of tax allowances and in-kind contributions.
Another important resource for the associations is the contribution of time and energy by members and volunteers. Local support for NPAs is relatively good (though varies by region) as local governments increasingly recognize the work of NPAs, and issue contracts for services. This is the reason why organizations currently offer a wide range of services in such popular fields as health care, education, accommodation, schooling, counselling and environmental protection, as well as in less common fields such as economic development, administrative and supporting services, etc.
The current legislative environment for non-profit organizations in Estonia is favourable. NPAs are supported by consultants working in regional development centres. They assist in setting up NPAs but also provide consultancy for various project applications. The development centres together with umbrella organizations and networks form a functioning and supportive infrastructure for Estonian non-profits and civic activists.
Legitimacy and accountability of the non-profit sector is vital to Estonian organizations, which is why Estonian organizations have adopted a Code of Ethics20. It deals with issues like democratic governance and management, civic courage and care, sustainable and responsible utilization of assets and resources, accountability and reporting, openness and transparency, independence and avoiding conflict of interest, keeping to one’s word, respecting the ownership of ideas, and tolerance.
According to the Non-profit associations Act an NPA is dissolved:
upon a decrease of the number of members of the non-profit association to below two;
by a resolution of the general meeting or other competent body
A resolution is adopted if over two-thirds of the members who participate in or are represented at the general meeting vote in favour and the articles of association do not prescribe a greater majority requirement (§ 39).
If a non-profit association is insolvent the management board should without delay and not later than within twenty days after the date on which the insolvency became evident, submit the bankruptcy petition of the NPA to a court. The members of the management board should jointly compensate to the NPA any payments made after the insolvency of the NPA became evident.
Compulsory dissolution (§ 40) can take place:
at the request of the Minister of Internal Affairs or another interested person;
if the activities of the non-profit association do not comply with the objectives in the articles of association;
if economic activity becomes the main activity of the non-profit association.
After satisfying or guaranteeing all the creditors' claims and depositing the money, the remaining assets are distributed among the persons entitled by the articles of association.
In case the NPA was founded only in the interests of its members, assets shall be distributed in equal parts among the persons who are members of the non-profit association at the time of dissolution. In other cases the assets can be transferred to the state which shall use them to the extent possible according to the objectives of the NPA.
Fundamental decisions related to the NPA are taken by the General Assembly. Among its key powers are:
amend the articles of association,
appoint and remove members of the management board,
elect and remove proxies,
decide on conclusion and terms and conditions of transactions with the members of the management board or another body prescribed by the articles of association,
decide on the conduct of legal disputes with the members of the management board or another body,
approval of annual reports decide on dissolution,
merger or division of the non-profit association;
elect members to other bodies prescribed by the articles of association.
In the case of Estonia, NPAs are quite similar to usual businesses regarding the incorporation, daily operations, bookkeeping process, etc. There are common taxation rules for all legal entities including NPAs: a social tax that is 33%, and an income tax is 20%. NPAs do not have to pay any corporate income tax on any income, including donations. In this respect, they are treated in a manner similar to businesses. Moreover, NPAs are permitted to engage in any activity, including business that corresponds to the purposes stated in their statutes and are not taxed on income from such activity. VAT rules are the same for companies and NPAs too. An NPA becomes VAT liable (obliged to get a VAT number) as soon as it earns more than EUR 40,000 annually. NPAs have several non-taxable expenses such as accommodation, transport, entertainment, and tax-free limits for some types of expenses.
The Estonian NPAs do not have automatic tax exemption. The Income Tax Act21 states that non-refundable funds, received from foreign donors, in addition to membership and entrance fees for NPAs are tax-exempt and enables them to apply for tax exemption on donations and income from economic activities.
Each NPA can submit an application for a status of public benefit and charitable organization for getting tax incentives. In order to qualify, an organization’s activities must be connected with support to charity, science, culture, education, sports, health care, social welfare, environment protection, or religious congregations in the public interest. The respective list of organizations is determined by the Tax and Customs Board on a case-by-case basis each year. As for donations, legal persons qualify for tax-exemption of their income if the donation is made to a "listed" organization. However, if a NPA is engaged in business as its principal activity or uses business income for purposes other than those specified in its statutes, it cannot be entered into the government list and donations made to this NPAs will therefore not be entitled to the tax benefits. Individuals have to pay taxes on funds they donate to the non-profit sector (§ 11 of the Income Tax Act). The treatment of non-monetary donations is the same as for monetary donations, and taxation is based on their market value. All donations are included automatically in the contributor’s semi-completed income tax return form.
Costs related to the activities of the organization are subject to taxation as fringe benefits. So in general the volunteer is responsible for covering all his/her expenses (food, lodging or transport). If the organization wishes to cover the volunteer’s costs, it has to be done through a labour contract or some civil contract. In practice sometimes there are written agreements concluded between the organization and the volunteer.
According to the Business Register22, there were 23 337 non-profit associations in 2021, which is 7,27% of the total number of legal persons. Since the 2018 Apartment Ownership and Cooperatives Act23 was passed, these formations are not considered under the Laws on NPAs. This action diminished the number of NPAs and Foundations for nearly a half.
It should be noted that there may be about 6000 NPAs that are passive: not operating, but still not deleted from the Register.
The Network of Estonian Non-profit Organizations (founded in 1991) is the single and largest Estonian organization uniting public benefit non-profit organizations. It has 110 member organizations all over Estonia. At the same time, our information network involves approx. 4000 organizations. NENO’s members are engaged in social, legal, educational, environmental and equal rights’ matters and also in the development of rural life.
Number of persons involved in NPA activities is difficult to determine as it changes over time.
According to research of 2019 (TLÜ, 2019) 88% of NPAs have private individuals as founders and 12% have other non-governmental organizations as their founders. There are fewer associations whose founders include a private company (3%), a local government (2%) or a public institution (1%). The older an NPA is, the more often other non-governmental organizations are among its founders. For example, this figure is 19% among NPAs established before 2000 and 5% among NPAs established in the last four years. The largest number of associations established with the participation of other associations is among the NPAs operating in the field of religion (33%), and the associations established with the participation of private companies are among the NPAs in the field of agriculture (37%).
Legal persons by area of activity according to Business Register24 as of December 2021 were as follows:
| Agriculture, forestry and fishing | 743 |
| Mining and quarrying | 1 |
| Manufacturing | 49 |
| Electricity, gas, steam and air conditioning supply | 6 |
| Water supply; sewerage, waste management and remediation activities | 128 |
| Construction | 87 |
| Wholesale and retail trade; repair of motor vehicles and motorcycles | 131 |
| Transportation and storage | 90 |
| Accommodation and food service activities | 101 |
| Information and communication | 404 |
| Financial and insurance activities | 19 |
| Real estate activities | 1 222 |
| Professional, scientific and technical activities | 839 |
| Administrative and support service activities | 338 |
| Public administration and defense; compulsory social security | 165 |
| Education | 2 230 |
| Human health and social work activities | 930 |
| Arts, entertainment and recreation | 8 008 |
| Other service activities | 7 743 |
| Activities of households as employers; undifferentiated goods and services producing activities of households for own use | 2 |
| Not specified | 25 |
| Total | 23 261 |
NPAs can be classified according to their types as follows:
local government associations (with their own law and regulations),
housing associations (with their own law),
industry associations (e.g. food association, machinery association, tourism association, etc.),
professional associations (union of dentists, union of kindergarten teachers etc),
religious organizations (congregations, rehabilitation centres)
associations uniting companies ( union of HR companies etc.)
international NPAs (Mondo, Save the Children, Doctors without Borders, Women in International security).
Estonian non-profit associations are funded from a variety of sources, including membership fees, public sector appropriations, public grants, project grants (financed by local and international foundations), payments for products and services, and donations from private persons and businesses. Indirect assistance is received in the form of tax allowances, in-kind contributions and voluntary work.
According to a study carried out by the Network of Estonian Non-profit Organizations, membership fees are the most important source of funding for Estonian voluntary organizations, followed by support from local authorities which are particularly important for voluntary organizations in rural areas and community organizations.
Most of the service delivery contracts are signed with social services (44%), followed by sport (15%) and culture (10%). Volunteers are involved in offering all types of public services contracted to NPAs, partly due to the lack of financial resources in local authorities, especially in small towns and rural municipalities. Volunteers make it possible to offer more public services than the local authorities are able to fund.
The NPAs are in addition to provision of services funded by public grants. The National Foundation of Civil Society (KÜSK)25 was established in 2008 and it is financed from the national budget. The Foundation focuses on capacity building of NGOs and development of a supportive environment for civic action. In 2018 KÜSK supported associations with 1,79 million euros.
The survey of Tallinn University et al (TLU, 2019) mapped the total turnover and own income of NPAs in 2017 (turnover without subsidies). Associations that were established in 2018 (ie that did not yet have a turnover in 2017) were excluded from the calculations.
The share of NPAs without turnover was 16%. The turnover of almost half of the NPAs is lower than 6,500 euros and the share of associations with such turnover was 48% in 2017. Almost one-fifth of NPAs had a turnover in the range of 6,501 - 32,000 euros in 2017, and 15% of associations had a higher turnover. 57% of NPAs earned own income. In 2017, 43% of NPAs earned their own income of up to 6,500 euros and 14% over 6,500 euros. The main way of earning own income in 2017 was the sale of services (62% of NPAs that earned own income). 19% of the income was generated from the sale of products, 16% from the provision of public services and 10% from the renting of real estate (incl. premises). Other opportunities to earn own income were also mentioned, such as membership fees, lotteries / auctions and income from organizing events.
Higher-than-average turnover figures characterize seniority and / or NPAs with a large membership. Almost a fifth of the associations established during 2017. The lack of turnover is more common for associations that operate only locally (25% had no turnover), do not belong to umbrella organizations (22%) or do not involve volunteers (22%). In comparison of fields of activity, the share of NPAs without turnover is higher than average in the field of natural environment (35% had no turnover).
The share of NPAs earning their own income is the lowest in the health care sector, where only 37% of associations earn their own income. The share of NPAs with high turnover and own income is the highest in the fields of social services and agriculture - more than a third of the associations in these fields have a turnover exceeding 32,000 euros and slightly less than a fifth earn their own income in the same range.
The NPAs registered in Tallinn stand out with the highest turnover numbers - 22% of them had a turnover of over 32,000 euros. The share of NPAs with a turnover of over 32,000 euros is the smallest in Valga and Viljandi counties (4–5%).
It is estimated that about 28 000 people or 4-5% of the Estonian workforce is employed in the non-profit sector. There is no data about the weight of NPAs in Estonian GDP.
Based on the Civil Society Development Plan (KODAR 2015–2020) the roles of associations in society can be divided into three:
1) NPAs help to prevent and solve social problems;
2) NPAs participate in the making and implementation of decisions concerning the community and the state;
3) NPAs help to improve the cohesion, trust and cooperation of society.
Hence, in addition to direct economic value, NPAs have wider societal impacts.
According to the survey carried out in 2019 (TLÜ, 2019) 44% are small organisations with less than 10 members, only 18%-20% have about 50 members. 23% of NPAs have paid employees and 53% involve volunteers from outside the organization. 13% of associations have full-time employees and 15% of NGOs have part-time employees. The median number of employees of NPAs is 2. The share of NPAs with employees is higher than average among older associations. One third of the NPAs established before 2000 have employees, but only 15% of the associations have paid employees established during the last four years. Thus, the use of paid labour is quite rare in the case of start-up NPAs.
In 2018 some 49% of the population participated in voluntary activities. At the same time, the 2018 survey showed that only a fifth of volunteers contributed to a community or citizens' initiative, and only a quarter volunteered regularly. NPAs with employees are more active in involving volunteers, of whom 70% involved voluntary workforce. Involvement of volunteers, including frequent involvement, is generally more common among NPAs with a high turnover or operating at an international level. The share of those associations that operate only locally, 39% involve volunteers, 51% of NPAs that operate in Estonia more widely (but have not expanded their activities abroad) and 67% of associations operating abroad involve volunteers. All this confirms that the involvement of volunteers is one of the indicators of the growing capacity of NPAs (TLÜ, 2019).
According to the survey of NPAs (TLÜ, 2019) the majority of NPAs (82%) operate at the local level. Fewer are those whose activities are nationwide or extend to foreign countries. However, the total number of associations whose activities are limited to the local level is only 15%. Some 23% operate more broadly in Estonia (but not all-Estonian), 22% are all-Estonian and 36% of NPAs (also) operate abroad.
The share of NPAs whose activities are limited to the local level is the highest (outside Tallinn) in Harju County (30%). A large proportion of those associations that have identified the promotion of the quality of life in the neighbourhood or region as their area of activity have limited their activities to the local level only (48%). As this field of activity is more often than average represented among the associations established in 2005-2009 (which may result from the implementation of the LEADER measure), this group also has more local actors than the average (22% of the NPAs established in 2005-2009).
The number of NPAs that do not operate at all at local level is the highest among associations registered in Tallinn (27% do not operate at local level). At the same time, it must be taken into account that in the case of Tallinn, the local level was limited to the level of one district, and a large part of Tallinn NPAs stated that they operate in more than one district in Tallinn. Taking into account also those NGPAs of the capital that operate in Tallinn at the level of several districts or covering the entire city, there are significantly fewer associations that do not operate in Tallinn at all - a total of 16%.
NPAs with a high turnover or a large membership and staff have expanded their activities abroad. The share of associations operating abroad is the highest among associations registered in Tallinn (54%). the most common activities abroad are in the following fields: development / humanitarian aid (100%), national defence (62%), societal development (60%), religion (58%), communication / information technology (55 %) and health care (54%). Operating at the international level is more common than average among NPAs belonging to umbrella organizations (50% of associations belonging to umbrella organizations, 28% of other associations).
Accounting Act https://www.riigiteataja.ee/en/eli/ee/501042014003/consolide/current
Apartment Ownership and Cooperatives Act https://www.riigiteataja.ee/en/eli/526102020001/consolide
Business register https://www.rik.ee/en/e-business-register
Code of Ethics https://heakodanik.ee/en/code-of-ethics/
Estonian Roundtable for Development Cooperation https://www.terveilm.ee/leht/?lang=en
Foundations Act https://www.riigiteataja.ee/en/eli/ee/510042014001/consolide/current
General Part of the Civil Code Act https://www.riigiteataja.ee/en/eli/ee/528032014002/consolide/current
Income Tax Act https://www.riigiteataja.ee/en/eli/ee/528082014008/consolide/current
Law of Obligations Act https://www.riigiteataja.ee/en/eli/ee/513062014001/consolide/current
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Ministry of Justice. https://www.just.ee/mittetulundusuhing#notari-tasu-mittetul
Müller, K. and Fernandes, M. (2021). A statute for European cross-border associations and non-profit organisations. European added value assessment. EPRS, European Parliamentary Research Service, European Parliament.
National Foundation of Civil Society https://kysk.eem
Network of Estonian Nonprofit Organizations https://heakodanik.ee/en/
Non-profit Associations Act https://www.riigiteataja.ee/en/eli/510042014003/consolide
Political Parties Act https://www.riigiteataja.ee/en/eli/502062014001/consolide
Rammo, A. (2014) What is public interest? Good Citizen, 2014, 1.p 8-9. Hea Kodanik, 1/2014
State Portal, www.eesti.ee
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The Constitution of the Republic of Estonia https://www.riigiteataja.ee/en/eli/530122020003/consolide
Value Added Tax Act https://www.riigiteataja.ee/en/eli/ee/528082014006/consolide/current
https://www.riigiteataja.ee/en/eli/510042014003/consolide↩︎
https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/529122021007/consolide↩︎
https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/512012022001/consolide↩︎
https://www.riigiteataja.ee/en/eli/506112013011/consolide↩︎
https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/530112021001/consolide↩︎
https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/501042021006/consolide↩︎
https://www.just.ee/mittetulundusuhing#notari-tasu-mittetul↩︎
https://www.riigiteataja.ee/en/eli/502062014001/consolide↩︎
https://www.riigiteataja.ee/en/eli/530122020003/consolide↩︎
An international organization is considered foreign legal entity↩︎
State Portal, www.eesti.ee↩︎
The memorandum of association is different from the articles of association or statute. The memorandum has to be signed before the statute is concluded↩︎
https://www.just.ee/mittetulundusuhing#notari-tasu-mittetul↩︎
https://www.riigiteataja.ee/en/eli/530012014003/consolide↩︎
Alari Rammo, Good Citizen, 2014, 1↩︎
https://heakodanik.ee↩︎
https://www.riigiteataja.ee/en/eli/ee/501042014003/consolide/current↩︎
https://www.riigiteataja.ee/en/eli/ee/528082014008/consolide/current↩︎
https://www.riigiteataja.ee/en/eli/ee/501042014003/consolide/current↩︎
https://heakodanik.ee/en/code-of-ethics/↩︎
https://www.riigiteataja.ee/en/eli/ee/528082014008/consolide/current↩︎
https://www.rik.ee/en/e-business-register↩︎
https://www.riigiteataja.ee/en/eli/526102020001/consolide↩︎
https://www.rik.ee/en/e-business-register↩︎
https://kysk.ee↩︎