Estonia recently launched e-Residency in 2014, which is a digital identity provided by the government of Estonia that gives you access to Estonia’s e-services as well as the ability to start an EU-based company online while living anywhere in the world.
To date, this highly popular program has seen over 90,000 people from over 170 countries apply for e-Residency and over 20,000 Estonian companies have been established by e-residents.
For digital nomads and people working remotely from home, this is an opportunity to gain access to the European market by starting your own EU-based company online.
Below we look at the top 4 reasons to become an e-resident in Estonia and answer some of the most frequently asked questions about the process and benefits.
A quick guide to Estonia’s e-Residency program
Estonia’s e-Residency program is open to anyone except Estonian citizens or people with existing Estonian residency rights. It’s a particularly popular option with people who are freelancing, working remotely, consulting internationally or anyone who is a digital nomad or digital entrepreneur and wanting to start a digital services company based in Europe.
Successful applicants get issued an e-Residency digital ID card that gives you access to e-services. However, it’s not a form of physical identification so it can’t be used as a passport or travel document. Getting granted e-Residency also doesn’t give you any rights to citizenship or physical residency or rights to enter the EU without a visa.
The e-Residency program aims to help provide access to Estonia’s digital services and empower entrepreneurs to expand their service offerings across Europe.
The easy application process is all online, with detailed information to guide you through the process.
Top 4 reasons to join Estonia’s e-Residency program
1. It’s quick and easy to apply for Estonian e-Residency online
The entire application process is very organized, streamlined, quick and easy to do online. It takes about 30 minutes to complete the application and you pay a reasonably priced application fee.
You start by submitting your online application, which is processed by the Estonian Police and Border Guard Board (PBGB). This will take up to 30 days to be processed and you’ll be able to track the status of your application by logging in to the application environment.
Once you’re granted residency, you’ll receive an e-Residency kit which contains your new Personal Digital ID Card, Smart Card Reader, plus PIN + PUK codes to use with your card.
2. It’s very reasonably priced and means you can operate an EU-based company
The application fee for the Estonia e-Residency program is between 100 and 120 Euros (depending on where you collect your e-Residency kit from). Your e-Residency digital ID card is then valid for 5 years and you won’t have to pay any annual renewal fees during that time.
With access to e-Residency in Estonia, you can then register a company in Estonia. While there are different options for company ownership, the most popular and suitable for e-residents is a private limited company (OÜ), which is easy to set up and has a minimum share capital requirement of EUR 2,500.
Digital entrepreneurs can benefit from being able to manage their businesses remotely with access to European markets through having e-Residency and business banking accounts from fintechs and banks in the European Economic Area.
Some of the advantages of having an EU-based company is the fact that it’s one of the single biggest economic zones in the world with 500 million customers and generating over 16 trillion EURO. With 27 member states, the EU is home to some of the wealthiest nations and that gives anyone operating a business there access to a huge potential customer base and also a wide range of suppliers.
3. Enables you to work remotely from anywhere
Being able to start and manage a company online in a transparent business environment is a huge attraction of the e-Residency program. For anyone working remotely – for example, freelancers, digital nomads, entrepreneurs and consultants – having an online company helps you to work from anywhere.
For example, if you sell services or digital products online, or if you are keen to cut down on the amount of paperwork involved in running your business from your current location – this e-Residency program will be well suited to your needs. And if you want your business to stay in the EU or get started in the EU market to expand regionally or globally from there and have access to EU funding or legislative rules, then this is another reason to consider the Estonian e-Residency program.
4. Gives you access to a range of useful Estonian e-services
By joining the Estonian e-Residency program, you get automatic access to a range of supportive e-services which can help you to manage your company online. These services include:
- Being able to digitally sign documents
- The ability to verify the authenticity of signed documents
- Being able to encrypt and send documents securely
- Gaining access to a wide range of Estonian public and private e-services
- Establishing an Estonian company online
- Managing your Estonian company online from almost any location on Earth
- Applying for digital business banking and online payment services
- Being able to declare Estonian corporate taxes online (if your company is an Estonian tax resident)
- Joining a community of like-minded people who are participating in the same e-Residency program
FAQs about e-Residency in Estonia
How do I open a company with Estonian e-Residency?
Once you have applied for your e-Residency digital ID and received it, you can create your own Estonian company online. You can do that though the government’s Company Registration Portal or through the Business Register API service. Registering a private limited company costs €265.
Part of this process involves choosing a licensed service provider to help you fulfill the legal address and contact personal requirements – and can include assistance with legal and tax matters.
Can I register a company if there are various co-founders?
If you want to register a company that has a couple of co-founders, then that will be seen as a multi-shareholder company (as opposed to a single shareholder company that just has one founder)/ If all the co-founders can provide digital signatures, then you can form the company online – otherwise, it will need to be done through an Estonian notary lawyer.
What types of company activities are prohibited?
As long as the business you are conducting is lawful and complies with all local legislative requirements, then you are not restricted in terms of the type of business activities you want to take part in.
You will need to see what type of regulations there are in the industry your company is in and find out about the licenses you may need before you start conducting any business.
How will my e-Residency company be taxed?
In terms of personal tax, you will still need to pay that based on where in the world you are living or where you are a tax resident. Your personal tax will be based on the salary you pay yourself from the company.
However, if you are a board member of the company, then if you pay yourself a board member’s fee, you’ll be taxed at 20% of the net income, plus social taxes of 33% in terms of Estonian law. The social taxes can be exempted if you are paying social tax already in another EU country or one that has a treaty covering avoidance of double social tax with Estonia.
In terms of corporate income tax, if your company is registered in Estonia, it will automatically be considered a tax resident there. In Estonia, companies don’t pay tax on any profits that are reinvested into the company. Instead, tax is paid on profits that get distributed at 20%, but if dividends are paid regularly over 3 years then this tax rate gets reduced to 14% of net distributed profits.
Depending on your circumstances (e.g. where you are living, working and effectively managing your company), your company may form a Permanent Establishment (PE) in another country, meaning it would also have to pay tax there. Thankfully, Estonia has established dual taxation treaties with more than 60 countries globally, so it is quite unlikely that your company will pay double taxes.
Permanent Establishment is a really complex area of international law. You can find more info on the e-Residency website.
Companies may be liable to also pay VAT, depending on the nature of your business activities. If your company has an annual turnover of less than €40,000, then you aren’t required to register for VAT – but you may be required to do so depending on which countries you sell your products to.
Where can I find more useful information about the Estonia e-Residency program?
A good place to start finding out the basics about e-Residency in Estonia is the e-Residency blog which covers news, stories from e-residents and useful how-to guides and guest posts from partner organizations. The Estonia e-Residency website also has various videos from their webinar series and other tutorials that are informative and aim to answer frequently asked questions about the program. They also have a business guide with comprehensive information about companies that have been established and detailing tax and employment implications.
Invest in Estonia is a government agency that promotes foreign investment and helps companies find business opportunities in Estonia, which is a useful place to start looking for ideas and opportunities.
If you’re interested to read more about tax law in Estonia, then the Estonia Tax and Customs Board is a useful website. And commercial code is a site that provides comprehensive information on laws and legislation to do with company law in Estonia to help you check compliance and licensing requirements for your business.
If you’re looking for legal advice and a notary in Estonia who is familiar with legal company requirements, then you can visit the Chamber of Notaries website which lists the contact details of various notaries you could get in touch with.
What are some interesting facts about Estonia?
The Republic of Estonia is a European country along the Baltic Sea that has a population of around 1.3 million people. Estonian, Russian and English are widely spoken across the country and in the biggest cities including Tallinn, Tartu, Narva and Pärnu.
With 99% of its state services available online, and being the first country to adopt online political voting – Estonia is at the forefront of digital services, e-government solutions and cybersecurity. More than 95% of Estonians submit their tax returns electronically.
Estonia has been a member of the EU since 2004 and also has membership with the WTO, NATO and OECD. From a business perspective, Estonia has launched many successful and entrepreneurial startups that have grown into globally successful multinational companies, such as Skype, Playtech, Bolt, Wise, Pipedrive and Zego.
Estonia is also ranked as a very easy country to do business in by the World Bank. As of 2018, it ranked 16th in the world in terms of the Ease of Doing Business Index. Part of this is due to the fact that the country has a well-established IT infrastructure and sector and it has simplified online tax returns which expedites the process of filing a tax return. It now takes a few minutes to file a tax return online. Estonia also has one of the lowest business bribery risks in the world, which makes it one of the safer countries in which to operate a business from a risk management, corruption and bribery perspective.
Final thoughts on starting a company in Estonia
There are many benefits to establishing a company in the EU, but until recently this wasn’t an option for many people who weren’t residents or citizens of an EU country. Estonia was the first country to launch an e-Residency program in 2014 which gives successful applicants access to Estonia’s many e-services as well as the ability to register an EU-based company online from anywhere in the world.
This has attracted a plethora of interest from people living and working across the world – whether as digital nomads, remote workers, consultants, entrepreneurs or freelancers who want to access the EU market. It’s quick and easy to apply for e-Residency, it’s very affordably priced and there are many resources available to help prospective applicants to launch and operate their companies and navigate the tax and legal aspects of doing so.