E-RESIDENCY IN ESTONIA
Estonia is a small country in Northern Europe. Nowadays, Estonia is a homeland to 1.3 million people, that makes it one of the less-populated countries of the European Union, Eurozone, NATO, the OECD, as well as the Schengen area.
However, Estonia is a world leader in the field of digital control and founder of Digital 5 (D5). In December 2014, Estonia became the first country in the world to introduce the concept of e-Residency. The main purpose of the e-Residency program is to make life and business easier for freelancers, business owners, and international partners, as well as any other non-residents, who are related to Estonia. E-Residency in Estonia makes it possible to start a business, expand your business, make investments or study in the European Union.
WHAT IS E-RESIDENCY?
Electronic residency is a state-issued digital identity and an e-Resident status, which provides access to Estonian e-government services and a transparent paperless business environment. E-Residency is issued by the Estonian government to non-citizens of Estonia who do not have the possibility of permanent residence on its territory but would like to have access to e-services of Estonia and the European Union.
Established as a nationwide initiative, the e-Residency program is led by a number of government ministries and institutions, whose efforts are aimed at improving Estonia’s digital infrastructure and business environment. But most importantly, thanks to Estonia’s EU membership, e-Residents have the right to use electronic services not only in the business environment of Estonia, but in the entire European Union.
However, it should be noted that the e-Resident ID-card does not grant Estonian citizenship nor the right to enter the EU to its holder, as it is not a physical identity card. In addition, e-Residency, as such, is tax-free.
Estonian e-Residency provides digital entrepreneurs with freedom to set up and manage businesses in the EU from anywhere in the world. According to the Estonian Info Register, as of October 2020, more than 73,000 people from 170+ countries have applied for e-Residency, having already created over 14,000 Estonian startups. The application is submitted remotely with the payment of a state fee in the amount of 265 EUR, and the e-Residency kit itself is issued to the applicant personally at one of the approved points of issue. At Trek Law, we are happy to guide our clients and help in obtaining an e-Resident card.
FIRST LOOK AT DOING BUSINESS IN ESTONIA WITH E-RESIDENCY
⦁ Business formation and management entirely online
⦁ Founding and running a company from anywhere in the world
⦁ Signature and verification of documents in digital format (contracts, annual reports)
⦁ Encryption and secure transmission of signed documents
⦁ Online banking transactions in an Estonian bank
General accessibility of information about Estonian companies helps Estonia to sustain a transparent and reliable business environment on the Internet and in the labor market. This includes public access to the basic information about the firm, such as ownership, contacts, and basic financial statements.
WHO BENEFITS FROM E-RESIDENCY?
⦁ Digital Nomad:
Start your paperless company and run it while traveling.
⦁ Freelancer:
Create a company with access to the European Single Market.
⦁ Start-up Founder:
Grow your company with access to the clientele and EU start-up funding.
⦁ Digital Entrepreneur:
Enter the European Single Market without unnecessary bureaucracy and personal presence.
One of the indisputable advantages of e-Residency for a digital entrepreneur is location independence. Travelling and managing your business 100% remotely from anywhere in the world has become easier than ever, whilst access to the Internet will allow you to move abroad at any time without the need to reestablish your company again.
The vastness of the European markets will open new opportunities for development of your business. Resident e-card will allow you to register a company in the EU without physical attendance. It is now possible to own your company without having to appoint a local director, while providers such as PayPal will handle online payments. Sign, authenticate, encrypt and send documents digitally. Tax declaration is also done online. You will now have access to the European Single Market and its cross-border capital.
It is time to join the global community. Online collaboration with e-Residents in over 170 countries will help build connections with service providers. The global community of e-Residents will allow you to discover limitless ways to grow your company.
FREQUENTLY ASKED QUESTIONS
How can I apply for e-Residency?
Unfortunately, not. Your status as an electronic resident does not give you permission to travel to Estonia or within the EU without a visa (if you are not a citizen of the European Union). Your e-Resident card cannot be used as a visa for travelling, as it does not contain a photo for physical identification.
You can apply for opening an account at a bank in Estonia, if you have a partner in Estonia/employees who reside in Estonia/you carry out financial activities in Estonia.
As a rule, the entire process from application to picking e-Resident card up takes from 4 to 6 weeks and only the applicant can collect it. In order to do that, you can select the country, where there is the Embassy or Consulate of Estonia. You will have to pick up your card within 6 months.
Not necessarily. Electronic residency does not mean that you are a tax resident of Estonia. Regardless of your e-resident status, it is always necessary to pay personal income tax in the country in which you are a tax resident.
Despite the complexity of international taxation, e-residency can make the process of paying taxes more accessible thanks to the e-services in Estonia. If there is an obligation to pay corporate tax in Estonia, the e-resident will be able to declare all taxes completely online.
In Estonia, income tax is calculated on a monthly basis and only after the distribution of profits.
In addition to corporate income tax, e-residents with a company in Estonia will also have to take into account 20% of income tax on a Board Member’s fee.
In this case, you need to order a new e-resident card, otherwise the e-services and services of the Republic of Estonia will not be available after the card expires.
HOW DOES THE E-RESIDENCY KIT WORK?
The applicant is issued a plastic smart card with PIN-codes and a chip required for authentication via a USB digital card reader. It is required to install the free ID-software for identification. Thus, by using an ID-card, PIN-codes and a card reader, e-Residents gain access to e-services provided by Estonian state institutions and the private sector.The ID-system allows you to sign official documents digitally. The digitization of the Estonian state and society implies that electronic residents can sign agreements and interact digitally with all government institutions and most companies, eliminating the need for physical presence.
WHO IS ELIGIBLE TO BECOME AN E-RESIDENT?
Estonia invites everyone in the world to apply for e-Residency if the following criteria are met:
⦁ Reasonable interest in using Estonian electronic services.
⦁ Not an Estonian citizen nor a foreigner residing in Estonia with a residence permit.
THE E-RESIDENT CARD IS ABOUT TO EXPIRE. WHAT DO I DO?
If your e-Residency card expire, the best solution would be to use the Smart-ID platform. It is an authentication service provided by SK ID Solutions (an organization independent from the Estonian government).
Check out the closest e-Residency kit pick-up locations
List of countries where it is possible to collect e-Residency card
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