The e-residency hustle from Estonia and what you need to know

In the small northern region of Europe, lies a nation called Estonia. As a matter of discussion, some of the world’s largest and fastest-growing companies were started here. You must already be familiar with some of these. To name, on this list are Skype, TransferWise, and PipeDrive.


Estonia is home to 1.3 million people and the entrepreneurial prowess of these 1.3M minds only, have forced the Estonian business market to be known as “Estonian Mafia”, both online and around the world.


You must be wondering about the secret of their success. Well, catering to this huge success is the advanced digital infrastructure and a belief that anything can be executed online with minimal bureaucracy.


Now, the best part! Anyone, including you, can set up his/her business in Estonia, no matter where in this whole wide world you belong to. Interesting, huh?


Yes, Estonia is the first country to offer e-residency to people worldwide. This means that just about anyone can run their own company or other business and finances in the country. And, as an e-resident, legally, they will be granted complete access to Estonia’s advanced digital infrastructure along with the same rights in business which the people of that country enjoy.


It is impressive to learn that more than 2000 companies were opened by e-residents in only the first two years of introducing this program. While a majority of these companies are micro-businesses run by digital nomads, independent contractors, freelancers, self-employed, etc., there are also some who dream of growing bigger than Skype.


So what is it that draws the attention of these tech geeks into running businesses like this?


Upon interviewing a few, we learned the nature of lifestyle that is on offer, how one can be independent of location, have greater ease of doing business, the low-cost administration plus simple taxes, all contributed to this large group of people being interested in running businesses like this. Estonian companies are European companies, so the business that one runs will be based inside the world’s largest single market while being able to be administered from any part of this world.


Now, we know you probably are thinking of being an Estonian e-resident and start your own business. And if so you are, here is some information that might come handy:


Obtaining an Estonian E-residency


As already clear, starting a business in Estonia would require you to obtain an e-residency. And to do so, you’ll have to complete your application and collect an ID card with a reader.


The process of application is simple and can be completed online. Once your card is ready, you can pick that up from the nearest Estonian embassy. Your fingerprints will then be collected for future verification purposes.


All in all, the process will cost you a €100, which is pretty much a great value for money considering complete access to the world’s most advanced digital infrastructure. The eligibility for being an e-resident is 18 years of age and no criminal record. Anyone fulfilling these requirements can apply to be an e-resident and most applications are approved.


Another qualifying factor is you should either be related to the country or must have a valid reason for wanting to use the country’s public e-services. The e-residents who opened their companies in the first two years were friends to Estonia who wanted to show their support, however now, a majority of these e-residents belong to the second category.


When you are asked about your reason for interest in opening a business, make sure you provide a genuine and suitable answer, as only this will determine whether your application is approved or rejected.


Obtaining an Estonian Address for the company


Everyone likes to keep things simple, and so do Estonians. You won’t be required to compile heaps of documents for setting up a company as an e-resident. There’s just one thing that you will need- Estonian Address, where your business can be registered on a legal basis.


Now, most of you might already be thinking about booking a flight to Estonia and searching for office space. But before you plan to do so, you can obtain the same remotely. How cool is that? This works just fine whether you are going to run a virtual office or have an office somewhere in Estonia.


One of the greatest things about having a business in Estonia is that almost everything is done online and you don’t have to hire someone just to open your post.


Getting a name for your company


Limited companies in Estonia are known as “Osaühing(s)”. This word is often abbreviated as OÜ and is used at the end of a company’s name as “Ltd” and “LLC” is used in other countries.


Companies in Estonia are required to write their names using the Latin alphabets and preferably without any special characters and symbols. They are required to have a unique name in the country’s company registry. This means they’re likely to have more options than in their home country.


Like already said, Estonian companies are EU companies, therefore, business owners would also want to check if there are similar trademarks across the continent. The European market is the world’s largest single market and is home to more than 500M customers as well as entrepreneurs, so it is unlikely that you have a unique company name.


Good thing is, a similar EU trademark is not going to stop you from using the name you want. Knowing which companies have a similar name as you, can help avoid confusion related to marketing in the future.


If you have a name in your mind, you can check for it against the Estonian company register and other EU trademarks.


Removing the language barrier


Learning a few words in the local language won’t do any harm especially when you know you are going to run an international business. However, Estonian companies are truly global in the sense that your customers, suppliers, or investors can be anywhere in the world.


If you remember the word “Osaühing”, then you are already speaking more Estonian that many of your counterparts. Language is not an issue, even when you need to access public or private services like banking, accounting or taxation. Estonia shares many of its characteristics with the rest of the Nordic region, including the level of English. In fact, with an exception to countries speaking English, Estonia ranks among the highest in the world for its proficiency in this language.


Paying the share capital


If you are planning to set up a limited company, the minimum share capital that you need to pay is €2500. In case, you are not ready to pay the amount when you are just setting up the business, you can choose to defer the payment for as long as you want. However, this rule only applies to companies with a share capital of €25000 or below.

Choosing to defer the payment, can be done before you make the dividend payments but you’ll still be responsible for your company up to the amount of capital left unpaid.

So this again, (might sound unsurprising by now) is an easy process. You can make a payment directly into your company’s bank account, whenever you are ready, and mark it as “Payment of Share Capital”, or “Osakapitali Sissemakse”, as they say, in Estonian.


Being the management board


Every company needs a management board. To say it sounds big, but it can be just you! Yes, a majority of companies set up by e-residents consist of a single employee acting as the only board member.


This is because the program is very popular among tech geeks, freelancers, self-employed and particularly among those who prefer location independence. Some countries complicate the process by requiring at least one director to be local, however, no such requirement exists in Estonia.


Paying the taxes


It might sound fair to pay the taxes only in the country you physically reside. However, with an e-residency and a business registered on an existing Estonian physical address, you are required to pay taxes as well. So, it certainly is not a way to avoid paying taxes.

No wonder, taxation in Estonia is a simple process. The advanced digital infrastructure has made it easy to determine what you owe. However, taxation can be complicated especially when you are location-independent. Make sure you consult a tax professional to accurately determine the income and corporation tax that you need to pay.


Doing Business globally


E-residency has made it simple for business owners to do business globally. But running a global business is even more mind-boggling than it sounds.


However, the digital infrastructure of the country is independent of itself. How? The country itself is backed up like a computer across secure locations around the world. At present, these locations are Estonian Embassies, but in the future, these will include revolutionary destinations created specifically for database security.


So, no matter the Earth gets hit by an asteroid, you’ll still be able to conduct business as usual, as long as you’re on the other side of the impact.


The final word


The reason, Estonian e-residency program is popular is it makes business administration easier. It might not be a tax haven but is surely an admin one. The program has helped many business owners save money and free up time so they can focus on what’s more important- their passion.

It’s high time you start one of your own too.


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