July 24, 2021
8 Minutes

How To Become An e-Resident Of Estonia

Learn how to become an e-Resident of Estonia. Topics include; history of Estonia, Estonia e-Residency myths, Estonia e-Residency benefits, and more.

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Table Of Contents

1. History Of Estonia

2. Estonia e-Residency Myths

3. Estonia e-Residency Benefits

4. How To Become An e-Resident Of Estonia?

5. Service Providers In Estonia

6. Banking In Estonia

7. Estonia e-Residency In 2021

The ease of doing business in Estonia is unparalleled. So much so, I became an e-Resident of Estonia in 2018. Since then, I've become an advocate of the e-Residency scheme. However, some misinterpret the Estonian e-Residency scheme. Hence, I wrote this in response to questions I get asked about becoming an e-Resident of Estonia.

History Of Estonia

Estonia is a country I admire. Since becoming one of its growing number of e-Residents, I've come to learn how digitally advanced its public services are.

Estonia's digital initiative started in the 1990s, soon after its independence from the Soviet Union in 1991. Following years of progress, Estonia joined the European Union in 2004. Subsequently, in 2011, Estonia joined the Eurozone.

Estonia has grappled with the notion of what it means to be a digital state. They've created solutions that have helped the country and its citizens to prosper. They're a country that uses blockchain technology, not one that solely publishes reports on the topic. Overall, Estonia's commitment to public sector innovation is admirable.

Other countries should heed lessons from Estonia's digital state. As I've written before, Estonia’s approach to governing its citizens is truly one of service.

Estonia e-Residency Myths

Many myths surround Estonia's e-residency scheme. Hence, before continuing, I want to clarify what the scheme is not. If you're still reading after I've busted the most common myths, I hope you'll find much value in what I'll be sharing.

Estonia's e-Residency is not residency. Once you become an e-Resident of Estonia, you don't become a resident of Estonia. You don't have the same rights as a resident.

Estonia's e-Residency is not citizenship. You don't become a citizen of Estonia upon becoming an e-Resident of Estonia. You don't get citizenship rights.

Estonia's e-Residency is not a travel document. You can't use your e-Residency documentation to travel (e-Residency is not a valid travel document anywhere).

Estonia's e-Residency is not tax evasion. You may have to pay tax in Estonia. Also, you will most likely be liable for tax in whichever country reside.

Estonia e-Residency Benefits

There are countless reasons as to why you might want to become an Estonian e-Resident. Putting your reasons aside, here are the top three reasons why others become Estonian e-Residents: (1) Business activity and working in Estonia. (2) Location-independent international business. (3) Bringing business to Estonia.

You might have other reasons for yearning to become an e-Resident of Estonia. For example, you may not live in Europe but need to set up a business in Europe.

Now, let's discuss a big talking point - taxation in Estonia (I'm not a tax advisor). Many people will have heard about Estonia's zero per cent tax rate: that being their motivation to set up a business in Estonia. However, like many things, it's not as simple as that.

In Estonia, the corporate tax rate is zero per cent on undistributed profits (you can pay salaries). However, the corporate tax rate is twenty per cent on distributed profits. I appreciate the simple fairness of the system.

It's permitted to invest business capital into financial products (e.g. Bitcoin) in Estonia, and gains are not liable for taxation if they remain undistributed. However, investments shouldn't become the primary function of the business. If they do, the business would likely have to satisfy specific regulations in Estonia.

It's essential to know that you'll likely be liable for income tax wherever you're a resident. If your country of residence has a ten per cent income tax rate, you'll likely be liable for that. Some countries may even try to tax your business's entire profits. On the other hand, some countries don't tax income generated externally.

PricewaterhouseCoopers has a helpful guide on tax in Estonia. As with anything related to taxation, get the advice of an expert in your country.

How To Become An e-Resident Of Estonia

I became an e-Resident of Estonia in 2018. It was an efficient process for a governmental scheme: the online application took less than thirty minutes. And, I was officially an e-Resident of Estonia by the end of that month (I didn't need to set foot in Estonia).

The initial part of the process requires applicants to complete a form on the e-Residency site. As part of the form, you'll need to submit a scanned copy of your passport and a passport photo. You'll need to pay the one-hundred euro application fee via Visa or Mastercard. And, in the form, you'll get to select which embassy you want your e-Residency pack shipped to (it's possible to collect it from Tallinn, Estonia).

The turnaround time for e-Residency is quick: you should get a reply within two weeks. However, it can take several weeks during peak periods.

Once your e-Residency is approved, it can take another two weeks for your e-Residency pack to arrive at your selected embassy. Again, it can take longer during peak periods. Rest assured, you'll get an email when it's ready for collection.

Suppose you're collecting your e-Residency pack from your local Estonian embassy. In that case, you'll have to present a form of identification upon arrival (e.g. passport). Also, you'll be required to sign a few official documents and get your fingerprints taken. Upon completion, you'll officially be an e-Resident of Estonia. Your Estonian e-Residency will be valid for five years (you must complete the same process for renewals).

The e-Residency pack contains an e-Residency card, a card reader, and two unique pin codes, which get used for logging into services and signing documents.

Before using the e-Residency card, it must get activated. That can take up to twenty-fours after collection. You can confirm whether your e-Residency has got activated for use on the Estonian Police and Border Guard website.

Remember to install DigiDoc4 and the web browser components before plugging your card and card reader into your machine (if you don't, your card won't get recognised). After installing DigiDoc4, unfold your card reader and insert your card into it (chip side). Then, slide it into your machine. You're now ready to control your business digitally.

Service Providers In Estonia

You'll require the support of a service provider to set up a business in Estonia. A service provider can help you establish and manage your business, advise on banking and finance, offer support on legal and administrative issues, and more.

Take a look at the e-Residency marketplace to find a service provider that fits your requirements: I highly recommend Xolo. A good service provider like Xolo will save you countless hours of administration each month.

Xolo makes managing your business remotely easy. Their software has a user-friendly dashboard that gives you a birds-eye view of your business. Furthermore, Xolo provides you with business tools, accounting and reporting support, access to payment gateways, and even a personal accountant (only with Xolo Growth).

Get €100 when you join Xolo via this link. It's free money. Quick, run with it.

Banking In Estonia

It's strange how we loathe dealing with banks. My experience of banking in Estonia is pleasant. I've dealt with LHV (a brick-and-mortar bank) and Wise (a digital bank).

Previously, I was a customer of LHV. Creating an account with LHV was easy. I walked into one of their beautiful branches in Tallinn: I walked out with an account in half-hour. (I'm not a customer anymore - their banking services were no longer a right fit for me.)

Now, I'm a happy customer of Wise (formerly TransferWise). If you receive income in various currencies, their multi-currency account will be a blessing for you. Also, their service is fantastic: that is a must for any provider handling your money.

Use this link to get a discount on your first transfer with Wise. It never hurts to save.

Estonia e-Residency In 2021

It's hard to argue that Estonia hasn't made a success of its pioneering e-Residency scheme. It has 80,000 e-Residents, 16,000 businesses and has collected 17.5 million euros in tax revenue. Those figures are from May 2021: they're on an upward trajectory (the Estonian e-Residency website shares the latest statistics on e-Residency).

Estonia not only collects tax revenue from the businesses of e-Residents, but it also collects the application fee of one-hundred euros. (I assume much of the application fee is administrative costs.) Estonia is estimated to have generated eight million euros on application fees.

e-Residents are also helping to fuel local businesses in Estonia. The reason being, many e-Residents are opting to use local service providers. That's money poured directly into the local economy. e-Residents are partly contributing to the growth of Estonia.

Other countries have similar schemes to Estonia (e.g. Singapore). That said, Estonia is reaping the rewards for being the first country to launch an e-Residency scheme. That has snowballed into other pioneering schemes such as Estonia's Digital Nomad Visa.

Estonia is the world leader in e-Residency. We'll likely see other countries trying to adopt a scheme similar to Estonia, encouraging businesses and visitors to their country.

It's often the case that a nation is unnecessarily bureaucratic, hence can't innovate fast enough. Estonia is an example of the opposite: it's aiding the prosperity of its economy.

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