Estonia might be a small Baltic nation, but it’s definitely making a big splash in the global business scene. With its innovative e-Residency program, Estonia has become a hub for entrepreneurs, freelancers, and digital nomads worldwide, who have created more than 26,000 companies. Meaning, that almost one out of five companies in Estonia, are established by e-residents.
What is an Estonian e-Residency?
The program, which has already benefited more than 100,000 individuals from more than 120 countries, offers a unique opportunity to establish and manage a digital business in the European Union, regardless of geographical location.
Estonian e-Residency is a government-issued digital identity that provides entrepreneurs with the freedom to start and run a location-independent business online. It's a revolutionary initiative that leverages Estonia's advanced digital infrastructure, offering a streamlined, paperless business environment, for entrepreneurs located almost anywhere.
Once you have the digital ID kit (which can be collected from over 50 locations around the world), you have full access to the system, enabling you to register and run a company, run it online, pay your taxes, and access online banking, all without ever visiting Estonia (although it is a wonderful country to visit if you get the chance.)
The e-Residency ID card enables you to digitally sign and verify documents and contracts online and is the key to your digital existence in Estonia. Using public-private key encryption, the resilient and secure system has powered the entire country’s government for decades - and now you can access it yourself.
Naturally, the e-Residency program targets global entrepreneurs who value flexibility, minimal bureaucracy, and a business-friendly environment. Many of these are location-independent remote workers, who have chosen to live where they love, or even to travel the world as a digital nomad and launch their businesses within a start-up culture country.
However, it is important to understand that Estonian e-Residency is a digital identity only, and it is neither a passport, residency permit nor travel document, the e-Residency only gives you access to the digital infrastructure of the country.
The Benefits of e-Residency
Estonian e-Residency offers many advantages to the diverse entrepreneurs ready to seize them.
Firstly, it provides access to the European Union market and the Eurozone, opening doors to over 500 million consumers. This supports business expansion and growth, in a stable regulatory framework and currency and the world’s largest trading bloc.
Secondly, the program offers a straightforward and quick company registration process. Once you have your e-Residency ID card, you can digitally sign the company registration to be up and running in hours - and that same ID gives you access to not only the Estonian government business infrastructure but also a growing range of specialist providers to support the e-Resident ecosystem, like GroüHub.
Thirdly, it’s the perfect support for the digital nomad lifestyle. Your business stays in one fully accessible location, without the regulatory hassles of establishing new entities as you move around yourself. You can run it from anywhere, and you don’t require local directors or representatives.
Finally, e-Residency allows for efficient business management. With services like GroüHub, you can handle your company's accounting and legal needs stress-free, allowing you to focus on what matters most - growing your business.
Best of all, GroüHub can help you with that too.
The growing marketplace of e-Residency service providers includes a differentiated range of support and price points. Many offering solely virtual office and basic accounting features, good for the simple digital freelancer.
While GroüHub can obviously help you with all the day-to-day business needs, from Legal Office & Authorized Contact Person, monthly accounting, to annual report declaration, we go further.
Our services include specialized consultants ready to provide personalized support to you, in scaling your business and achieving your goals.
Check out our monthly service plans.
It’s the perfect combination to launch your digital business to the world and scale it to the moon and beyond.
Understanding Taxation in Estonia
It’s important to understand that most Estonian e-residents are not tax resident in Estonia, and will continue to pay their income taxes in the place where they live. It’s your business that is resident in Estonia, not you!
However, business taxes are pretty unusual in Estonia.
The business culture in Estonia is remarkable, but it’s not just an intangible thing people talk about. Because the country is committed to supporting innovation and growth at every level, from the solopreneur to the unicorn, it put its fiscal policy behind that vision too.
So, Estonian business owners are charged 0% corporate income tax on reinvested profits. This means you only pay corporation tax when profits are distributed as dividends.
Combined with the low costs of company formation in Estonia, this powerfully de-risks the innovation and startup process - you won’t pay the government one cent unless your idea is successful enough to yield profits!
In practice, many e-Residents choose to pay themselves a salary or consulting fee in any case, rather than a dividend, and end up paying no tax in Estonia at all.
One more note on tax - let’s bust a persistent myth here:
While Estonia is top of the international tax competitive index, and tax rates are considered competitive globally, Estonia is not a tax haven.
In fact, the digital transparency of the Estonian business system means it’s a terrible place to hide or launder assets, and no big tech corporations are hiding profits in Estonia either!
Transparent, fair, and open, is the Estonian way.
So, is Estonian e-Residency for you?
Estonian e-Residency is a groundbreaking program that empowers global entrepreneurs to operate businesses in the digital age. It offers a unique blend of flexibility, efficiency, and access to a vast market.
While it's not a one-size-fits-all solution, for many digital nomads, freelancers, and entrepreneurs, it's a game-changer.
Many Estonian e-residents initially form single-ownership private limited companies, as this is incredibly simple and straightforward, supporting long-term solopreneurship. Compared with simply trading as a freelancer, having a limited company demonstrates credibility, smooths income, limits personal liability and is ready to scale later on if required.
Furthermore, Estonian e-Residency is also the perfect vehicle for international collaborations - even if none of the founders are Estonian, using a neutral, digital, transparent third jurisdiction for company formation is often an excellent solution.
And if you want to scale and grow, then the combination of e-Residency and GroüHub will set you up for success - and support you every step of the way.
About the author... Maya Middlemiss has been an e-resident of Estonia since 2018 and has been appointed as the official Envoy for the e-Residency program for her enthusiasm and knowledge of the program. Originally from Britain, she is a solopreneur currently living in Spain, as well as the host of the Remote Work Europe community, and the Future is Freelance podcast.
We offer you to book a personalized advisory call with our expert, who will listen, understand, explain and clarify your questions about e-Residency and doing business in Estonia.
Comentarios