What is Estonian e-Residency?
Estonia was the first country to come up with the concept of e-Residency all the way back in 2014. While e-Residency sounds technically complicated, it's just a fancy term for a digital identity card that's issued by the Estonian government and gives the holders of said digital identity (called e-residents) access to Estonia's highly-advanced digital infrastructure.
This digital infrastructure is where things get interesting. In Estonia, citizens can do pretty much everything online: they can vote, sign contracts, buy and sell property, and most relevant for this particular article — launch a business. Even the most dreaded activity of all, filing taxes, is completed 100% online in just a few clicks. The information is already pre-filled for you, so all that's left for you to do at tax time is log in, confirm, submit — and you're done!
This advanced digital infrastructure is a major reason why a recent UN e-Government survey named Estonia, along with Denmark and South Korea, as one of the top three most digitally-advanced countries on the planet.
Who can benefit from e-Residency in Estonia?
As a card-carrying e-resident, you'll have access to this advanced digital infrastructure 365 days a year, 24 hours a day, from anywhere on the planet. When compared to the alternative (what other country would allow you to launch a business online in just 15 minutes and 33 seconds?) — it's unsurprising that entrepreneurs, freelancers, independent contractors and digital nomads from all around the world have chosen to run their borderless business with Estonian e-Residency.
This flexibility makes for some pretty interesting use cases! For example, an Indian national can use e-Residency to establish an Estonian company that she runs from her home in Singapore, serving Berlin-based clients. She can use her digital signature to sign contracts with clients across the EU whether she's at home in Singapore, or on a beach in Honalulu. Everything is handled 100% online with minimal bureaucracy, allowing modern entrepreneurs more freedom and flexibility than ever before.
As e-Residency's oldest and most popular service provider, we at Xolo speak from experience when we say that every single e-resident is unique. But to help you narrow things down a bit more, here are common groups of people who choose to become e-residents:
… And many more.
What does it mean to operate a borderless e-Resident business?
"What we aim to do is to create a worldwide virtual business environment, where people from both the developed and developing countries can easily become entrepreneurs and start doing business anywhere in the world. Physical national borders and restrictions will no longer present an obstacle. You can start a business, open bank accounts, make transactions, sign contracts and even declare taxes, all on your computer" - Kaspar Korjus, e-Residency Program Managing Director 2014-2019
In most places on earth, it is notoriously difficult to launch and run a SMB. Between getting tangled in layers of complex bureaucracy, the high taxes, the lack of infrastructure, and the high risk, it's easy to see why many regard running a small business as more trouble than its worth. Estonia's pro-business taxation system (more on that later), advanced digital infrastructure and low bureaucracy make it one of the very best — if not the best — place to start a business on the entre planet: by making it accessible, affordable and straightforward.
And as Estonia is an EU member state, running an Estonian business means you have access to the EU single market. Additionally, while freelancers and solopreneurs from some locations may have problems gaining access to popular payment gateways like Paypal and Stripe, launching an Estonian business with an associated bank account is an effective (and completely legal) way to finally open that Paypal/Stripe account.
the solo's preferred e-Residency partnerLearn more
What are the benefits of Estonian e-Residency?
Like a fine, barrel-aged whiskey, the power of e-Residency grows more potent with age as new service providers enter the marketplace and the e-Residency community continues to grow.
But the list of benefits of being an Estonian e-resident is already quite long! As an Estonian e-resident, you'll be able to:
You're right to be wondering at this point, what's in it for Estonia? e-Residency brings new revenue to the country in the form of state fees, taxes, tourist visits, as well as products/services purchased from local businesses.
In other words: Estonia “exported” its innovative, pro-business infrastructurue in order to “import” more revenue for the country. And in exchange, e-Resident entrprrneurs are able to run a borderless business with more freedom, ease, and opportunity. We'd call that a win/win!
Why should I choose Estonian e-Residency as the base for my borderless business?
Since Estonia first pioneered the concept all the way back in 2014, its growing popularity with global entrepreneurs made other governments take notice. Then the Coronavirus pandemic of 2020 happened, and demand for paperless, digital pathways for personal and business admin forced many governments to invest in updating their infrastructure for our increasingly digital world.
Unsurprisingly then, many other nations are following Estonia into proposed or already-launched e-Residency programs, from Azerbaijan to Ukraine. All of these schemes offer a variety benefits and have different requirements, in terms of income, share capital, cost, and access to the all-important digital infrastructure and EU business ecosystem.
Some are aimed at specific demographic targets, such as high net worth individuals, or those seeking access to specific marketplaces. Most of these programs are still quite new and lack anything resembling the support and marketplace on offer in Estonia. That said, you can still compare the different schemes and what they require/provide in this round-up — just in case there is a program better suited to your individual needs. For example, if you don't think you'll need digital signatures or more robust banking options, it's worth having a look.
Above all, be careful to understand the tax implications for your proposed business, both now and in the future. This article cannot and should not be considered a fair trade-off for meeting with a seasoned financial advisor who has a better understanding of your individual situation. 🤓
Is Estonia a competitive tax environment for my e-resident business?
In a world where businesses, people and money can move around with relative ease, having a competitive tax code has become even more important for economic success. According to 2021 figures released by the US-based Tax Foundation, Estonia has the most competitive tax system in the OECD for the eighth year in a row (International Tax Competitiveness Index 2021) and shares a place at the top of the list for Internet Freedom. Estonian’s tax and overall financial ecosystem is known for being uniquely transparent and fair.
Estonia also has a unique income tax system where corporate income tax is charged on profit distribution (i.e. dividends) only, and is capped at 20% (from January 1, 2024, the VAT rate will be 22%). As long as you keep your profits within the company, you won't have to pay any corporate income taxes.
Estonia has a flat 20% (from January 1, 2024, the VAT rate will be 22%) tax on individual income that doesn't apply to personal dividend income, and all of your tax filing and payments can be easily managed via your chosen e-Residency service provider.
Make launching and running your Estonian e-resident business 10x easier with Xolo Leap
Throughout this article, you may have noticed us mentioning Service Providers. Service providers are essentially like local caretakers for your business: they help you get set up, serve as the intermediary between you and the Estonian government, hellp ensure you're abididing by the local laws (especially if/when they change), even forward your mail to you. All Estonian e-resident businesses' are required by law to have a Service Provider. Here's a short sales pitch for why you should choose Xolo Leap as yours:
Hi there. We're Xolo, and we're all-for-solos. We help freelancers, digital nomads, solopreneurs, entrepreneurs, consultants and sole traders (or really anyone who makes their living outside of a traditional employer-employee relationship) — to run a borderless EU business with Estonian e-Residency.
We're the oldest service provider in the marketplace, and last time we checked, we've registered more than 2X the OÜs of our closest competitor.
We know it would be polite to play coy here and pretend we don't know how we got here. But the truth is that we do know how we got here. We're proud to employ a team of the smartest, most helpful accountants in all of Estonia — who all happen to speak native-level English. Many of them have been here since the very beginning (they've seen it all and then some). And they're here to help you build the kind of business that will support the life you want to live.
We can't promise to make your business successful. That's on you. But we can promise to get your Estonian e-resident business (OÜ) set up in the most efficient, stress-free way possible. We promise to provide an easy-to-use platform that has all the integrations a modern borderless business needs. We promise to take care of all your accounting and bookkeeping so you can focus on the *real* work — the stuff you're good at and get paid for. We promise to make running a business so efficient that your administrative responsibilities will take no more than 10 minutes a day. And we promise to provide the professional guidance and support to put your goals — both personal and professional — within reach.
Frequently asked questions about Estonian e-Residency
Is Estonian e-Residency equivalent to an Estonian passport?
Your Estonian e-Residency can be thought of as a digital passport, which gives you access to the digital infrastructure of e-Estonia, in pretty much the same way it would be available to a resident of Estonia.
However, your E-ID does not confer the right to live and work in Estonia, nor can it be used as a travel document. E-Residency is purely an Estonian e-citizenship, as opposed to the rights that a residential visa would give you.
TL;DR: Sorry, e-Residency doesn't give you the right to move to Estonia! 😅
Is Estonian e-Residency a remote work visa or digital nomad visa?
Estonian e-Residency is great for those who want to operate their business remotely or nomadically, because it allows you to create your business in a modern/digital way. However, e-Residency should not be confused with a visa, which would give you varying rights to physically live within Estonia itself.
If you would like to move to Estonia and experience the social and business culture not just online, but IRL, there is a new Estonian digital nomad visa which allows you to legally live in Estonia while working remotely for an overseas business, for up to one year. There is also a start-up visa for Estonia, which can help non-EU founders create a physical presence in Estonia, for themselves and their team
Does holding Estonian e-Residency make me a tax resident of Estonia?
Tax residency is a complex question, so it's best to talk to a qualified professional who has insight into your individual situation before making any big decisions. But in most cases, becoming an Estonian e-resident does NOT make you tax resident in Estonia. What e-Residency gives you is the opportunity to form a business which is legally resident in Estonia. So while you will not be a tax resident of Estonia, your business is.
You may pay some personal and business taxes in Estonia as a result of your business activities there, but usually, you will be a tax resident (and pay the bulk of your personal taxes and social security) in the country that you live in for the majority of the time. Estonia has bilateral double taxation agreements with more than 60 countries, so in most cases you will not be taxed on the same income twice over.
And just to be Swarovski crystal clear: Estonian e-Residency is NOT a tax haven or tax avoidance scheme, and won't save you from paying your fair share of taxes in your country of residence.
Can e-residents travel to Estonia to visit?
E-residents have no rights beyond any other guest, but Estonia’s thriving tourism industry welcomes visitors from around the world to enjoy the rich experience of this beautiful, vibrant country.
Visas may be required for extended stays, or for those traveling from outside the Schengen region — your local travel agent can best advise. For some travel inspo, check out visitestonia.com
What does it cost to become an Estonian e-resident?
- State fee for e-Residency: €120 + travel costs to collect your e-resident ID-card at your selected location
- State fee for company registration in Estonia: €265
- State service fee for company online registration in Estonian Business Registry: €25 + VAT (paid via Xolo Leap)
Explore this subject in more detail in our step-by-step guide to applying for e-Residency
How long does it take to become an Estonian e-resident?
The e-Residency application processing is in the hands of the Estonian Police and Border Guard, who will contact you by email once your application is approved. There are very few specific requirements for Estonian e-Residency; however, a clean criminal record is required
The entire process usually takes 3-4 weeks, but can occasionally take a bit longer. When you choose Xolo as your e-Residency service provider, we'll walk you through every step of the process, including applying for e-Residency, so you don't have to do it alone!