In November 2019 the number of companies created by e-residents exceeded 10 000. It’s an impressive number, as 10 000 businesses is no small feat. Of course, as an official service provider at the e-Residency marketplace, we at Comistar (Global Company in Europe) are doing our best to spread the word and aiming at something more spectacular — 100 000 businesses or even 1 million businesses. Sounds like a crazy thought, but e-Residency is a global product, and why shouldn’t we be targeting anything less than that? In the last two years alone, more than 7000 companies were created, which shows that the pace of registering new e-residency companies in Estonia has accelerated. It’s a good thing as the e-residency community grows stronger. We don’t know any other governmental product (country-as-a-service) which has been used by foreigners and non-residents on that kind of scale, and we’re definitely glad to be part of it.
As 10 000 companies is a big marker for Estonian e-residency program, we’re going to re-visit the opportunities what the e-residency brings below.
- E-residency program was launched in 2014. E-residency program is built on the digital infrastructure which the Estonian government has built in the last two decades, enabling its citizens to execute most of the government related actions online (voting, school system, public transportation, healthcare, business management, tax returns, etc).
- The aim of the e-residency program is to provide access to foreigners to use the Estonian governmental services just like Estonians do. The main purpose is to enable opening and managing an Estonian company fully online.
- You can open the European company in Estonia with your e-residency card in 1–2 days. It’s a quick and easy process. You can also manage your Estonian company 100% online.
- Estonian company gives you an access to the European market. Meaning, you’ll have European company operating within the EU, with all the benefits like European bank account, free movement of products and capital, etc. Europe, with its more than 500 million people population, is a great market due to high living standard and purchasing power.
- E-residency card does not automatically grant entry permit to the EU, right to travel in Europe visa-free, does not affect your tax residency, nor give any right to an actual Estonian citizenship. The purpose of the e-residency is to simplify opening and managing an Estonian company.
- Estonian company does not automatically come with a bank account. Bank account has to be applied separately after the company is registered.
- It may take 4–5 weeks to obtain the e-residency card. Sometimes, if pressed for time, we’ve helped our clients to register the Estonian company via notary instead to save time.
- E-residency card costs 100€ (one-time fee). State fee for company incorporation is 190€. The minimum share capital contribution is 2500€. You can pay in the share capital later as decided in the company’s articles of association (can be 2 years, 3 years, or even 5 years). You can not pay dividends unless you have paid in the share capital.
- Every Estonian company has to have an Estonian address and a contact person (if the company is managed by a non-resident). Comistar can help with both.
- All shareholders and management body members have to have e-residency cards if they want to be part of the company structure. Board members and shareholders can be added later, but please note that shareholders can currently only be added via visiting the Estonian notary. We can represent our clients at the Estonian notary via power of attorney.
- Accounting costs in Estonia are reasonable. It’s quite important to have a good accounting provider in Estonia. Optimised accounting processes and quality service all-around is vital for long-term upkeep and compliance.
- Personally, you’re still a tax resident in your country of residence. There can be tax implications for your Estonian company as well, and you’ll need to consult about these matters with your Estonian advisor and the local advisor in your own country.
- Most service providers don’t serve FATF countries. It also complicates banking matters.
- Banking problems have been made easier by the online banks operating under E-Money Institution license. Companies like Revolut, TransferWise, Holvi etc, are filling in for the conventional banks. They provide an IBAN account for everyday transactions, and are completely sufficient banking partners on most cases.
- Estonian company is not an offshore company.
- Make sure you consult about VAT matters before starting your business in Europe. There are different rules for physical products and digital products, for domestic and international transactions, and so forth. Make sure your accountant knows and understands these rules. We can make a 20-minute free of charge intro call at Comistar and cover the principles of these rules.
- Estonian company does not have to pay corporate tax. If you make 100 000€ per year, and you do not pay it out, you get to use that 100 000€ for investments to the business. If you do pay it out, then Estonia taxes you with 20% on gross dividends. Meaning, if you want to distribute 100 000€ gross, you’ll pay 20 000€ to the Estonian government, and receive 80 000€. NB! Don’t forget the possible tax implications. There are tax treaties between countries, and there might be a situation where your own country might tax the Estonian company.
- Salary taxes are taxed in the country of residence. Meaning, if you’re a German living in Germany, then Estonia doesn’t tax your salary paid from the Estonian company. You’ll need to declare and pay your tax in Germany.
- Liquidation of the Estonian company takes time. It’s not an overly complex process, but due to mandatory buffer period it takes 8–10 months.
- You can do any kind of business with the Estonian company, as long as it’s legal. The fact that you can doesn’t mean it’s sensible in all cases — if you have a fruit stand in France, then you have a local business, and having an Estonian company doesn’t help or make things easier for you.
- You can’t use the e-residency card to register the Estonian company as a daughter company or a branch of another legal entity. Estonian company can be registered with the e-residency card only when it’s done by natural persons.
- Estonia has special crypto licenses for blockchain companies, which have been very popular in the recent years.
- Did we miss something and you still have questions? Get in touch with us at e-resident.me and firstname.lastname@example.org. Run your company in Europe!
Estonian e-residency makes a lot of sense if you’re a non-EU citizen and are looking to have a company in Europe. It’s the quickest, most cost-effective to start and manage, and we have a strong network of service providers and e-residency community to help you on every step of the way. If you’re already an EU citizen, but are just looking for a less bureaucratic way to open and manage a company, Estonian company is also a great option. If you’re looking to register the Estonian company solely for the tax optimization purposes, then you need to have a good plan for that, as it’s not as straightforward as it seems. The most efficient solutions for tax optimisation involve moving as an individual as well. Estonia isn’t a bad place to reside either, unless it’s a winter time.
Comistar provides business, legal and tax support for e-residency companies. Our core focus is on Fintech licensing, e-commerce companies, blockchain industry and affiliate marketers. We’ve been operating for over 5 years and have helped more than 300 companies to get started in Estonia.