1. What Is Estonian e-Residency… and What Isn’t It?
New ideas pass through three periods: 1) It can’t be done. 2) It probably can be done, but it’s not worth doing. 3) I knew it was a good idea all along! -Arthur C. Clarke
Every now and then, humanity summons an innovation that challenges how we think about the old ways… it just sometimes takes a while to get going. Estonia’s ground-breaking e-residency program has been around since 2014, yet it’s had difficulty coming into its own. That is, until recently.
As of May 24, 2017, the program made some revolutionary new changes to address some of the drawbacks that were keeping it anchored. Now, we can finally see an unobstructed view of what a digital nation without borders looks like.
The Estonian e-residency program fills some very specific niches, especially for location-independent professionals. The core functions e-residency that provides — such as founding an EU company online from anywhere in the world — were enough to garner over 20,000 e-residents from over 138 countries, even before the latest renovations. To date, over 3,000 companies have been started under the program.
And those numbers are poised to rise drastically in the upcoming months. With the new revisions, it’s easier than ever to start a business remotely, with physically visiting the country of Estonia no longer a requirement. On top of that, over 1,000 British business-owners have already applied for e-residency in hopes of keeping their businesses in the EU after Brexit. All conditions are pointing towards this program — supported by the United Nations — to finally bloom after gestating for the last three years.
But on the cusp of e-residency’s Second Coming, many people have still never heard of it from its First Coming. That’s one of the reasons we wanted to write this book: to explain what this unprecedented program can do for you and your company.
Before we get into the specific advice such as which banks to join or what to expect when applying, first, let’s go over a outline of the entire program for a frame of reference.
An Overview of Estonian e-Residency
The country of Estonia itself lives on the forefront of the digital age. After gaining independence from Russia in 1991, the young nation realized it needed to carve itself a niche to stay competitive in the world. Almost prophetically, it chose the tech industry.
This progressive Baltic country made enormous leaps throughout the 90s. In 1991 only half the population had a phone line, but by the end of the decade 97% of schools were online and the government’s cabinet meetings were entirely paperless. The trend continues even in modern times: free wi-fi in populated areas, massive fiber-optic cabling projects, online tax returns for 94% of the people, and state-of-the-art digital infrastructure.
Today, Estonia enjoys some of the world’s most forward-thinking internet laws and privacy protections. It was one of the first countries to purport that internet access was a human right, and in 2016 was ranked at the top by Freedom House for global internet freedom (along with Iceland).
With Estonia’s background in digital achievements, it makes sense that they’d be the first country on the planet to carry out digital residency.
According to programme director Kaspar Korjus, one of the goals of e-residency is “democratising entrepreneurship.” Korjus puts forth that many good business ideas are stifled because of financial or bureaucratic reasons. Even persistent international companies are beleaguered by administrative hurdles when expanding into new countries.
By offering a transnational digital identity, “Estonia’s gift to the world” allows virtually anyone from anywhere to establish a company in the European Union and use Estonia’s advanced digital infrastructure to manage it.
Aside from starting a business, e-residents can also bank internationally and digitally. Estonia’s ultra-modern online banking facilities would be a step up for most global citizens, especially considering the options for multiple currencies. With the program’s new partnership with Holvi, the Finnish fintech firm responsible for neutralizing many of the early e-residency program’s drawbacks, banking as an e-resident has never been more worthwhile.
Still, e-residency is not as inclusive as it sounds. It’s less like an actual national residency than it might sound; the reality is closer to something in the middle, with some but not all the advantages of nationality.
With that in mind, let’s take a look at what Estonia e-residents can do… and what they can’t.
What You Can Do with e-Residency
Not sure if e-residency can help you specifically? Take a look at this list to see if any of these services are applicable to you.
- Found and Manage an EU Company. E-residents can open digital businesses, technically in Estonia (but in actuality managed remotely), and without the need of a local director. This comes with a smorgasbord of secondary advantages, such as tax cuts, minimal bureaucracy, workarounds for problems in the owner’s mother country, and status as part of the EU, NATO, and OECD. We’ll talk about these advantages in Chapter 4.
- Hassle-free International Banking. Estonia’s cutting-edge online banking offers modern banking features like multiple currencies and 100% digital interactions. On top of that, there’s the benefits of having an international account (verified by the EU, no less), such as diversifying assets.
- Digitally Sign Documents. The Estonian e-residency ID card allows you to sign online documents with legal authenticity — a huge advantage for digital nomads and remote team-members.
- Encrypt and Exchange Documents. E-residents can take advantage of Estonia’s advanced digital infrastructure, including document encryption and transmission.
- Declare Taxes Online. Estonia’s online tax platform is not only convenient, it can also be handled remotely.
- Aid of a Business Service Provider. If you need help setting up your company, specialty services can help you find a legal address, navigate the business registry, and help with opening a bank account.
What You Can NOT Do with e-Residency
Make no mistake about it: e-residency is not the same as residency! Here are a few privileges that e-residency does not provide, no matter what the title suggests.
- NO Citizenship. An e-residency will not make you a citizen of Estonia or by extension the EU; you will not receive any of the social benefits or state rights, such as the right to vote in Estonian elections.
- NO Permit to Stay. E-residency is not a visa for living in the country of Estonia, and will not permit physical residency.
- NO Travel Documentation. An e-residency ID card can not be used as a passport or a valid state-issued ID outside of digital environments.
- NO Means for Tax Evasion. No, despite how it may sound, e-residency is not a clever way to avoid paying taxes in your home country. Let’s clear up that misconception right now to avoid paying hefty penalties in the future.
The people of the world are becoming increasingly location-independent thanks to the bounties of the digital age; however, the governments of the world, mired in tradition, are failing to keep pace. Even if you don’t personally need the services of the program, you can still appreciate how Estonia is sticking its neck out to try something new… and necessary for the world of the future.
In this book, we’ll continue to dive into the specifics of the e-residency program. We’ll explain how to apply, how to set up a business, how to apply for a bank account, and all the expert tips and techniques for each. The goal of this ebook is to provide a single, all-encompassing source to answer any questions you may have about Estonian e-residency.
This post is Part 1 of our 5 part “Complete Guide to Estonian e-Residency.” We will release a new chapter every 2 weeks. Subscribe to our email list to get updates when we release new posts!