Through e-Residency, Estonia offers entrepreneurs, freelancers and digital nomads the opportunity to set up businesses and access online services without having to be physically present in the country. Anyone can apply for e-residency and start a business without having to give up their independence of location.
The e-Residency functions as a digital identity, not as a physical residence permit.
The so-called e-Residents receive a digital ID card that enables secure authentication and legally binding electronic signatures.
The online services include the administration of companies founded in Estonia and a completely digitalized tax declaration process.
Foreigners can use the digital ID to access Estonian banks and payment service providers. This makes it much easier to carry out business transactions, such as concluding contracts and issuing invoices, in the EU.
Thanks to the advanced digitalization of the small Baltic state, neither the application for an e-Residency nor setting up a company takes much time. Accounting and tax declarations can also be completed online quickly.
Indemnity Insurance Seal for your Principals
- Individual and comprehensive insurance protection
- High coverage sums for financial losses
- No-claims evidence going back five years
Find the perfect protection for your business here
For digital nomads, e-Residency in Estonia offers many advantages:
- Simple Company Formation: Companies can even be formed online within a few hours and at low cost.
- Access to the EU market: Estonia is a member of the EU, contracts and invoices according to EU standards can be drawn up and processed more easily.
- Taxation: There is a transparent tax system, whereby company profits are only taxed when the profit is distributed.
- Simple Administration: The Estonian online services allow tax declarations, accounting and contracts to be processed completely digitally. In addition, contracts or important documents can be signed electronically and legally binding.
- Location Independence: There is no need to travel to Estonia. Companies founded in the Baltic state can be managed entirely online. There are many service providers from Estonia who specialize in supporting local administration. These can also be hired completely online.
Things to Keep in Mind About e-Residency in Estonia
The online application for e-Residency in Estonia can be completed quickly. Nevertheless, there are a few things you should be aware of.
Fees for e-Residency and starting a company
A fee is charged for e-residency, i.e. registration, the digital ID card and its pick-up. This fee is around 100 to 130 Euros. The e-residency is valid for five years, after which you have to submit a new application, this time in a more simplified form. However, the fee is required again.
In addition to the fees for e-Residency, there are other ongoing costs: A company founded in Estonia must have a registered address in Estonia. There are several providers that offer virtual office addresses or business addresses. Accounting services, legal advice on starting a business or government fees should also be considered as running costs.
Taxes and Tax Obligations
Having an e-Residency does not automatically mean tax exemption in Estonia. Before deciding on a digital identity, everyone should look into the tax obligations in their home country and in Estonia. Tax obligations may also apply in the home country, even though the company is run in the Baltic state.
The following taxation applies in Estonia
- Corporation tax: The special thing about corporation tax in Estonia is that it is not due annually, only when profits are distributed. Then 20 % is charged on these profits. As long as the profits remain in the company and are reinvested, no tax is charged.
- Dividend taxation: 20% corporation tax is also applied to distributed dividends. Estonia has concluded a double taxation agreement with many countries, which means that often dividends are not taxed again in the e-Resident's home country.
- VAT: Companies founded in Estonia must register for VAT as soon as their annual turnover exceeds 40.000 Euros. After registration, the company receives an EU-wide VAT number, which is required for trading within the EU.
All companies in Estonia must submit an annual tax declaration, even if no profits are distributed. As accounting must be done according to Estonian regulations, it is recomended for e-Residents to use local accounting services. On the official website you can find offers for these accounting services. Both the submission of the tax return and the use of the services can still be handled completely digitally!
Data Security
As Estonian e-Residents never really have to be on site and can actually carry out all processes online, the question arises as to whether personal data could potentially be exposed to cyber attacks.
To prevent this, the digital ID card has an integrated chip that stores and secures the e-Resident's data. To ensure that the digital signatures through the digital ID are encrypted, the card uses PKI (Public Key Infrastructure) technology. The digital signature option ensures a legally valid binding in contracts and documents and is strongly protected by cryptographic algorithms.
In addition, data transmissions are protected by end-to-end encryption and secure transmission protocols such as SSL and TLS. Two-factor authentication with the digital ID card in combination with a security code can also be used optionally, but is always recommended.
The application process for e-Residency in Estonia, like most processes, can be carried out almost entirely online. The process can be divided into five steps:
- Online Application: On the official website (e-resident.gov.ee) you can find an application form that must be filled out. You need to upload a copy of a (still valid) passport and a current passport photo. With this application process a letter of motivation is explicitly requested. It should explain why you want to obtain an e-Residency and for which purpose. Generally speaking, only around 1% of applications are rejected.
- Background Check: As soon as the application is submitted, Estonian security authorities carry out a background check to dismiss any security concerns. Depending on the country of origin, this can take up to several weeks, which makes it one of the most time-consuming steps in the application process.
- Approval: After a successful check, the approval confirmation is sent by mail. All that remains is to collect and activate the digital ID card.
- Collection: An appointment has to be made to collect the digital ID card; detailed instructions will be sent by email. The card must be collected in person, as your identity will be checked using a valid ID document when you collect it. Usually, this can be done at an embassy or consulate. However, there are now also more than 50 special collection points in 51 countries. The ID card can also be collected there. A complete list of all locations can be found on the official website.
- Activation: Upon collection, the e-Resident receives an activation kit containing instructions and the PIN codes for the card. The activation itself can be carried out online.
exali also offers insurance in Estonia! And if you are a founder, even with a 15% discount
When you take out Professional Indemnity Insurance through exali as a founder, you benefit from a 15% discount in the first two years of insurance. This means you can take care of growing your business without having to constantly think about your professional risks.
Estonia's advanced digital infrastructure allows you to start and manage a business from anywhere in the world. The record for setting up a company via e-Residency is just 2 hours. Generally speaking, a company can be set up very quickly and easily via e-Residency. However, it usually takes a little longer than the record holder.
In order to start a business, it makes sense to think about the actual business idea in advance. As soon as a basic framework is set up, a business plan should be developed to keep an eye on all factors and risks and to choose the right form of company.
You can register your own company completely online via e-Residency. The digital ID card gives you access to the business register. All formalities can be completed there:
- The company name, which is also checked for availability there.
- The details of the managing directors and shareholders. The e- Resident can act in both functions.
- The founding documents, such as a description of the company or the registration in the commercial register.
Thanks to the ID card, the application to set up a company can be signed online with full legal validity.
To be able to run the company from any location, you need an Estonian business address. A selection of service providers offering usable business addresses is available on the official website. These addresses can be purchased for around 200 to 400 euros per year.
A one-time fee is due for the registration of the company. Usually it amounts to around 265 Euros (as of July 2024). It may take a few days to review the application. As soon as the registration has been approved, it is confirmed by email. You will receive a registration certificate, which is also required, for example, to open an Estonian bank account. Some Estonian banks offer the opening of a bank account as a completely digital process as well.
The administration of a company in Estonia is simple and straightforward, because it can be done digitally from any location. Nevertheless, you should regularly check whether legislation or tax regulations have changed. It is important that the accounting meets Estonian standards and that an annual tax declaration is submitted.
There are different forms of company, all of which have their advantages and disadvantages. For e- Residents, the Private Limited Company (Osaühing or OÜ) is the most suitable form.
The following company forms are available to e-Residents:
Protect your business worldwide now
Founding an online service company
A freelance web developer from Romania uses Estonian e-Residency to set up a Private Limited Company (OÜ). The e-Residency allows him to carry out the entire process of company formation and administration online without having to travel to Estonia in person. He uses Estonia's digital infrastructure to sign contracts and issue invoices electronically. Estonia's tax-friendly environment, where profits are not taxed until they are distributed, allows him to reinvest his profits in business growth. With EU-wide VAT registration, he can easily offer his services to customers throughout the EU.
International example from e-Commerce
An entrepreneur from Brazil plans to set up an international e-commerce business selling goods to the EU. Through e-residency in Estonia, he establishes an OÜ that serves as his European business base. This makes customs and tax processing within the EU easier. He uses the Estonian digital ID for secure transactions and to manage his business remotely. The flexible company structure and access to EU markets offer him significant competitive advantages. By using Estonian logistics partners, he can optimize his supply chain and deliver to customers in the EU faster and more cost-effectively.
Take out Professional Indemnity Insurance now!
In general, there is no mandatory insurance for companies in Estonia. However, freelancers and the self-employed in particular can expect high claims for damages from customers or clients in the event of professional errors and mishaps. In order not to risk your own private assets or the liquidity of your company as a result of these claims, it is particularly important to take out Professional Indemnity Insurance. Professional Indemnity Insurance should cover financial losses, property damage and personal injury as well as possible consequential losses (e.g. loss of turnover for your customers.
Professional Indemnity Insurance through exali covers precisely these risks reliably and worldwide. The only requirement for wordwide coverage is a business address in the European Union. With an e-Residency in Estonia, you can therefore insure all your professional risks without any problems! The experts in exali's customer service team will provide you with personal support in choosing the perfect cover for your company.
With exali, you'll get:
- Professional Indemnity online in 5 minutes - even for ongoing projects.
- Personal support - you choose when and how.
- Worldwide coverage - you decide where you work and for whom.
- Modular insurance - we understand your evolving business needs.
- All-around protection - no matter how your business grows.
