By Daniel Schwarz

All You Need to Know About Estonia’s E-Residency Program

By Daniel Schwarz

Estonia's Capitol, Tallin

Estonia has become the first country in the world to offer a transnational digital identity. It’s attracted the attention of entrepreneurs and digital nomads worldwide, but there’s still a huge amount of confusion about the benefits of the E-Residency Program and what e-residency actually means. Let’s take a look.

What Is E-Residency?

It’s a way of accessing Estonia’s government services without ever actually visiting Estonia.

You can start a company with all the benefits of the EU legal framework as well as remotely access low maintenance administrative tools such as tax declaration and company formation. In 2009, Estonia broke a world record for the “fastest time to register a new legal entity” – 18 minutes.

In short, this beautiful Baltic country is offering remotely accessible services that would normally only be available to actual residents of Estonia. For digital nomad entrepreneurs that don’t have a fixed location, this is a huge deal and a big step towards full location-independence, and to top it off, it comes with minimal bureaucracy and a clear, desirable tax framework.

What Is E-Residency Not?

E-Residency does not mean actual residency. It’s not a visa, a right to remain, an identification card or citizenship, nor does it come with any of the social rights that Estonians locals have.

More importantly, it’s not a way of avoiding tax in any way, although I will elaborate on the tax benefits later on.

What Are the Benefits of Becoming An Estonian E-Resident?

Here’s a clearer, more concise list of benefits:

  • Very low administrative burden
  • 0% corporation tax (but 20% income tax)
  • A euro-currency or multi-currency bank account
  • More trust due to incorporating in a EU state
  • Access to more online services such as PayPal
  • Modern banking that can be managed remotely
  • You specifically want a business in Estonia
  • Save time and money by using government software

EU Benefits

But here’s the big question, do you need to be an Estonian e-resident to have all of this? Well, the answer to that is no. You can set up a more cost-effective international bank account to avoid currency conversion fees, and you can start a company in a country with minimal accounting requirements or zero tax.

However, depending on where you reside and where you’re setting up shop, it can be difficult; usually, it’s impossible without having to immigrate or at least spend time in the country while you set up a bank account and sign documents.

Bottom line: becoming a resident or starting a company in another country usually feels like a bit of a hack. It’s possible, but few countries have actually made the effort to make the ordeal convenient. E-residency is the solution for the digital era.

How to Become an E-Resident

Chris Ward tells us in-depth how he actually applied for e-residency in Estonia, but I’ll sum up the steps quickly and then I’ll move on to some of the technical details.

Step 1: Completing the Application Form

On the form you’ll be asked about your current citizenship, reasons for applying, and of course you can specify which country you’d like to collect the card from.

E-Residency Application Form

Step 2: Payment and Delivery

Many successful applicants have said that the card takes approximately a month to arrive at the embassy in whichever country you selected on the form. It costs 50 euros.

Step 3: Equipment

As well as the e-residency card you’ll also find a USB reader in the starter kit, and that combined with the reader software will authorise you to access Estonian services and digitally sign documents.

E-Residency Starter Kit


Starting a Company in Estonia

Just like when you incorporate a business entity in any other country, you need an address in that country – but before you say “ahh, so there’s the catch”, the address can be a virtual one. Since e-residency is still taking its first baby steps, we can expect things like this to become easier over time.

You can register a company online at the Company Registration Portal, which doesn’t take very long, using your Estonian E-Card.

Estonian E-Card

Opening a Bank Account in Estonia

Estonian online banking is generally quite secure and user-friendly. Best of all, you can report tax directly from your bank account, saving you time, money, and of course sanity.

Finding a Virtual Address

Okay, so this one is a “gotcha”. You have to visit one of three banks (LHV, Swedbank or SEB) that supports e-residents to open a bank account, however your e-residency card can be used to digitally authorise the final step. E-Estonia is working on a way to make this a non-compliance; by Autumn 2016, e-residents will no longer be required to meet with a bank official face-to-face, and instead we’ll be able to use secure, virtual video chats.

Paying Tax (Where Everybody Gets Confused)

Estonia has a very unique and desirable tax system. First of all, there is zero corporation tax, meaning that only employees are subjected to income tax of which they are responsible for.

As for the shareholders of the company, they only pay tax on distributed profits. Basically, when they’re issued a dividend. If you’re not receiving a dividend, you’re not subjected to tax and you can reinvest those funds into company growth instead.

Who Pays Tax On Dividends?

Your company foots the tax bill when the dividends are distributed, although each shareholder is still liable for income tax in their own country of residence. Remember, e-residency doesn’t mean that you’re an Estonian resident, although you can still become a tax resident in Estonia if you choose to stay there indefinitely.

Where Do You Pay Income Tax?

It doesn’t mean that you’ll be taxed twice, though. Most countries have double-taxation laws and you’ll need to consult the relevant tax treaties between your resident country and Estonia.

Sometimes you’ll be taxed on foreign income, sometimes you won’t; the rules differ from one country to the next depending on the level of interaction with your home country. Being “resident for tax reasons” nowhere is entirely feasible, although many digital nomads make the mistake of assuming it applies to them.

Always, always, always consult legal advice.


In the first 7 months, over 4,000 entrepreneurs and digital nomads applied for e-residency, and for only 50 euros, you can do the same. If you have any further questions, Kaspar Korjus (Director of the Estonia E-Residency Program) recently did an AMA on Nomad Forum where he clarified some of the more confusing aspects of Estonian e-residency.

I wanted to say a big thank you to Sebastian Johnsson for letting me use his images. Sebastian aims to remotely open a bank account in Estonia, but doesn’t want to start a company there because the tax rate isn’t as tempting as Malta’s (where he currently lives). Estonia’s e-residency benefits individuals as well as companies.

A thank you to Yulcu Iskender as well, who wants to move his business to Europe in order to benefit from everything that the European Union has to offer, and Skyler Shaw who finds the tax benefits very advantageous.

  • Antonella

    Great article! Since I started working remotely with clients worldwide I’ve felt there’s a troubling mismatch between independent work on a global scale that is only possible on the Internet and the intricacies, entanglements, claustrophobic bureaucracy of local work rules, regulations and taxes (being originally from Italy, one of the most bureaucratic countries in the world, I’d say I’ve felt the pain quite deeply). I hope Estonian e-residency is a wake-up call for all other countries and a first step towards a more general, orchestrated approach towards a significantly more simplified and unified system of law and taxation better suited to the globally distributed workforce of the electronic age.

    • I hear ya. For me it’s the minimal level of administration that entices me. Doing my company’s annual accounts yesterday was complete torture. I’m already “from” the EU too, so I already have those benefits. I think the biggest advancement would be other countries following suit.

  • I have applied for E residency and i have discovered that they have a special process for annual report and it forces you to buy services from an accountant an it costs as much money as in the UK & even more. Service provider ask to send them every single transactions for accounting. It can be workable if you have 3 transactions a month. for instance, if you are an IT consultant but if you receive lots of small fees it is going to cost a lot of money. Plus since you don’t read estonian, people can scam you, and take advantage of you. At the end it may cost more than paying your tax in the UK. Plus take into account, that you may receive papers in estonian. So in this case, you have to scan them, go through Ocr and then translate them.

    • A lot of things to consider here. I would love to know if others have similar experiences?

  • Niall Doherty

    Very interesting. Thanks for sharing this info.

    One question related to what you wrote near the end: “Sebastian aims to remotely open a bank account in Estonia, but doesn’t want to start a company there because the tax rate isn’t as tempting as Malta’s (where he currently lives).”

    If there’s 0% corporation tax for companies in Estonia, I’m wondering how the tax rate can be more tempting in Malta?

    • You’re welcome Niall. Corporation tax is 0% but income tax is 20%. I think Malta is 10%.

  • Urmo Pärg

    As a clarification, by law an Estonian company is required to have accounting (as practice), not an accountant. So, if you have sufficient skills and spare time to gather up-to-date info about the local legislation and execute the relevant tasks, you can fulfill the duty yourself. It is normal practice indeed.

    But if you feel like focusing on your core job only, there is an accepted alternative to use the help of relevant service providers. So, it’s just a matter of preferences regarding which business-related functions to master yourself vs outsource to an external expert.

    Estonian Gov. makes efforts to support both options, offering DIY tools and encouraging market competition among service providers. Hopefully all e-residents will benefit.

  • Awesome, thanks for setting the record straight. I’m sure the information/requirements will change over time and the process evolves.

  • Arash

    Hi there,
    MY BIG QUESTION is, If I start a buisiness in estonia (I mean really small business, like a cafe, etc…) , this will directly lead me to have Estonian temporary resident permit ? Or what to do to have it ?
    the problem is that I dont have any european countries resident permit and I don’t want to be sent back to my country at the middle of my buisiness !

    • If we’re talking about cafés, then we’re talking about about being physically resident in the country, which is not what e-residency is about. You’ll have to seek advice on that because they’re two different things.

      • Arash

        thanks for the answer Daniel.

        • You’re welcome. It may be that you can start the company via e-residency and spend some time there to start the business (for however long the a visa allows you) and then you hire somebody else (a local) to run the café.

          • Arash

            yeah sure. maybe I can hire somebody for some time. but the main problem I must deal with is VISA . Thanks anyway (Thumbs up)

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