The globe has no shortage of startups. From western nations’ reputations as tech hotbeds, to Africa’s 41% female-lead entrepreneur scene, global innovation from the bottom up is on the rise. However, red tape, taxes, and otherwise unattractive ecosystems are presenting challenges for many startups—and they are beginning to look elsewhere to nurture their business endeavors. For a growing number of organizations and individuals, “elsewhere” means registering their business in Estonia, the EU’s fourth-smallest country by population. The former Soviet republic now offers the world’s first e-residency, and aims to attract startups and established businesses alike to operate independent of location—and it’s proving successful.
Estonia’s e-Residency and the World
Estonia has granted e-Residency to over 46,000 applicants from over 150 countries in the program’s first four years, meaning the number of e-residents has outpaced Estonian birth rates. What’s driving so many applicants? For most, location independence for their international business is the selling point. For others, simply bringing business to Estonia and supporting the e-Residency is what motivates them to apply.
Applicants who are interested in Estonia’s e-Residency program must (of course) apply online. This may not come as a surprise given both the nature of the residency and the fact that Estonia’s government provides 99% of its services online—and was the first nation to declare that access to the internet is a social right. If granted e-Residency, holders can obtain their ID card from an Estonian embassy. This digital-centric approach is certainly a cornerstone in the e-Residency’s foundation, and it appears to be attracting applicants who share these values.
Who Can Apply for Estonia’s e-Residency?
The e-Residency is available to four main types of applicants: digital nomads, freelancers, startups, and EU companies—essentially anyone who wishes to run a business remotely, and to have that business registered in Estonia and, in turn, the EU. Once granted e-Residency, holders can run their location-independent business with all of the tools needed to function; holders can accept payments via online payment platforms, digitally sign, authenticate, encrypt, and send documents, gain access to the EU Single Market, and connect with service providers—all without needing to appoint a local director.
Once an applicant receives their e-Residency, they then have access to online banking and government services, with expanding services in the EU. In short, it’s a digital identity card recognized and accepted by most banks, Estonia’s government and, since 2018, accepted as an online ID across the EU. But banking in Estonia offers holders a number of perks, if quite specific. Currently, only three banks in Estonia offer services to e-residents, two of which are Swedish banks. Holders have access to Euro- and multi-currency accounts, a service many Estonian banks offer—each of which is available from anywhere in the world. But prospective e-residents beware: opening a bank account in Estonia is not a guaranteed right, as no bank is obligated to open an account for e-Residents as long as they are not actual Estonian residents.
What Estonia’s e-Residency is Not
The ‘e’ in e-Residency is most important; Estonia’s e-Residency is not an actual residency. Holders of the e-Residency do not have the right to stay in Estonia, the EU, or Schengen zone, or to any social rights available in Estonia. Similarly, e-Residency does not mean citizenship; holders should not expect to receive Estonian consular support anywhere in the world, including Estonia. Further, holders’ e-Residency is not a valid picture ID, and cannot be used as a form of ID at any physical location for any service that requires an ID.
And, if applicants are considering e-Residency as a way to avoid paying taxes, they are sorely mistaken; all holders are subject to taxes in their country of physical residence, despite being seen as a tax resident in Estonia. Estonia’s government has outlined the e-Residency’s tax implications, all of which is important for potential applicants to understand before applying.
Grow Your Global Footprint with an Experienced Partner
Estonia’s e-Residency is a game-changer for how global businesses (however small) operate across borders, offering a degree of location independence previously unseen. But for many expanding businesses, Estonia’s e-Residency doesn’t offer the comprehensive services and support needed to take a business global.
Velocity Global has helped hundreds of organizations realize their global expansion goals, assisting in establishing presence in 185 countries and counting. Whether your organization is exploring multiple markets or you’ve got your eye set on a specific location, Velocity Global’s International PEO (Professional Employer Organization) solution can get you global in as few as 48 hours, virtually anywhere. Ready to take on new markets and establish your business as a global player? Let’s make it happen.