How to Become a Digital Resident in Estonia and Reduce Your Taxes

E-Residency in Estonia to reduce taxes.

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Estonia, a small country in the Baltic Republic with approximately 1.3 million inhabitants, has stood out in recent years for its innovative initiative: the digital residency program (e-residency). This program offers attractive tax advantages for entrepreneurs and people who want to have a presence in the European Union without being Estonian citizens. The amazing thing is that this process can be done completely online, without the need to travel to Estonia. Here we explain how to become a digital resident in Estonia and how this can help you pay less taxes.

What is e-residency in Estonia?

Estonian e-residency is a program that allows anyone to obtain a digital ID that gives them access to Estonian digital services from anywhere in the world. It is important to note that this digital residence card does not confer Estonian citizenship, but is a privilege granted to those who meet the requirements. Furthermore, the Estonian State reserves the right to withdraw this card in case of misuse.

How do people become e-residents and access these benefits?

The application process is relatively simple. Interested parties must register on the e-Residency website, provide some personal data and wait for approval from the Estonian Border Police. Although they theoretically have up to 30 days to receive a response, the process typically takes around 20 days, with an approval rate of 85%. However, due to the situation in Ukraine, the review of applications has been intensified to prevent the creation of problematic companies in Europe, which has led to the blocking of applications from Russia in recent months.

Once approved, applicants can collect their e-Residency card at a nearby Estonian embassy within 2 to 5 weeks, this card does not contain a photo, but is equipped with a chip, a personal code and biometric data, like the iris of the eyes and the fingerprint. This is the only step that requires physical presence, since from this point on, e-residents can access Estonian government services, including the creation of digital companies.

Of course, as with any process, there are associated costs. Applying for an e-Residency costs 120 euros, without annual fees, but it is necessary to renew it every five years by paying the same amount. The physical e-residence card is essential since it is needed to carry out online procedures. Additionally, if the card is lost, an additional fee must also be paid.

To establish a company in Estonia, in addition to registration, a bank account is required. Fortunately, opening a bank account in Estonia can be done online, although some e-residents have found this process a little more complicated if they do not have a previously established bank account with another bank.

The cost of setting up a company in Estonia is 190 euros, with an annual expense of between 200 and 400 euros to maintain the legal address. Although these costs exist, Estonia is proud to have first place in the International Tax Competitiveness Index, which means there is no corporate tax or fees on reinvested profits.

Estonia as an International Business Center

Initially, the program was conceived to attract entrepreneurs from Latin America and Asia who wanted to establish companies in a European country and benefit from membership in the European Union. However, surprisingly, 70% of those registered turned out to be citizens of the European Union itself, including Spaniards. The reason behind this trend is the ease and speed with which businesses can be established and managed in Estonia compared to the often grueling bureaucracy in their home countries.

The e-residency program has seen notable growth in recent years, with more than 103,000 e-residents from 181 countries registered as of mid-2023. This may seem like a modest number, but considering Estonia’s workforce, which barely exceeds 650,000 inhabitants, the program has increased the country’s workforce by almost 10%.

Although not all e-residents set up businesses in Estonia, around a third do so, equivalent to approximately 26,300 businesses run by people around the world. Spaniards have also joined this trend, with around 120 Spaniards registering as e-residents each month. In total, Spain leads the list of countries participating in this program in 2023, closely followed by Ukraine, Germany, Turkey and France.

So what makes Estonia so attractive to Spanish entrepreneurs? The answer lies in the ease and speed of opening and running a business in Estonia. Unlike Spain, where bureaucracy can be overwhelming, in Estonia, setting up a business is as simple as a few clicks. E-government in Estonia was introduced in 2002 with a qualified digital signature, which has allowed virtually all official processes to be carried out online. According to some e-residents, setting up a business in Estonia is a matter of minutes, which contrasts significantly with the complexities and delays they often face in their home countries.

Advantages of being a Digital Resident in Estonia

  • Founding your own company in Estonia: One of the biggest benefits of digital residency is the ability to establish your own company in Estonia, giving you access to European Union markets without the need to be a citizen of a member country.
  • Less bureaucracy and paperwork: In Estonia, you can have your business up and running in as little as 2 hours, avoiding the excessive bureaucracy often found elsewhere.
  • Reduced taxes: All companies in Estonia pay 25% taxes, but if you reinvest the profits in your company, the tax burden is reduced to 0% the following year. This can be a great advantage for the growth of your business.
  • Cheaper products and services: As a resident of Estonia, you can access cheaper products and services, as you avoid the extra cost of value-added taxes.

The Future for Entrepreneurs in Estonia

The Estonian government estimates to have more than 10 million e-residents by 2025. This supports its reputation as an attractive location for international business. According to the World Bank and the World Economic Forum, Estonia is one of the easiest and most efficient places to do business internationally.

The main countries that apply for electronic residency in Estonia are the United States, Finland, the United Kingdom, Canada and India. Even European countries such as Spain access this process, which demonstrates the global attractiveness of this program when creating a business.

In summary, digital residency in Estonia offers unique opportunities for entrepreneurs and businessmen seeking to establish businesses in the European Union and reduce their tax burden. With an online application process and support from the Estonian government, this program continues to attract people from all over the world who want to take advantage of the benefits of being a digital resident in this Baltic country.

Do you need more information about Estonia E-Residency?

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