You know that the PayPal ls the worlds biggest bank with no actual money, and Airbnb is the worlds leading rental service without any physical property. So, why Estonia is not going to has the worlds largest population with no actual physical people inside the borders? In 2014, Estonia started the e-residency program to permit people to open an EU based business from anywhere in the world.
I'm an e-Resident since September 2018, and here are some facts I learned on my company formation process.
1. What is e-residency, and what is not?
With e-Residency, Estonian government gives you an ID number and grants you the right to open and manage an EU company. You can do any legal activity with your Digi-ID card. Since you can use your Digi-ID card as your signature, you can do any legal action remotely.
e-Residency does not mean residency permit or a visa. The Digi-ID does not include its owner's picture, indicating it is not for physical purposes. It does not affect entering the EU zone. However, Estonia looks warm to welcome you with your business, if you wish.
2. How to apply to be an e-resident?
Just visit e-resident.gov.ee and then follow the "Join e-residency" link. When you reach the apply.gov.ee page, it'll ask you some personal details, just like your name, citizenships, and contact information. You'll need to scan and send your passport or EU ID card, and biometric photo. In the additional information section, your online CV and social media links are also needed.
The most crucial area, in my opinion, is the "reason for application" section. You choose your main motivation, which might be bringing business to Estonia, or just being a fan of e-residency. There are a few other options are available, in any case. Then, you'll write the details of your motivation. In this section, explain what you'll do as an e-Resident. You may wish to include your business plan, goals and experiences. Your social media, CV, and motivation will provide Estonian Police and Border Guard complete information. So, it'd be a good idea to work on them before the application process.
There is an application fee which is €150, and not recoverable if your application is rejected. However, €150 is the only fee you'll pay for getting your Digi-ID.
3. How to get your Digi-ID?
When you submit your application, you'll get something like the following e-mail soon:
Estonian Police and Border Guard Board has received an application for e-Resident Digi-ID submitted by UMUT ERKAL born on 01.01.1984. The application number 1234567890 was submitted on 19.09.2018 and is currently being reviewed.
Within one month, you'll receive the result of your application. If it's accepted, you'll get an e-mail like that:
Estonian Police and Border Guard Board has granted e-Residency to UMUT ERKAL born on 01.01.1984. You will be notified upon the document’s arrival to the place of issue marked on the application form.
Within days, your Digi-ID will be sent to Estonian Consulate you choose. You'll need to go to the consulate, sign an agreement and provide your fingerprints. Here is the e-mail you'll receive when your Digi-ID arrives:
Your digital identity card has arrived to the Estonian Embassy in Ankara. The card can be picked up only on Mondays or Thursdays at 3 p.m. except for public holidays of Estonia and Turkey. Cards are issued in living queue, and no appointment is needed.
Please do not make appointments in the electronic calendar of the Embassy for picking up e-residency digital identity cards, such appointments are not allowed and will be deleted.
Card must be picked up by the user personally as fingerprints are collected during the pick-up. Please have your valid passport or Turkish ID along with you for identification purposes.
The card should be collected within 6 months from the day it arrived at the Embassy, and the user was informed about this for the first time. If card is not picked up during 6 months, it will be returned to Estonia and destroyed.
There will be no questioning in the process. You'll collect your Digi-ID.
4. How to open a business in Estonia?
There are few steps on the business formation. It's just like buying a domain. First, you'll need to select a service provider. They have several offers for different businesses. If you're planning to form a consultation or software company, it's easy and not so expensive. However, if you're going to deal with physical goods, like me, it will be more costly since your service provider will deal with inventory management.
You'll find the service providers list from e-resident.gov.ee/service_category/virtual-office-contact-person/ page. Please note, only a few providers support physical good companies. After selecting your provider, choose a plan. These plans include a virtual office address, incoming mail digitalization, contact person, invoice management, VAT registration, and more.
Then, check if your desired business name is available for you. It should not be others trademark inside Estonia or Europe. You may use e-Residency Hub's name checker: app.erhub.ee/en/name-search If you're OK with your company name, which will be like "Company Name OÜ," enter the company details. These include field of activity, your contact information, board members information and shareholders information. Finally, you'll need to pay the company formation fees, which will be around €120.
When your service provider receives the information, they'll send an agreement to you, and you both sign the document digitally. Then, the service provider initiates company formation. There are some points you'll need to sigh through the government websites, but don't worry. Your service provider will guide you step by step. Within 2 to 4 days, the court will decide to approve your company, or not. If everything goes right, you'll have your company formed within a few days.
5. Which banking services are available to the e-residents?
You may open a bank account on numerous Estonian banks. However, according to Estonian laws, you'll have to visit Estonia one time and sign an agreement with your bank. In this process, your service provider should assist you with your bank appointment.
But wait. We're e-Residents, and there is Holvi. Holvi is a digital banking service for makers and doers. You can open an Holvi account from anywhere in the world, just with your business information. No physical appointment is necessary. Then, Holvi will ship you a Mastercard business prepaid card. There is a small monthly fee of Holvi, but it recovers you from traveling abroad for a signature. I'm so happy with the Holvi. You can open a Holvi account from holvi.com page.
After you set-up your bank account, you can connect PayPal or other payment providers to your account quickly.
6. Which kind of businesses is appropriate for the e-residents?
Since e-Residency is a kind of virtual service, it is more suitable for digital businesses. If you're planning to open a business consultancy or software development company, it perfectly fits e-Residency.
If you're planning to go into physical goods business, things will be a bit harder and expensive than other kinds of businesses. With a bit of research, there are no barriers to doing physical goods business.
Amazon FBA is also working with e-Residency. In FBA, which is the abbreviation of Fulfilment by Amazon; storage, packaging, shipments, returns management and Amazon does the customer relations for you. There will be some barriers to the customs. Amazon might not accept to deal with customs for you. However, there are intermediary companies that receive, inspects, labels and sends your inventory to Amazon. If there are some physical interaction is required, as you'll have a registered business in the EU, you may employ people and pay their salaries.
Estonian government wants your company to succeed and does not request VAT until your annual turnover passes €40.000. Your company won't pay taxes if you invest the income back to the company. However, there are labor taxes, income taxes, and social taxes. Since we e-Residents doesn't live in Estonia, we won't be paying most of these taxes to Estonia. Though, our country of residence might request income taxes from us.
Taxation is not an easy subject, so it's better to look at these resources:
• How do e-residents pay taxes: medium.com/e-residency-blog/how-do-e-residents-pay-taxes-73b8c96902b6
• Taxation: investinestonia.com/business-in-estonia/taxation/vat/
• Estonian Tax and Customs Board: emta.ee/eng
To sum up, e-Residency gives you the ability to run an EU based company, with remote management. You can access common payment tools, and open your business to the world.
If you're not sure whether open or not an EU company, I suggest you get e-Residency first. Then, you can open your business whenever you want. This way will save you much time if you need to open a company quickly.
Good luck with your e-Residency.