What is a Trusted e-Residency Company and how to get one

Anywhere Consulting OÜ is proudly incorporated in Estonia through their e-Residency program. As I'm getting questions on Estonian business management a lot lately, I decided to sum up my experiences in a blog post.

The most common questions I get:

1. Why open up a shop in Estonia? What are the benefits?

2. How to do it?

3. What are my experiences with running the business?

So I will focus on answering these questions, plus provide some personal background as well. It is by far not a paid endorsement of the program nor the service providers I mention.

WHY DO BUSINESS IN ESTONIA?

First off, here's my background, as every entrepreneur has its unique setup which determines the decisions. Anywhere Consulting OÜ is wholly owned by me, and I'm the managing director as well so I'm responsible for everything within the company. 

I'm a Hungarian national, so far a member of the EU, therefore tapping into the EU market wasn't a bonus for me, I was already in. Some entrepreneurs set up shops in Estonia to get into the EU with a fully EU-based company, which can be managed entirely online. For me, that wasn't the case. 

In my home country, we have a very beneficial tax program in place for sole owners and SMEs. Though an Estonian company can be operated with on an almost 0% or a limited amount of taxes, saving some money on taxes wouldn't be enough for me to justify moving my business to Estonia.

COSTS OF RUNNING A BUSINESS

The main reason to open a business in Estonia was the overall summary of costs to run the business. When it comes to running a business, there are several costs which an entrepreneur need to think of. 

TAX. However, I had a good setup before for tax optimization, Estonia has a lot to offer in this. Estonian companies pay 0% taxes on salaries for non-Estonian residents, which means if you are not living in Estonia and your company pays you a salary, you pay 0% on it. Of course, you still have to pay your personal income tax in your home country after that, but the company won't put any plus on it. The big deal, however, is not here, but you also pay 0% income tax on any reinvested or retained corporate profits and dividends. It means, if you have capital in your company and you reinvest it on let's say at the stock market as a business, you pay 0% on the capital gains. You actually won't pay any corporate income tax, until you take out the capital from the company. It allows you to reinvest your corporate profits in many different ways and get tax free profits. On the other hand, when you do get it out from your company as a dividend to your personal account, you pay 20% corporate tax + your personal income tax.

Overall, taxation in Estonia works for those who want to build a company, reinvest their profits and not live-off the company capital on salaries and stuff. Of course, claiming expenses is very straightforward and easy, so you can deduct a lot, just by running your company. 

MANAGEMENT. Here's where Estonia shines compared to offshore options like Hong Kong and others. Setting up the company is around 200 EUR which includes the state fee plus a setup cost for a 3rd party provider who does it for you. You can do it for yourself, but my time is worth more than a couple of EURs, so I always use 3rd party service providers. You also need an official business address plus accounting. Taxes are running on e-tax, so everything is submitted online. You can do the accounting as it is very, very, very simple, but again, my time is worth more, and I use a service which costs me 300 EUR per year. That gives me an official address plus annual accounting, plus 0-24 legal advice.

I use Nordic Consult for everything, they are amazing, I would highly recommend them!

BANKING. Good news: you don't need to fly to Estonia and open up a business bank account. You can if you want to, Tallinn is a fantastic little gem, is worth spending a few days there. As I said, I'm a Hungarian, and I had Hungarian businesses. One of the main reasons why I switched to Estonia was the insane paperwork and the even more crazy banking fees. However, as a Hungarian business, you can open an account at international online banks and e-money accounts, but try to explain that in your papers for the Hungarian authorities. Thanks to the fact that Estonia is a fully digital country, they have no problem with businesses opening up business accounts at Revolut or TransferWise. Through these online business accounts, I pay little or no fees on banking. You can open up a Revolut or TransferWise account online, with your Estonian business information you can verify your account online, and that's it. Other options are Holvi, N26, Payoneer or you can open a traditional bank account in your home country - it's not mandatory for Estonian businesses to have an Estonian banking account. 

If you have missed our post on the Essential toolkit to manage your business online, read it here.

TIME. Overall, my time has been freed up. Seriously, I spend zero time on paperwork. Accounting is a) download the annual statement from my Revolut Business Account or TransferWise Borderless Account b) collect all my invoices which I always do anyway c) share the folder with my accountant d) sign the annual return online e) sleep tight. I'm not automating the invoices yet because I love to write invoices anyway but apart from this, I don't do any paperwork. If I have any questions on expense claiming, contracts, taxes, I write to Nordic Consult, and they get back to me with a handy answer within 24 hours. They are seriously amazing.

RULE OF LAW, TRANSPARENCY, NATIONAL BRAND

Apart from the actual costs, there are other benefits which are somewhat immaterial. 

1. Estonia is a member of EU, NATO, and many others. NATO's cybersecurity HQ is in Tallinn, so I guess it makes Estonia's digital presence pretty secured. It's a stable democracy, sufficiently modern and trustworthy.

2. Doing business is fully transparent. Anyone can check other companies online with the name of the business or the company ID in hand. I highly value transparency, and I love countries who also appreciate this. You can check our legal on this link, by the way. Openness also raises trust between my clients and me. Estonian company is not a shady offshore business. To me, even a Hong Kong company is a bit controversial.

3. National brand is also essential. It does matter if you issue an invoice from an Eastern European country OR an offshore company. Estonia is a startup-focused country: they are popular with digital nomads, remote freelancers, and location independent businesses. The state is flexible, young, modern, and forward-thinking. Everything I can signup for.

 
 

HOW TO SETUP A BUSINESS IN ESTONIA?

  • Now this will be a shorter, straightforward part of this post. Here are the bullet-points:

  • Apply for e-Residency. You can apply here. Literally, anyone can apply, you just need to prove that you are who you are. Click on the link above and learn more about the process, which is surprisingly easy. The application is fully online.

  • Wait for the approval. It does take time as your application will go through the Estonian border police or whatever. For me, it took 1-2 weeks, but for others, it might take 3-4 weeks or even more. If you are from the EU already, this time can be shorter.

  • Once approval is done and you've got the email notification, please go to the nearest Estonian embassy (in my case it was in Vienna) and bring your passport. Verify yourself with the passport and provide a fingerprint, plus collect your e-Residency ID Card. To me, the rendezvous took 5 minutes.

  • With the e-Residency ID Card, you can a) sign documents online on governmental portals b) access to e-services like Estonian banks and others. It works with every computer, and it is fully encrypted and secured. It's not a new national ID, and it's an ID which you can use to run your business officially.

  • Get a service provider (my recommendation is Nordic Consult) and provide the essentials: ID card number (don't worry, you still need PIN and password and the physical card to sign stuff), the name of your business and some minor others. You don't need to provide personal details at all now, as it is on your e-Residency Card anyway.

  • Pay the fees, state fee plus the fee for the service provider. In total it was around 500 EUR to me, and I will pay like 2-300 EUR extra annually after the first year of accounting and legal address.

  • Wait, like a couple of hours, max one day.

  • Enjoy your new business. With the newly operational business, you can now open bank accounts online at Revolut or TransferWise or anywhere you prefer.

Here's the official walkthrough on how to start a company in Estonia.

FINAL THOUGHTS

E-Residency Business is amazing. The best part is the team who runs it. Imagine a world, where your government officials blog on Medium:

Not enough? Estonia is planning to launch it's own ESTCOIN and ICO, providing multiple variants of cryptocurrencies for entrepreneurs. 

Overall I think e-Residency Business is the future. No businesses should be tied into one single nation's infrastructure, and every company should freely pick the best online solutions for them. To me personally, establishing a business in Estonia was the best business decisions of my life so far and I'm proudly promoting this approach for everyone.

 

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