E-residency in Estonia [Question]

[Dresden]

Hello

Is anyone running their marketing business through e-residency in Estonia? I've been doing some research lately and I see many benefits in doing so.

Could someone tell me the monthly costs involved in running a business there? I've read a couple pages about it but the prices range from xx - xxx so I'd really like to hear it from someone who has personal experience. (monthly business costs, bookkeeping, bank accounts, virtual address, credit cards etc.)

In my country I pay about $200 + 18% of income tax on everything I earn. Id like to know if I'd be able to cut those costs in half at least.

 

[bryanon]

I happen to be someone who's originally from Estonia so whilst I haven't lived there for quite some time, I do know a thing or two about the taxation, as well as the e-residency program.

In general, there are a few quite important things that are noteworthy and relevant:

1) The first hurdle you'll run into is that while incorporating in Estonia is super easy and takes literally 10 minutes online, it's nowadays EXTREMELY difficult to get a bank account for your new company with any of the local banks, unless you're an actual (not e-) resident of the country or hold an Estonian passport. You can immediately forget about remote account opening. You'll need a trip (or two) to Estonia at the very least, and there's still a very high chance of the account not getting opened.

2) If you do manage to get a bank account, note that Estonia isn't a tax haven. While the tax situation is quite favourable and unique in the sense that re-invested company profits are not taxed (so, effectively, a 0% corporate income tax), you will still pay a 20% (or 14% in some unique cases) dividend withholding tax when you take money out from the company.

As for other expenses, they're largely in line with what you'd expect to pay anywhere else in Europe (except for the UK, where financial services are priced ridiculously high). Don't quote me on that, but you'd probably pay along the lines of €50-100 a month for bookkeeping, €15-25 a month for a virtual address and pennies on the dollar in bank account fees (but dependent on your transaction volumes, of course).

Ah, yes - and bear in mind that if your annual turnover exceeds €40k then you'll also need to register yourself as a VAT payer, in which case you'll pay 20% VAT for all sales, unless they're exempt (most common exempt sales are those to other EU companies who have a VAT number, or to non-EU companies or individuals. Any sales to EU individuals will be taxed).

Hope this helps.

 

[Dresden]

I happen to be someone who's originally from Estonia so whilst I haven't lived there for quite some time, I do know a thing or two about the taxation, as well as the e-residency program.

In general, there are a few quite important things that are noteworthy and relevant:

1) The first hurdle you'll run into is that while incorporating in Estonia is super easy and takes literally 10 minutes online, it's nowadays EXTREMELY difficult to get a bank account for your new company with any of the local banks, unless you're an actual (not e-) resident of the country or hold an Estonian passport. You can immediately forget about remote account opening. You'll need a trip (or two) to Estonia at the very least, and there's still a very high chance of the account not getting opened.

2) If you do manage to get a bank account, note that Estonia isn't a tax haven. While the tax situation is quite favourable and unique in the sense that re-invested company profits are not taxed (so, effectively, a 0% corporate income tax), you will still pay a 20% (or 14% in some unique cases) dividend withholding tax when you take money out from the company.

As for other expenses, they're largely in line with what you'd expect to pay anywhere else in Europe (except for the UK, where financial services are priced ridiculously high). Don't quote me on that, but you'd probably pay along the lines of €50-100 a month for bookkeeping, €15-25 a month for a virtual address and pennies on the dollar in bank account fees (but dependent on your transaction volumes, of course).

Ah, yes - and bear in mind that if your annual turnover exceeds €40k then you'll also need to register yourself as a VAT payer, in which case you'll pay 20% VAT for all sales, unless they're exempt (most common exempt sales are those to other EU companies who have a VAT number, or to non-EU companies or individuals. Any sales to EU individuals will be taxed).

Hope this helps.

Thanks for the detailed reply! I'm ready to take the trip to Estonia as I'm only 12 hours away from Tallinn, I'd just have to call a few banks to see if I'd be eligible to open an account there. So would you say I'd be able to run it all for around €150/month max? I really like the fact that the reinvestments are not taxed and being able to operate the business from anywhere in the world. Again, thanks for the detailed reply Bryanon.

 

[Lukmat]

I am going to do it in near future, ill follow this thread but e-residency started, waiting for info from ambassy

 

[bryanon]

Thanks for the detailed reply! I'm ready to take the trip to Estonia as I'm only 12 hours away from Tallinn, I'd just have to call a few banks to see if I'd be eligible to open an account there. So would you say I'd be able to run it all for around €150/month max? I really like the fact that the reinvestments are not taxed and being able to operate the business from anywhere in the world. Again, thanks for the detailed reply Bryanon.

Nice one!

When it comes to bank account eligibility, a lot will depend whether the 12 hours is towards the East or the West

I'd also recommend you to ring up the smaller / lesser known banks like LHV. Large ones (Swedbank, SEB) are less likely to play ball with you.

For your monthly expenditure, just do some research online - should be quite easy. Most reputable businesses nowadays have their websites in English as well, so it shouldn't be hard finding bookkeepers, address forwarding services, etc. with a quick Google search.

 

[Lukmat]

Nice one!

When it comes to bank account eligibility, a lot will depend whether the 12 hours is towards the East or the West

I'd also recommend you to ring up the smaller / lesser known banks like LHV. Large ones (Swedbank, SEB) are less likely to play ball with you.

For your monthly expenditure, just do some research online - should be quite easy. Most reputable businesses nowadays have their websites in English as well, so it shouldn't be hard finding bookkeepers, address forwarding services, etc. with a quick Google search.

Thanks for the detailed reply! I'm ready to take the trip to Estonia as I'm only 12 hours away from Tallinn, I'd just have to call a few banks to see if I'd be eligible to open an account there. So would you say I'd be able to run it all for around €150/month max? I really like the fact that the reinvestments are not taxed and being able to operate the business from anywhere in the world. Again, thanks for the detailed reply Bryanon.

Visit in Estonia is not required. If you have e-residency, to do in every ambassy, you can start business online, even Estonian ltd company.
For banking, I don't recommend putting cash into Estonian banks, it's close to Russia. I would use Transferwise, just got card for ATM, have IBAN accounts in UK, US, Australia, Canada and Germany. Also you can open account in your own country for your Estonian business.

Cost for whole operation will take me 800 euro and 50 euro / month for adress and invoice service.
It's worth to go to Estonia if you are close and want for example a car assigned to your Estonian business. Huge discount in VAT.

 

[Dresden]

Visit in Estonia is not required. If you have e-residency, to do in every ambassy, you can start business online, even Estonian ltd company.
For banking, I don't recommend putting cash into Estonian banks, it's close to Russia. I would use Transferwise, just got card for ATM, have IBAN accounts in UK, US, Australia, Canada and Germany. Also you can open account in your own country for your Estonian business.

Cost for whole operation will take me 800 euro and 50 euro / month for adress and invoice service.
It's worth to go to Estonia if you are close and want for example a car assigned to your Estonian business. Huge discount in VAT.

Really interesting. Thanks for your reply Vinku. Also thanks for that PM that you sent me otherwise I wouldn't have looked into this. I'm going to look into transferwise right now.

 

[Heiko]

Following this. Estonia seems way better than Germany when it comes to taxes. I haven't got in contact with banks yet but I would love to get a followup @Dresden

 

[bryanon]

Following this. Estonia seems way better than Germany when it comes to taxes. I haven't got in contact with banks yet but I would love to get a followup @Dresden

Yeah, the 0% income tax on reinvested profits is a nice and fairly unique thing. ALTHOGUH, as of this year, Latvia has actually switched to the same model (but their dividend tax is smaller than Estonia's), and we also have Georgia (where I am now, ironically) that has the same model, but the added benefit of the economy being growing, so banks are very lenient when it comes to KYC and also pay good interest on balances. Took me a "whole" 15 minutes to open a bank account here as a foreigner! No KYC questions, not even address proof documents.

 

[ExperimentalSEO]

Isn't OP still going to be liable for income taxes of his home country?

 

[kenksk]

There are companies here that can help you with the bank accounts and stuff but you do need to visit at least once.

 

[Dresden]

Isn't OP still going to be liable for income taxes of his home country?

I talked to my bookkeeper about this and he said as long as I'm not selling or receiving payments from people living in my country then no I do not.

 

[bryanon]

Isn't OP still going to be liable for income taxes of his home country?

It depends on his country of residence. Some countries (UK, most of Western Europe) tax their residents on their worldwide income, in which case it would be so. Others (Hong Kong, Malaysia, Costa Rica, many Eastern European countries) only tax income that originates from that same country. Others yet (Malta, some Carribean tax havens) don't tax foreign income but only so long as the funds aren't remitted to that country.