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E-Estonia - Digital Citizenship/E-Residency

Discussion in 'Business & Tax Advice' started by ColonelSoldier, Aug 19, 2015.

  1. ColonelSoldier

    ColonelSoldier Junior Member

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    https://e-estonia.com/

    Very, very cool program running now in Estonia.

    In a nutshell, e-residency in Estonia gives anyone in the world the ability to open a company in Estonia (European Union!) and a company bank account too (must visit the country to open the bank account at this stage).

    It is not a true residency, but a "privilege". Awesome potential for entrepreneurs who do e-commerce, drop shipping, affiliate marketing and all the rest.

    I would say it is an extremely competitive program that allows location independent entrepreneurs to https://e-estonia.com/estonia-opens-e-residency-to-the-world/ when you spend that money on building your business. Hands down, it beats all prescribed "tax havens" and the "Double Irish Dutch sandwich" by a mile because not only is your company fully online and self-managed without having to pay loads of admin fees, but your company has... 0% corporate tax! Plus you have the EU backing your company rather than some obscure island.

    They want to attract the attention of tech businesses that are location independent internet based businesses - obviously very applicable to most guys here and startups etc.

    Keep note, you must visit a bank there to open a bank account for your company. I have just sent an enquiry, but I believe this does not limit you to opening bank accounts, or currency wallets elsewhere: e.g. Estonian EU based company, with checking accounts in Hong Kong, Singapore, Latvia, OkPay, bitcoins, the list goes on! Not sure about PayPal either but merchant accounts wouldn't be hard if you have a EU company.

    Another issue is if you are a resident of a country that taxes you on your worldwide income (I believe USA) you would of course be taxed on the income earned by your Estonia company. Check with your accountant.

    However, if you are domiciled in places in which you are not taxed worldwide, then e-residency is literally the future of tech business. They are aiming for https://e-estonia.com/taavi-kotka-promises-10-million-e-estonians-2025/ and the country's population is 1.31 million.

    I personally have been approved and am going to pick my card up soon from one of their embassies.

    Anyone else started their Estonian company yet?


    Directly from their https://e-estonia.com/e-residents/services-and-benefits/:

     
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    Last edited: Aug 19, 2015
  2. Capo Dei Capi

    Capo Dei Capi BANNED BANNED

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    You will still have to pay taxes to the country you are residing in, so its only good for a tech company that is saving up money,not if your paying yourself 100% of the profits in salary. The worldwide taxing refers to people that are a citizen of a country but residing in another country, not that you can send yourself payments from a foreign company and not pay taxes.
     
    Last edited: Aug 20, 2015
  3. Mikaelo

    Mikaelo Regular Member

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    Awesome post, i've always wanted to visit Estonia. Have you been?
     
  4. unopalashgai

    unopalashgai Newbie

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    this is pretty awesome but they say you cant enter estonia with this card
     
  5. neu009

    neu009 Senior Member

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    You will have to pay taxes where you live, does not matter where you have your company. You can of course re-invest most in your business , buy assets etc. and reduce your taxable income. Talk to you account if this makes sense for you before you assume this is the greatest deal ever..
     
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  6. funkymozi

    funkymozi Regular Member

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    I was looking into offshore incorporation, this might be an option. Anyone know any cons to this?
     
  7. peetrike

    peetrike Power Member

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    Yeah, it`s really easy to use it. You can open a new company in 15 minutes and digitally sign documents wherever you are.

    Cheers
     
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  8. funkymozi

    funkymozi Regular Member

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    Do you know how easy/hard it is to open a bank account?
     
  9. peetrike

    peetrike Power Member

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    Easy, you can open it for yourself or for your business. Just visit the bank and you`re done.

    Cheers
     
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  10. ColonelSoldier

    ColonelSoldier Junior Member

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    That's the point - once you are making enough cash that you are not a resident of your home country that has sky high tax, i.e. most of the West, and you have become a resident of a country that doesn't tax worldwide then you don't have to open some random island company and you can have an EU company.
     
  11. Rough Driver

    Rough Driver Newbie

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    Interesting, but I am not 100% sure about the Estonian cops launching a "background" check. What are the Estonian .gov policy on bitcoin for example and if you are involved in the Bitcoin community would they refuse?

    Also what if you were working in the adult industry and wanted to set up a company?

    Its certainly a very interesting development if they are going to take an "enlightened" view - hopefully some middle ranking bureaucrat does not mess it up.
     
  12. Capo Dei Capi

    Capo Dei Capi BANNED BANNED

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    What country? Even singapore taxes it if it is brought into the country.
     
  13. ColonelSoldier

    ColonelSoldier Junior Member

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    The background check was a questionnaire.
    They're interested in anything start-up-ish, would certainly include bitcoin given the country is run digitally.
    I work in adult too and there's a million ways to describe your business model to bank/someone: eg. special interest toys, instructional dvds, live stream performances


    That's actually the point of having your business elsewhere.
    On this list is 60 countries that do not tax foreign earned income of resident foreigners (including Singapore):
    https://en.wikipedia.org/wiki/International_taxation
     
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  14. tjoans

    tjoans Newbie

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    Only thing I can think of that would make someone think twice about this is the new VAT tax that all EU companies are now subject to(2015).
     
  15. bloupdot

    bloupdot Newbie

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    From what i have read in the Estonian Legislation, you have to pay 25% of tax when you withdraw money from your Estonian company.
    So, no thank you!
     
  16. LaurusK

    LaurusK Newbie

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    A few things are worth mentioning - it does actually make sense for those who's income = salary AND the bank account can be opened remotely.

    * withdrawing money does not equal to distributing dividends, so there are ways (depends a little on your turnover and how much you withdraw)
    * someone pointed out correctly that you'll pay income tax in your own country, but if you don't distribute dividends, there's no income. Companies profit is not your income.
    * VAT - currently, if your turnover is less than 16K/yearly there's no VAT and this bar will be raised to 40K/year in 2018. Also, if your business is a "B2C", your VAT rate will be 0% (and you don't have to get a VAT number).
    * Bitcoin - you'll need to apply for a license called "alternative financial services"
    * Adult - depends, but sugarcoating it would make sense

    Applying for e-residency might take approximately a month, after that all's pretty easy (company set-up, bank account).

    PM me if you need more information.
     
  17. RuthSam

    RuthSam Jr. VIP Jr. VIP Premium Member

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    You may use Google and spend some time to do your research. Estonia and this e-residency is a trap and it will not work for 90% of all of you. I only say.. spend some time to research before you pay a single $ for this dream!
     
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  18. BloodyNinja

    BloodyNinja Power Member

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    I'll add here some points to consider

    1. Profit tax

    It's indeed 0% in Estonia but consider the fact that most small businesses in other countries have relatively simple ways to show a smaller profit than it actually is. Furthermore being unprofitable or hanging around zero is normal for businesses in the first few years of their life. That said, if you think you will be profitable in the first years and won't have many expenses (e.g. consulting business), 0% profit tax might be a good thing for you.

    2. Income tax

    There are two distinct income taxes in Estonia: individual income tax, which is 20%and corporate income tax, which is 25%.
    If you work as a non-incorporated freelancer, you must pay 20%
    If you work as a company and later cash out through dividends, you pay 25%.

    3. VAT

    VAT is indeed 20% and you add it to the price in two cases only:
    a) You are billing a local company or individual
    b) You are billing an EU individual or an EU company without a VAT number

    When your company reaches 16k EUR in yearly turnover (40k starting from 2018), you must request a VAT number. And here's a BIG catch. Let's say, you have a B2C company that sells stuff either to non-EU companies or EU companies with a VAT number. You also have some small local expenses like accounting. This means you receive a few incoming invoices with VAT while make zero outgoing invoices with VAT. Incoming VAT cannot be deducted from the outgoing as the former is bigger than the latter. This creates a small VAT prepayment, which raises red flags in the automatic software used by the tax office. Ring-ring. This is tax department ringing you to ask a few questions. Every month.

    That said, there are means to "fix" this problem but they will already cost you something.

    4. Bitcoins

    If you want to perform operations with bitcoin, you will be subject to money laundering laws. They will ask you to send all information about your clients and transactions to the local authorities.
    Read this http://news.postimees.ee/3652435/supreme-court-subjects-bitcoins-trade-to-money-laundering-rules and google more by "btc.ee" keyword if you feel interested.
    It's also not like you can use company's money to buy bitcoins. This area has no certain regulations yet and I would just avoid being "above the radars" in it.

    5. Offshore transfers

    According to Estonian laws, any money transfer to an offshore zone is subject to the income tax.

    6. Declaration of transactions greater than 1000 eur per month

    Perhaps, Estonia is the only country which has both means and laws obliging you to declare all transactions with any party, which exceed 1000 eur per month in turnover. Let's say, you bill some company 5 times within a month, each bill amounts 200 eur. You will have to declare those 5 transactions, which means they will be completely transparent to the tax office.

    7. There's also one extremely good thing about registering a business in Estonia as a foreigner. Financial raiding in any form is non-existent. Unlike in many Eastern countries with either small taxes or easy ways to avoid them.