(Editor’s note: During the past few years, the Estonian e-Residency concept has redefined what it means to be a digital society. Here’s how they did it.)
By AVO ALENDER
Estonia (Eesti) is a small country in Northern Europe that sits south of Finland, across the Baltic Sea from Sweden, just north of Latvia, and just west of Russia. It’s estimated that 1.3 million people call this country home, which makes it one of the least-populous member states of the European Union, Eurozone, NATO, OECD, and the Schengen Area.
The official language is Estonian, and the capital – which doubles as the country’s largest city – is Tallinn.
More importantly, though, Estonia is the world leader in digital governance and a founding member of Digital 5 (D5), a global network of leading digital governments. In fact, in December 2014, Estonia became the first country in the world to introduce the concept of e-Residency.
When you sign up for Estonian e-Residency, you receive a government-issued smart ID card that provides digital identification and authorisation. That way, you can digitally sign important documents, access secure services, and make secure transactions – even if you don’t live in Estonia.
For example, e-Residency would allow an Indian entrepreneur to establish an Estonian company that he runs from Singapore to serve clients based in Germany. He’d also be able to use his digital signature to sign contracts with customers throughout the European Union. All of it would be done online, remotely, and completely hassle-free.
What does e-Residency mean?
As the name suggests, e-Residency gives foreigners the ability to apply for a secure digital residency in Estonia, even though they don’t actually live there.
e-Residency in 2 minutes, Kaspar Korjus (Program director of e-Residency)
How does it work?
e-Residents are given a digital ID card that contains a special chip. This card enables them to use Estonian public and private sector services and resources, sign documents remotely, and encrypt files.
The security and simplicity of Estonia’s e-Residency program has become a success story all over the world. Media outlets swarmed as soon as the program started allowing people to sign up to be notified of an official launch. Within 24 hours, people in 168 different countries signed up for an official notification. Then, when the formal application process actually began, more than 6,000 people applied.
Edward Lucas was the first e-Resident of Estonia (image: e-estonia.com).
So far, some of the world’s biggest names are among the list of Estonian e-Residents – including Japanese Prime Minister Shinzō Abe, former Apple evangelist Guy Kawasaki, and Timothy Draper from the venture capital firm Draper Fisher Jurvetson.
While e-Residency is a new concept, the idea of a government-issued digital ID card is not. In fact, Estonians have been using these cards for more than a decade. Since Estonia is often called “e-Estonia” because of its technological advances, it made perfect sense to expand this digital ID service to the rest of the world. By extending virtually every public and private sector transaction to people in other countries, Estonia has created long-term value in the idea of secure digital identities, especially when it comes to commercialized Platform-as-a-Service (PaaS).
The motivation behind e-Residency is simple – to create a country without borders.
“What we aim to do is to create a worldwide virtual business environment, where people from both the developed and developing countries can easily become entrepreneurs and start doing business anywhere in the world. Physical national borders and restrictions will no longer present an obstacle. You can start a business, open bank accounts, make transactions, sign contracts and even declare taxes, all on your computer,” said Kaspar Korjus, Estonian e-Residency Program Director.
The main goal of the e-Residency program is to make life and business significantly easier for freelancers, digital nomads, business owners, international partners, and any other non-resident who has a relation to Estonia. Whether you want to start a business, expand your business, make investments, or study in the European Union, Estonian e-Residency makes it possible – and simple.
As an e-Resident, you’ll be able to:
√ Establish and run a company online
√ Conduct your banking online (e.g. make electronic bank transfers)
√ Have access to international payment service providers
√ Digitally sign documents (e.g. annual reports, contracts) within the company as well as with external partners
√ Verify the authenticity of signed documents
√ Encrypt and transmit documents securely
√ Declare taxes online
As more people have come to realize the value in e-Residency, the program has continued to grow.
As of June 16th, 2017, over 20,200 people from 140 countries have applied for e-Residency – and 19,254 of them have already received their e-Residency digital ID card. A whopping 1675 of them have established a new company in Estonia, and there are more than 3256 Estonian companies in total that have at least one e-Resident owner or board member.
(Source: e-Residency dashboard)
For 2016-2017, the goal for new e-Residents has been set at 60,000, and targets for the future have been set even higher. In fact, back in 2014 when the program first launched, Estonian Government CIO Taavi Kotka announced an ambitious goal – to have 10 million e-Residents by 2025.
The closer reality comes to meeting that projection, the better it is both for Estonia’s private sector and for e-Residents too. After all, the more e-Residents there are as potential customers, the more attractive the e-Residency platform will be for the private sector – and the more interest there will be to develop services on the platform.
Some private companies have already dived into the e-Residency world. Startup companies Fundwise, Funderbeam, and Teleport introduced their cooperation with the e-Residency platform. And, Nasdaq has announced that Estonia’s e-Residency platform will be facilitating a blockchain-based e-voting service.
How can you apply for Estonian e-Residency?
All you have to do is fill out the online application form. Once you do, Estonian Police and Border Guard will do a background check. Once your application is approved, you’ll choose where you want to pick up your digital ID card. You can select one of the 38 Estonian embassies and consulates around the world, or you can go to an Estonian Police and Border Guard Station.
Once your digital ID card arrives at your chosen pickup location, you’ll need to personally go get it. In order to get it, you’ll need to show valid travel documents for your country of nationality and submit your fingerprints for verification.
Ready to start the process?
Read more from the official e-Residency website at https://e-resident.gov.ee/.
Go to https://apply.gov.ee. There, you’ll find an online application form. You’ll need to upload your photos, describe your purpose for applying, and pay the 100 euro e-Residency state fee.
Once your application has been submitted, you’ll need to wait about 10 business days for the background check to be completed.
After you verify your identity at the pickup location, you’ll get an e-Resident starter kit which contains your digital ID card and a smart card reader.
The whole process should take two to four weeks, depending on the pickup location you choose and the number of waiting applicants.
What happens once you receive your digital ID card?
You’ll be able to digitally identify yourself – meaning that you can digitally sign documents, authenticate documents, and encrypt documents – for three years. You’ll be able to enjoy all of the convenience and ease that Estonian residents have been taking advantage of for a decade!
Just remember, your Estonian e-Residency card is not a physical ID card, and it can’t be used as a travel document. Also, your e-Residency will not grant you citizenship, tax residency, residence permit of rights, or entry into Estonia or the rest of the European Union.
But why would you want to run your business in Estonia in the first place?
Just as you might switch your traditional bank to one with a modern and easy-to-use mobile app like Monese or Number26, we here at LeapIN (together with the Estonian public sector) share the vision that you’ll benefit greatly from switching your business to a country with minimal bureaucracy, fewer administrative hassles, and an infrastructure that is easy to use remotely.
Specifically, you’ll get:
√ A presence in the EU single market; you will be a trusted member of the European Union business community
√ Access to international payments providers like Google, PayPal etc.
√ A trusted and transparent business entity that has been incorporated through a simplified setup process
√ Access to a simple and fair tax system – 0% corporate income tax as long as you keep your profit earned in the company or reinvest it into growing your business.
√ Full remote control – secure access to your bank and company data via e-Residency, location independently
√ Paperless administration
√ Digital signature and encryption tools that come with a guaranteed high level of security
In a world where businesses, people, and money can move around with relative ease, having a competitive tax code has become even more important to economic success. According to the latest figures released by the US-based Tax Foundation, Estonia has the most competitive tax system in the OECD (International Tax Competitiveness Index Rankings) and shares a place at the top of list for Internet Freedom.
Estonia has a unique income tax system where corporate income tax is charged on profit distribution (i.e., dividends) only, and is capped at 20%. As long as you keep your profits within the company, you will not have to pay any corporate income taxes. And, Estonia has a flat 20% tax on individual income that does not apply to personal dividend income.
Ready to reap the benefits? LeapIN can get you started!
Here at LeapIN, we believe that all of the benefits and features we’ve talked about can be even better – by packaging them into one hassle-free solution for a competitively-priced monthly fee. And, of course, there are no hidden costs or surprises!
We will select the best components of the Estonian/European Union ecosystem for your needs, glue them together with our magic, and create a self-service based, highly automated company management solution that’s powered and secured by Estonian e-Residency.
Our target customers are freelancers, digital nomads, and distributed teams in need of a way to run their businesses remotely. As work shifts from full-time to free agent employment, and as global cross-border employment increases, our focus is on setting up a trusted micro-business with a simplified company structure, minimal hassles, no paperwork, and seamless accounting that’s based on your revenue model.
Features when starting your micro-business with LeapIN include:
√ Having a company in the European Union
√ Bank account & payment card
√ Secure online banking
√ Accounting, taxes & compliance handled by LeapIN
√ Support for global app stores
√ Support for payment gateways & bulk invoicing
√ VAT number
LeapIN online self-service
About the author:
Avo Alender is co-founder and customer experience manager at LeapIN.
LeapIN is a turn-key solution to remotely start and run a location independent company with a business bank account. We handle incorporation, accounting, taxes and compliance. Powered by Estonian e-Residency.