I wouldn’t actually call myself a Digital Nomad, but I do fit the description.
In the past 4 years, for example, I‘ve lived in 5 different countries across 4 continents.
It wasn’t always a matter of the decisions I made as much as the circumstances I found myself in, but, nevertheless, that’s how it’s been.
As a result, for the past few years, I have mostly worked remotely. Thankfully, the software development industry is one of the most supportive in that regard.
However, it can sometimes get tricky to setup a business when you don’t have a fixed location.
Luckily, or so I thought, Estonian E-residency came to my rescue.
The Digital Residents of Estonia
In 2014, Estonia launched an extremely ambitious program called E-Residency.
The idea was the following:
Non-Estonian citizens (from anywhere in the world) could sign up to become a Digital Resident, which would give them the opportunity to open and run a company in Estonia without actually living there.
The goal was to attract new businesses to Estonia, in order to help develop their already-strong startup ecosystem, as well as generate tax revenue for the country, of course.
From that perspective, it was a win-win scenario for Digital Nomads, remote workers, early-stage startups, and a wide range of entrepreneurs.
You could move around as much as you’d like, but your company would stay in the same place, reaping the benefits of being located in the EU, in a country with a competitive corporate tax rate, and multiple benefits for early-stage businesses. Not too bad.
Although, it’s important to note that Digital Residents are not actual Estonian residents, so they do not have any rights in to live, make use of services, or work in Estonia. They can open a business there — that’s it.
A Solution For Me?
When the E-Residency program launched, I was living in Finland, just a two-hour ferry ride away from Estonia.
I’m a Finnish national and had been living there for 5 years, so I wasn’t jumping around the world just yet.
But I thought this program could be of use for me in the future.
So in 2016 I signed up. I could be wrong, but I’m quite sure I was one of the first 10,000 or so to join the initiative. I paid a fee of 100 euros, and two weeks later I was collecting my e-card from the Embassy in Helsinki.
I didn’t open a business though. The years went on and I only used the card once, to renew my digital residency when Estonia expanded the validity of the card from 2 to 4 years.
Then, in November of last year, an opportunity came to me for some consultancy work that would require having an EU-based company.
I thought this was the perfect opportunity to put my digital residency to use.
I dug up my PIN codes and opened a company in about a week — entirely remotely. I signed everything digitally and used Xolo, a platform for e-residents, to facilitate the process.
For my bank account, I was suggested to use TransferWise Borderless by both Xolo and the official website of the E-Residency program.
Here’s the thing: If you have a business, you need a bank account. So, when Estonia first launched the program, you actually needed to go to Estonia once to open a bank account with one of the local banks.
Then they realized that was quite a bottleneck for a country that tries to make everything possible remote, and, in 2016, they passed some legislation to make it possible (in theory) to open bank accounts remotely.
However, none of the banks (that I know of & that they suggest) actually implemented remote bank account opening services. Hence, while legally possible, it is, to the extent of my knowledge, impossible to open a bank account in Estonia without going there (for now).
And that’s how I ended up with TransferWise, which, again, was the recommended choice for me.
TransferWise Borderless lets you have bank details to receive payments in various parts of the world. It’s not an actual bank account in your name, but it acts just like one.
That means I can have bank details in the US, Brazil, India, the EU, and multiple other places and receive payments in the local currency.
That’s quite great. But, read that again. I can have bank details in the EU, but where in the EU?
Turns out TransferWise Borderless EU accounts are located in Belgium and only Belgium. For most purposes, that’s perfectly fine. Euros are euros, and you could theoretically receive them in any EU country.
Well, tell that to my client.
After going through the process of setting up the company, negotiating contracts, and performing the service, I was told I couldn’t be paid in my Borderless account because of their Anti-Money Laundering policy.
Since my company was in Estonia, they weren’t able to pay me in Belgium, no ifs, ands, or buts about it.
And I’m not mad at them. The policy makes perfect sense. While my limited research tells me it should be okay to receive payments in another country as long as all the company details match up the bank details, the company has their policy and that’s what it is.
That brings us to today.
About a month ago ago, I started the process of dissolution for my Estonian company.
An alternative to keep the business alive would have been to go to Estonia and set up a bank account, which I would have strongly considered, if we weren’t in the middle of a pandemic.
Also, as I need to file taxes, sign documents, and keep a virtual address and representative in Estonia even if I have no revenue, keeping the company going would have actually had a cost — which cannot be justified if there’s no revenue.
Finally, it is my intention to settle down in one place for the next years, so a company in Estonia doesn’t make as much sense anymore.
Lessons From Me to You
To conclude, I thought I’d provide a concise list of pros and cons for those considering opening up a business in Estonia under their E-Residency program.
Friendly disclaimer: I’m not qualified to give legal, financial, or any type of advice, really. These are just some of my opinions, not guidelines.
- It’s easy and relatively cheap to become an E-Resident
- You can open and run a company in the EU from anywhere in the world (with some caveats)
- Tools like Xolo provide a good integrated solution for banking, accounting, taxes, and invoicing for a reasonable price — this cuts down on a lot of the bureaucracy you have to handle
- Estonia has a competitive corporate tax rate
- You only pay taxes when you distribute dividends. Reinvested all your profits? No taxes for you!
- It sounds hip and cool
- You probably will have to go to Estonia at least once to set up a bank account
- If you don’t know someone in Estonia, you will need to hire a third-party to be your representative there (this is easy, but an additional cost)
- The program is still in its infancy, so it’s not always easy to find answers to your questions, and you’ll have to explain it to clients a few times…
- The software you use for signing documents doesn’t have the best user experience
- Forgetting / Losing your PIN codes can be a big hassle — you need to be comfortable using digital products
If you do decide to open a company in Estonia, here are some estimates of costs you could expect to incur:
- Becoming an E-Resident: 100.00€ (One-time fee)
- State Registration Fees for Companies: 220.00€ (One-time fee)
- Opening a bank account (via Xolo): 100.00€ (One-time fee)
- Monthly fee for bank account + corporate card: ~12.00€ / month
- Monthly payments for integrated business solution*: 50–200€ / month
*Accounting, Virtual Office, Taxes, Mailbox, Invoicing, etc
Honestly, even though it did not work for me, I still believe that the E-Residency initiative by Estonia is an extremely interesting proposition that will be implemented by more countries in the near-future.
It has a variety of obvious benefits, and, given that one is able to physically go to Estonia at least once, I believe it could work reasonably well.
However, I would advise you to be prepared for unforeseen issues that are bound to arise from taking part in any early-stage initiative. Also, make sure to do a lot of research to find out if this is really for you.
But if you’re comfortable with technology, want to try something new, and are willing to explore an uncommon solution with its unique challenges, E-Residency could potentially be for you.
Who knows? Maybe we’ll all want to have our HQ in Tallinn in a few years…