Estonian e-residency in reality
e-Residency is not required to start a company in Estonia
It takes ca 2 months to get an e-residency card after the application has been submitted.
Meanwhile, you can create your company and start with your business.
What is e-Residency
E-residency is a status by which non-residents can gain a secure digital identity (ID card) issued by Estonia. This enables them to use the services provided by Estonian state agencies and private sector, connected usually to/ linked usually with the ID card.
e-residents are able to:
- give digital signatures
- encrypt documents
- use Estonia's state portal Eesti.ee
- found enterprises in Estonia
- provide reports to Estonian Tax and Customs Board and E-Business Register
- fill Estonian tax declarations on the Internet
- use Estonian online banking systems
All this can be done with the same password/PIN codes
It is believed that e-residency might be most useful for entrepreneurs, as it is customary in Estonia to provide services and paperwork online, registering a new enterprise can be done quickly online and there is no corporate income tax on undistributed profits.
All e-residents get a plastic ID card with pin codes, to identify themselves in the digital environment, using a digital card reader connected to a computer. In order to use the card reader, the user has to install special software available at www.id.ee.
In Estonia, most companies and all state/municipal institutions usually use digitally signed agreements, thereby eliminating the need for physical presence. By law, all state and municipal institutions MUST accept digitally signed documents.
The biggest problem with using the e-residency is a simplified understanding that once one has acquired it, one can then easily register a company in Estonia. In fact, this is not quite so for 2 reasons:
- Registration of a company is partly a legal, partly a technical process, and without any previous actual experience or professional assistance, one is either not able to register the company, or is doing it in a way which later would not satisfy one’s needs.
- If an e-residency holder does not have a bank account in Estonia, then it is very complicated to register the company with paid-in share capital, which means that subsequently one will come to face unexpected problems.
Without a bank account, a company is usually useless. In order to open a bank account for a company, or turn the start-up account into an operating account, the board members have to identify themselves to the bank. Although many banks send e-mails to new companies and actively promote their services, in reality they usually refuse to open bank accounts because in their minds e-residents have no links with Estonia. This means that opening a company’s bank account and getting an internet banking contract could become an art instead of a transparent process where you know the result.
Even if it was possible to open the account, the decision-making in banks could take even as much as a week or two and requires your presence in Estonia at least once but often even twice.
It is also important to know that even though a company can be established without paid-in share capital, then later when you present the company’s registration documents to your partners or officials, the documents would plainly state "founded without making the contribution", which sounds as if you have no money. Later, when you pay in the share capital, the process of registering this amendment involves certain aspects that often make the process time consuming and complicated.
As long as the share capital is not paid in, it is not allowed to distribute dividends.
How to start a company
Even if you have an e-residency card, it is often reasonable to start your company in co-operation with an experienced service provider. There are two main reasons for that:
1. To avoid different problems which might rise because of your lack of experience with an Estonian company.
2. To get full support with the services. In case everything is not properly prepared, it becomes very complicated to give you further support in some matters especially in communication with the bank. It is almost sure you will need some assistance sooner or later or you must visit Estonia personally.