Are you looking for a change of location? If so then this article is only for you, here we will discuss Estonia who is developing a new visa for digital nomads, this facility makes Estonia a spot for people who want to travel and work anywhere in the world. This country has planned to become the first ever place which targets digital nomads, with this Estonia will become a global forefront for providing an inviting environment for limitless and borderless people.
Why choose Estonia as a business centre?
Estonia can become one of the best places to work for digital nomads because it is known as the land of business and is the best-recommended place for startups. According to a magazine, Estonia ranks third across all of Europe for a number of startups per capita. Estonia always keeps technology updated and has new technology for entrepreneurs which allow people to work from anywhere in the world.
The population of Estonia is around 1.3 million and is a leading creator of startups in any field like technology, engineering, electronics, and location services in Europe.
To extend more space for digital nomads, Estonia is bringing a new visa for digital nomads.
Jobbatical is global job search platform who is developing this visa program in collaboration with Estonia’s Ministry of the Interior, which will help the workers who want to work by travelling in the world and it is a great place to be a digital nomad. Being in Estonia you do not have to limit your careers to industries that are popular or growing, or because many companies have their headquarters there.
Why Estonia is a border breaking destination for digital nomads:
The new visa program in Estonia has been set up and running in 2019, just a few things are left for being finalized. After getting Estonia’s visa workers and digital nomads will become known as “e-Estonians,” the visa will allow lots of advantages to the digital nomads by cutting through bureaucratic red tape.
The benefits of the visa for digital nomads include the following:
- One year of legal residency in Estonia
- It allows travel access to other European Union countries for a period of 90 days.
- It gives support to the nomads to become a registered taxpayer for one year.
- It allows you to access a range of services and rights accorded to all Estonian citizens.
Estonia has an e-Residency program which was established in 2014, which gives the facility of a “smart card” and access to the financial services, start-up support, and tax declaration support, among other benefits to the non-resident working professionals. If you are granted with visa, the Estonian officials will also allow you to expand your visa program including more facilities like healthcare services through a buy-in program.
Estonia’s Impact on the future of digital nomads
In recent years, Estonia had joined the ranks of the best countries for digital nomads, still, there are chances that Estonia will reach the forefront of the future of work, these all is possible because of the availability of visa for digital nomads.
It is noted that the new visa program will eliminate the need for digital nomads to obtain tourist visas to work in the country for a longer period of time. This program will bring a stream of more than 1,400 skilled workers in year to Estonia who is contributing to the development of the economy. It is an example for other countries, either large or small, who are thinking to offer a visa to digital nomads.
Estonia’s Technological Appeal
Estonia is located on the Baltic Sea south of Finland, besides being a small country it has a wide variety of attractions. According to an article, Estonia is the Digital Republic of Europe along with a government that is borderless, block chained, and secure.
Tallinn, the capital of Estonia is situated on the northern coast and it is home to a thriving cultural and educational scene, it also has the best-preserved medieval architecture in Europe.
The Digital nomads who reside outside the capital have many places to explore in Estonia like an archipelago of more than two dozen islands on the Baltic.
Estonia contains beautiful forests, castles, waterfalls, fishing villages, beaches, and national parks, which are scattered in the whole country in various different regions.
Estonia’s new and innovative e-residency program was launched in December 2014, which made Estonia a matter of talk over the internet, it is always improving and adding new elements in the program.
Let’s discuss the e-residency, the banking system of Estonia and how to run a business in Estonia, we will further discuss some basic tax implications, and about the process of obtaining e-residency.
Some major truths about the e-residency in Estonia
- It does not provide you with the actual residency: The e-residency program does not give you any rights to live in Estonia, the EU or the Schengen zone or anywhere in Estonia, and with all this, you will not get any social rights in Estonia.
- It is not possible to avoid paying tax in the actual country of residence after getting the e-residence in Estonia.
- It is not an identity or travel document: it can never be used as a travel document or identification in the real world. It can be used as an electronic identification which allows you to log into online services on government portals and online banks. The e-residency card is sometimes used in Europe making it bound to increase.
You also have an opportunity to use it to sign electronic documents within the EU and somehow anywhere.
In general terms, it is a digital identity card which can be accepted in banks, services and by the Estonian governments. There are chances that it will get accepted as online identification in all the EU countries. The e-residency is useful in banks as well as in running a business in Estonia.
Reasons for the bank in Estonia
Below are some reasons which will help you in deciding why you should bank in Estonia:
- If you live there and spend a notable amount of time there.
- Your friends, family, or customers have a residence there.
- If you want a Euro-account or a multi-currency account offered by many Estonian banks.
- If you are thinking to diversify your assets as a part of international strategy.
- If you want to maintain modern banking that you can manage from anywhere.
- If you want to place your assets in a country in which the governments are not consistently running huge budget deficits.
- If you want to invest your money in the English, Estonian or Russian banks.
- If you want to start your business in Estonia
- If you want to use your e-residency card.
You still need to make efforts even if you are an e-residents in Estonia to open a bank account. if you think you can open a bank account in Estonia in a single visit to the bank holding an e-residency card, then make it sure it is not so easy to do so. You need a proper and legal residency to open a bank account in Estonia.
Estonia follows strict Anti-Money Laundering (AML) rules, AML rules provide you with the facility to open an account, if you can not demonstrate a strong connection to Estonia.
The following reasons may be considered valid by the banks to open a bank account.
- You are living in Estonia for a longer period of time.
- You are living at any other place as an Estonian citizen.
- Your parents are Estonian.
- You are doing a job in an Estonian company.
- You have more than one business that is located in Estonia.
- You have a property in Estonia.
If you do not have a strong investment or any business settled in Estonia than you need to more efforts to open a bank account there.
How to choose a bank in Estonia
To give you a choice, there are only three banks in Estonia that allow the e-residency card for managing your account. SEB (Sweden), Swedbank (Sweden), LHV (Estonia), these three banks are a better option to invest and save money and allow the e-residency card as well.
The SEB and Swedbank are large and world-class Swedish banks who operate large-scale operations in Estonia. Talking about LHV, it is a medium sized modern Estonian banks, which is largely rooted as an investment firm.
SEB and Swedbank both have their branches in the whole Estonia, but LHV only contains two branches, one is located in Tallinn and the other one is in Tartu. Despite being a disadvantage it is beneficial in many aspects like:
- it gives a lower overhead which is beneficial for us as they provide cheaper banking.
- Last year in 2018, they had started some fees for non-residents and e-residents, but they are affordable in comparison to the two Swedish banks.
- They even manage to deal with their customers remotely, even if they are Estonian citizens.
- If you are an e-residents, you only have to go once in LHV banks for completing the documented regulations. After that, you are free to operate things electronically from anywhere in the world.
- If you want a debit card, you have to come back to pick it within a week or after the approval of account opening.
The Swedbank will open your account in the case when are operating your registered business in Estonia, but the condition is, the business needed to be changed in the last year.
SEB will open your account in a condition that is your business have large clients that you work closely within Estonia.
So, after taking all the above points into consideration, LHV is the best option for banking in Estonia, it has one more beneficial reason to open an account which is it does not require having any connection with Estonia at all and it also not require any huge investments of time or money.
Just to save you from the legal issues of these banks the Estonian government brought a change from January 2019, according to which you no longer need to have an Estonian bank account to confirm that you paid the share capital of your company, so with this you have the opportunity to choose any bank or electronic payment institution in the EU/EEA.
Why set up a business in Estonia
If you register your business in Estonia you are considered to be tax resident there.
There are many tax treaties and tax professionals who give you guidance if you are running your business from a different country in which you are personally a tax resident, they will guide you to look at the chances of the company that is it will get considered resident in your home country.
If we talk about the tax-related issues in Estonia, the tax burden here is far from the highest, but it is not a tax haven country. The straight tax of 20% is levied on the general stuff which includes 20% income tax, 20% corporate tax, on distributed profits, and 20% VAT. The employees and directors who perform their services within Estonia have to pay 35% of the social taxes.
If you are an e-resident than you will not have to worry about social taxes because it will not apply to someone living outside of Estonia and are not performing any actual work within Estonia, if you spend a large portion of your time on board member duties you will have to pay yourself a board member salary.
If you are not paying social taxes in the EU, you have to pay social tax on the part of your salary, you label as being for the board member duties, in addition to Estonian income tax (20%). You will get credits for these taxes wherever you live.
If you are doing your work from outside Estonia, and spending most of your time working on the actual business than you do not legally require to pay a board member salary, the business you are doing outside Estonia includes works like developing your product, freelancing, consulting, getting clients and more.
If you want to pay board member salary, you can pay it according to the time you spend in the management of the company instead of working for the company.
So if we look at the overall tax burden on individuals in Estonia, it is an average and not so high, if you do not bother the average tax issues than it is the best option for you, looking from the prospect of cash-flow, remote management and a better environment for doing business.
There’s one exception, in this case, that is if you are a resident in a country that does not tax salary income from abroad, in this, you have to pay yourself a salary which is tax-free. Before all this make sure that the Estonian company will not consider tax resident in which you are resident. It will only happen in the condition where you are a nomad or a location worker with a primary tax residency in a country with some taxable scheme.
How does Estonia’s 0% tax on undistributed profits works?
Estonia’s tax system is unique and attractive for the businesses that invest their profits in setting up and growing the company. The corporate tax of 20% is only for distributed profits. So if you reinvest your profits without distributing it to shareholders in the form of dividends you are not liable to pay corporate tax. If in case the company distribute profits then you have to pay the tax in any form. This option is best for individuals who want to reinvest their profits, just because their personal tax is less than ideal at the moment.
If we look deeper into this, when profits are distributed in the form of dividends, the 20% tax is needed to pay by the company and not by any individual who is receiving the dividends. There is no tax applicable on dividend withholding in Estonia.
Generally, the receiving person is liable to pay dividend or income tax significantly to the taxation rules in its relevant country of residence.
The process of acquiring Estonian e-residency
The process of getting an e-residency starts and end within a month, and for opting it you are not required to visit Estonia, the process starts with an application which is available online, and to receive the card you have to visit the nearest Estonian Embassy.
The process to get the e-residency card is as follows:
- In order to fill the application, you are needed to submit the documents like a scanned copy of your passport, a passport photo, a visa or Mastercard to follow the payment process, these documents are needed to attach with the application on the e-residency website. After this, you have to select the embassy or consulate where the card will get shipped after the approval of your e-residency card.
- After completing the application process, you have to wait for two weeks in which the result of the application will get released. Sometimes it takes more time in approval if they have many applications to process at a time.
- Once your application gets approved, you can contemplate your e-residency card to arrive after two weeks at the embassy selected by you.
- To collect your e-residency card you have to head towards the embassy and there you have to show your ID document and sign some forms.
- As the last step, do not forget to ask the staff at the embassy to report back to the Police and Border Guard Board that you have picked up the card. After this ask them to activate your card as soon as possible so that you can use it without any trouble. With this step, you get the ownership of becoming the Estonian e-resident.
The locations where you will get your e-residency card includes the following countries and their decided cities:
- Australia- Canberra
- The Czech Republic- Prague
- Estonia- Tallinn
- India-New Delhi
- Israel-Tel Aviv
- Japan- Tokyo
- Kazakhstan- Astana
- The Netherlands-The Hague
- Russian Federation-Moskow, Pskov, St Petersburg
- Singapore- Singapore
- South Korea- Seoul
- The UK- London
- The USA- New York City, San Francisco, Washington D.C
What are the items included in your Welcome pack
Along with e-residency card, you will get a welcome pack in which the following items are included:
- Your e-residency card
- A small, collapsible card reader
- Your PIN codes
How to use your e-residency card
- In order to start the card, you are needed to unfold the card reader and insert the e-resident card into the reader. Do not connect the card reader to your computer with this step.
- After this, download and install the DigiDoc4 application and the web components from the installation site.
- Install the software and do not forget to close the DigiDoc4. After this insert the card reader with the ID card into your computer.
- Before using the card check whether it has been activated or not, generally, it takes 24 hours from the pickup of your card
- Verify that the ID card is working correctly by logging in to an authorized website, there you have to enter the pin code which you have got in the welcome pack.
Some solution for errors or problems
Sometimes the logging in takes time, so in this case, restart your computer and try again, if still, the error is occurring then your certificate has not been activated yet. This happens when you picked up the ID card and the embassy has not yet reported back to the police and Border Guard Board that you picked up your card.
This is not a big issue your card will get activated soon, but if you want to speed up the process, send an email to email@example.com telling them about the error issues and card activation.
So enjoy the e-resident card becoming a digital nomad and earn some serious income in Estonia.