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Entrepreneurial Estonia

Date of publication: 7 October 2019

Vitali Galitskihh, Head of Tallinn Office

Source: Dengi.ua

From the moment the e-residency program was launched more than 50 000 people from 162 countries have become e-residents of Estonia, and, in turn, established more than 6 000 companies.

A citizen of any country having an e-residency card can register a business online in one day and then manage it remotely. He/she can also get access to Internet banking and international services (Paypal, Amazon, etc.), sign documents with a digital signature, which is identical to the handwritten signature and does not require notarial certification. And all this is done without any paperwork.

From my personal experience, Ukrainian citizens receive the e-resident card, first and foremost, to register a company in Estonia. Usually they are attracted by a credible jurisdiction, the rule-of-law state where they can comfortably do their business and offer their goods and services in the territory of European Union. As a rule, the Ukrainian entrepreneurs with e-residence are not limited to doing business in Estonia. They use Estonia as a stepping stone to the Scandinavian and EU market as a whole.

It should be made clear that the e-residency card is an effective tool for person identification on the Internet and the possibility of electronic signature, which in turn provides access to the electronic services of the Estonian state. Many Ukrainian citizens are mistaken in thinking that e-residency grants any privileges or the right to enter Estonia or the EU, which is a prerequisite for obtaining the residence and work permits. What is more, the e-residency card has noting to do with the tax residence and its owner does not start paying taxes in Estonia.

In the early years of e-residency program the banks did consider the e-residency card as a small advantage when opening a bank account for a company incorporated in Estonia. But with a rapid increase in the number of e-residents, the banking institutions have quickly abandoned this practice. And now the e-residency card does not give any advantages when opening a bank account in Estonia. Yet certain conveniences when using online banking still exist (possibility of entering your personal account and accepting payments with a help of electronic signature).

Some people think that the importance of e-residence is exaggerated, but that is only because with the lapse of time the concept of e-residence was endued with certain properties that it has never had.

In Estonia, the e-residency program is criticized mainly by the banking sector, which is tasked with money laundering prevention. The main argument of the banks was that the availability of such cards allows using the nominal directors from countries where the bank is unable to check the information about and history of such persons. During the public discussions it was decided that the police department dealing with the issuance of e-residency cards would conduct a more thorough examination of the applicant’s identity. As a result, if the department has previously made a decision in 1-2 weeks, now it takes about a month to decide.

When applying for e-residency status, a citizen of Ukraine must understand that this card provides access to the services of another country with different culture, social and economic environment. Therefore, it is necessary to peruse the laws and regulations of both Estonia and the European Union within a short time. One should be prepared that the expectations associated with an e-residence may not materialize from the position of a foreign national, and there will be an urgent need to pay extra attention to the business practices of Estonia, an activity that is being accepted in Estonia. E-residency does not imply the tax evasion services, but rather develops solutions to help tax declaration by the cardholders in their home countries.

Of course, there are certain problems with the e-residence system as well. For example, the issues pertaining to the opening of a current account for the companies incorporated by the cardholders require a proper solution. At the same time, the Estonian law does not prohibit opening accounts for a company in any other country.

In general, the e-residency program is unique and will be useful for entrepreneurs striving to extend their business beyond the boundaries of one country, those who are open to new technologies and think of optimization of the business managing costs.