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  • Explaining the details of e-Residency Need help?
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Explaining the details of e-Residency

03 November 2021

Svetlana Majerovitš , Tax & Legal Services Director |
Anna-Anita Danilova, Tax & Legal Services Assistant Project Manager |

Estonian e-residency programme has gained its worldwide popularity being the pioneer governmental project designed to attract businesses through extremely convenient location-independent business management solutions. It was invented to give anyone, irrespective of his/her citizenship, location etc., the access to Estonian digital ecosystem, the one, that Estonians have been successfully using for a long period of time already. Estonia is heaven of paperless business operation and many locals, for example, would not remember when the last time was, they signed the document by hand, instead of using their digital signatures.

Nevertheless, in practice, the programme turned out to be a bit misleading for foreign entrepreneurs. The issues that a new user of e-residency cannot anticipate are not connected to the shortcomings of any part of the digital solutions themselves. However, the obstacles can arise from either setting up and understanding of the system for an individual, who is not familiar with the technology yet, or with the institutions, that in some cases require the personal presence of a person for some specific transactions.

Naturally, the strongest incentive for an entrepreneur to become an e-resident of Estonia is establishing local company. Therefore, in this article we will discuss the difficulties that may arise when establishing a company through the e-residency programme. Based on our experience, we will share the tips you would like to be told about before commencing the establishment procedures.

The first step on the way of incorporating an Estonian company online is acquiring your personal e-residency card. E-residency card is issued only for natural persons. When received, you can easily proceed with the next step – incorporation – fully online. But don’t be in a hurry and let’s clarify the nuances. First, the ease of the incorporation process depends on whether the intended founder of the company is a natural of a legal person. If we are dealing with the first scenario mentioned, then it is the easiest possibility. The natural person with the e-residency card will be able to proceed with the application without any obstacles. It is worth mentioning, that if there are several natural person founders, then each one of them must have obtained his/her e-residency card prior to the application process. However, once the founder of the company is/are legal person(s), the process is not that easy.

Thus, if the founder and member of the management board is a natural person with e-residency – it is quite easy to establish a company online. But if the founder is a legal entity, then a lot of documents must be collected and translated into Estonian, which makes the establishment of a company fully online very time consuming and stressful. Therefore, in such a case it would be easier and more reasonable to establish the company at a Notary’s office, as the Notary can check the documents and advise you. It will be safer to establish a company in cooperation with your local adviser, who can assist you in the preparation of the documents and designing them in accordance with the company’s needs. This will provide you with a higher level of assurance about the correctness of the documents.

Many e-residents ask about the process of opening a bank account in Estonia. As mentioned before, e-residency doesn’t mean that you are an Estonian resident or tax resident. It means that you have access to electronic services and can give a digital signature, but this will not help you when opening a bank account. If you wish to open a bank account in Estonia, please remember -  the key factor is that you need to show that your business is closely connected to Estonia, not that you are an e-resident.

 

THE COVID-19 STORY

When considering applying for Estonian e-residency, the positive feedback from enterprises during COVID-19 pandemic can become a determining factor. Spring 2020 was very unexpected and obviously had its impact on businesses all over the world. Circumstances that businesses faced with required very quick reaction to adapt to new reality.

From our experience in BDO in Estonia, we can confirm that international enterprises, who were used to manage operations of Estonian companies digitally, happened to be in a much more favourable position. In fact, border closures and travel restrictions did not become an obstacle for continuous and effortless administration of business from abroad.

One of many positive examples that we were pleased to witness, was the smooth application process for government grants. When Estonian government issued several programmes to subsidize companies operating in most affected sectors and to compensate employers’ expenses for salary payments, the application deadlines were relatively short. However, e-residency owners had a unique opportunity to go through the application process for such grants without any stress or rush. This is because e-residency owners can either make applications through the governmental electronic portal or issue a power of attorney for a chosen representative to manage these issues on their behalf – all this remotely. In both cases it practically takes few minutes to be accomplished.

Summing up, Estonia can be proud of the level of its digitalisation. Based on our experience, we can confirm that the status of an e-resident and technical solutions of this programme are a great opportunity for a location-independent business management, designed to save you time and avoid unnecessary bureaucracy and costs.