Digital nomading has quickly become one of the most common ways to travel long-term. When you can do all your work on your laptop, you can theoretically do it from anywhere — and so you can travel the world while making a living online.
But, as many nomads soon find out, things can get quite complicated when you start living a borderless life.
Rules and systems often just aren’t designed with digital nomads in mind. Taxation, healthcare, or running a business remotely often become frustrating once you’re no longer living in — and working from — only one country.
Lately, Estonia has been making some buzz with its e-Residency program, pitching it as a solution to the digital nomad’s woes.
But is it all that it is hyped up to be?
What is e-residency?
The Baltic country of Estonia is famed for its advanced e-government systems that let its citizens do nearly everything securely online, including voting and managing their health care. In recent years, Estonia has allowed access to these systems to foreigners via the e-Residency program, inviting nomads, freelancers, and entrepreneurs outside Estonia to join this new ‘digital nation’.
Since I became an e-resident a while ago I’ve had a ton of questions about it from digital nomads and remote workers. I thought I’d try to explain here what e-Residency is and isn’t, and to give you my take on whether it’s an attractive program for digital nomads.
I used to be a nomad for two years, during which I experienced first-hand how confusing it can be to manage such an international lifestyle. These days I have a permanent base again in Lisbon, though I still travel often, and I’m closely involved in the Lisbon Digital Nomad community. I’m constantly seeing the need among friends and colleagues for solutions to a location-independent life — and wanting some for myself, too!
The e-Residency program has clearly found an eager target audience with digital nomads, but there does seem to be much confusion around it.
While it can be a great tool, it’s not a complete solution for nomads. The name “e-residency” is brilliant from a marketing point of view, but it does imply it can do much more than it currently can.
To be clear, Estonian E-residency does NOT:
- Make you an actual resident or citizen of Estonia
- Provide any sort of health care or state benefits
- Give you a Schengen visa or any residency rights in the EU
- Make you, as a person, tax resident in Estonia (though if you create an Estonian company it will pay corporate tax there)
When you really boil it down, e-Residency is just an Estonian digital identity card. You can use it with a card reader that plugs into your computer’s USB port. With this, you can log securely into state services, banking, and other Estonian systems that use this Digi-ID. e-Residency, in itself, doesn’t give you any particular rights or benefits.
So think of e-Residency as, well… getting a login. It’s a very cool login, but ultimately just a login.
You still need to use it for something.
Creating an Estonian company
At the moment, the main use for e-Residency is to easily create an Estonian company that you can run remotely from anywhere in the world.
If you’re an expat or online worker then this can be a convenient way to let you bypass bureaucracy wherever you live (as Estonia’s systems are really nice to use). They are also ideal for running an online business or one with international clients, as everything can be done in a 100% paperless and online way.
For others, a compelling reason to start an Estonian company is to gain easy access to the EU market or bypass certain limitations in their home country. (For example, payment solutions like PayPal are not available in certain countries.)
There are different service providers working with e-Residency. One of the popular ones is Xolo (formerly LeapIN), which I’ve used myself. In another post, I cover the pros and cons of using Xolo Leap to start an Estonian company remotely.
If you look past some of the hype, you’ll realize it’s not that unusual for a country to allow foreigners to run a business there. You can have an American LLC without being a resident or citizen, for example. Estonia has just made it easy and is trying to attract digital entrepreneurs from around the world to its e-Residency program.
Keep in mind that there’s a difference between you as an individual and your company as a legal entity. Even if you have your company in Estonia, you (as a person) still need to be a tax resident somewhere. And you don’t become an Estonian tax resident through e-Residency.
Where a full-time nomad should be tax resident is often a subject of discussion, but for many, it will still be their home country. If you’re a full-time or aspiring nomad, it’s good to have a clear understanding of what tax residency and corporate residency are. I recommend consulting FAQs or watching videos on this topic, as it can help you make much more informed decisions.
How to get Estonian e-Residency
The signup process is fairly simple and takes just a number of weeks.
The first step is to submit an application for e-Residency and pay an application fee. The Estonian Police and Border Guard Board then does a background check on you (ensuring you’re not a criminal, etc.).
Once accepted, you can pick up with e-Residency ID-card from one of many locations around the world. I went to pick it up at the Estonian embassy in Lisbon, where it took me about 5 minutes to get my card and card reader. You still have to wait a day or two for the ID-card to be activated, after which you can start using Estonia’s e-government systems.
Because my main purpose was to start a company, I proceeded to set one up using the Xolo Leap service provider, which takes care of the entire process.
The future of e-Residency
To get back to the original question of this post, “is e-Residency useful for digital nomads?”, I think it definitely can be.
Setting up and running a company remotely, using Estonia’s easy-to-use systems, is a cool option to have. I think this can make sense for digital nomads who want to simplify their business processes or reduce any admin/bureaucracy. It won’t solve any of the other issues of a full-time-nomad life, though.
The use case for online workers, expats, or ‘slowmads’ — people who live in different countries but don’t travel continuously — seems stronger at the moment. For example, you could be tax resident in a foreign country, but run your online company through Estonia because it’s easy, secure, in English, and paperless.
That said, there are plans to expand e-Residency in the future, which would be interesting for digital nomads. Here’s what the e-Residency 2.0 whitepaper says about this:
If more services like this do get added to e-Residency, it could truly become a one-stop-shop for digital nomads. At the moment, it’s not there yet — and so you should consider joining only if you’d like to start an Estonian company that you can manage online.
While I’m trying to focus on just the facts and not the marketing here, I must admit that it’s also cool to be a part of e-Residency just for what it aspires to be. Estonia is at the forefront of many interesting developments, which is wonderful to support and be a part of. I also have to thank e-Residency for introducing me to the country of Estonia and inspiring me to visit it. It’s really nice to see that in a world that lately seems to want to put up more walls, Estonia is so committed to openness and new ideas.
Finally, I should mention that if taxation and business matters for digital nomads still seem confusing to you, you are definitely not alone! Every nomad I know struggles with this in some way and I’ve heard of numerous approaches used.
I wanted to explain the possible applications for e-Residency based on my experiences here, but if you’re unsure about what you should do, I recommend consulting with a knowledgable accountant or international tax lawyer. There are a ton of different aspects that can come into play depending on where you live, where you travel, and what sort of work you do. Going through all that with an expert can be very clarifying, especially as online information can be quite conflicting.
As a digital nomad, you’ll still have to navigate the (often complicated) systems as they are. Hopefully, a true turn-key solution will one day exist for digital nomads, and maybe e-Residency will become that solution. For now, it mainly serves as a convenient method through which you can set up an online company in Estonia.
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Thank you for your useful post.
I have a question regarding the taxation for the Estonian company. If the company gets its income from outside Estonia, does the 20% income tax on transferred profit still apply?
Hey! Yeah it still applies in that case. Any distributed profits are taxable, so it doesn’t matter where the revenues are from.
Hi Marek! Thanks for sharing this information it helps alot. Please what are the posible ways to get Estonia visa and work in a remote area?
Iam intrested to work in remote areas in Estonia but living in West Aftica do i need an agant in Estonia to connect me with a company before granting me a working visa?.
Hi Mohamed. The just recently announced Digital Nomad Visa for Estonia is something different from what this page is about. You can read about eligibility for the visa here. It’s not highly open – for example, you have to prove at least €3504 in monthly income to be eligible.
I really get a lot of useful information in your post.
Thanks for that.
But I have a question about this:
I don’t want my e-Residency for establishing a company. I just want it to open a new personal paypal account.
My question is: Can I open a presonal paypal accountWITHOUT a company?
I’m not 100% sure but I think you’ll struggle to do this as PayPal accounts are country-based. To sign up for an Estonian personal PayPal account it will ask you for a street address in Estonia and to verify your account using an Estonian (or EU?) bank or credit card. But perhaps there are service providers working with e-Residency that can help you with this.