eResidency: The Advantages Of a Virtual Residence For Freelancers
Estonia has long been considered a model country when it comes to digitisation, with most processes already being carried out entirely electronically, especially in government administration. Non-Estonians have also been able to benefit from these services for some time now: Since 2014, people from all over the world have had the opportunity to apply for a digital residency in the Baltic state. We have taken a closer look at the extent to which this offer is worthwhile for freelancers and founders from the Netherlands.
Virtual Immigration Through the eResidency Programme
What unfortunately still sounds like a dream for the future in many countries has long been a reality in Estonia: Adult citizens can almost always handle government-related administration from their computer - be it their tax return or registering their place of residence. Only individuals who, for example, are getting married, getting divorced or want to sell a property have to appear in person. This is made possible by an ID chip card that all residents receive upon reaching the age of majority.
These services have also been open to foreigners since December 2014. eResidency makes it possible to virtually immigrate to Estonia and access the state’s electronic services. It will allow people from all over the world access to the digital state of Estonia.
eResidency As a Stimulus Package
The numbers speak for themselves: Around 80,000 people from 170 different countries have already accepted the offer. Since the programme began, these so-called eResidents have founded 17.000 companies, generating sales of 3.68 billion.
Digital immigration brings many benefits to the country of Estonia. The taxes paid by virtual citizens have long since covered the programme’s expenses - because every foreigner who sets up a company in Estonia via electronic residency pays 20 percent business tax. So far this approach has brought the state 54 million euros in tax money. But what about the benefits for those seeking virtual citizenship in Estonia?
eResidency: Lots Of Freedom, Few Obligations?
If you’re starting to dream of a digitised, inexpensive work paradise now, we have to put the breaks on a bit because eResidency does not mean you benefit from a completely unbureaucratic tax haven. Being an eResident does NOT replace your tax residency. You are required to declare taxes both in your country of residence and in Estonia, and you can’t avoid tedious bookkeeping either. Financially, you will not enjoy any benefits initially. However, there is still a lot to be said for virtual citizenship.
Digital Nomads Thanks To eResidency
Work when and where you want... a lot of people dream about that, but actually it’s difficult to do. Citizens from other EU countries make up a large part of eResidents in Estonia, and with good reason. In your home country, you often encounter a lot of obstacles in terms of cost and effort when starting a business.
You can read more about the daily work of freelancers in our article Customer Acquisation, Start-ups, Covid-19: An Interview with a Specialist about the Daily Work of Freelancers.
In Estonia, on the other hand, a company can be registered in an average of 18 minutes, and the responsible authorities send out the confirmation after around 12 hours. In other countries, founding a company is often much more complicated. In fact, almost 40 percent of applicants want eResidency to found a company that is not tied to any location.
eResidents Work When And Where They Want
This independence of location leads seamlessly to the next benefit: As an eResident, thanks to digitised processes, you can do almost all the work from your own computer – where it is currently located and whether you ever set foot in Estonia is completely irrelevant.
Flexible Work As a Startup
For startups in particular, deciding on a company location is a momentous decision; after all this is what determines what rights and obligations apply. If you start a business as a digital citizen in Estonia, you stay independent, have many options open and can work from anywhere. This also applies to the search for suitable employees.
Access To the European Market With eResidency
The idea behind the eResident programme is to democratise opportunities and give people in developing countries access to the European market. A person’s origin should not be a stumbling block on the way to entrepreneurial success. In this sense digital citizenship offers people from non-EU countries in particular a good chance of gaining access to the European market. In addition, Estonia’s digital offerings give them the tools they need to work globally.
The eResidency programme offers startups, founders and freelancers not only the opportunity to start their own business in an uncomplicated way, but also to open up new markets. The path to digital citizenship is extremely simple.
Digital Immigration Made Easy
As mentioned at the beginning, all adult citizens have an ID chip card which they can use to access state services. Foreigners can also apply for this card as follows:
- Fill out an online form.
- Upload a copy of your passport.
- Write a letter of motivation explaining why you are applying for digital citizenship in Estonia.
- The fee for the subsequent processing is 100 euros.
After you have submitted your documents, a background check will be carried out by the police and border protection authorities. However, what sounds serious is rarely an obstacle on the way to becoming an eResident. Less than one percent of the applicants are rejected.
How To Start Your Own Business As an eResident
Once you have gone through this process, not only can you use the Estonian government’s Citizens’ Portal, but you can also start a business in Estonia. On average, the company will be registered in just 18 minutes, and you will receive confirmation around 12 hours later. All you have to do is fill out another form and transfer another 190 euros. If you would like support throughout the entire process, service providers such as LeapIN help eResidents who want to start their own business.
Flexible Start For Your Own Business
eResidency in Estonia may not offer any monetary benefits. It’s neither a tax haven, nor are you completely free from tiresome bureaucracy. However, almost anyone can start their own business with relatively little effort, work from any location and easily access digital services. Those who are considering founding a company or are considering living and working as a digital nomad with complete flexibility can start out on this path very easily.
Professional Indemnity Insurance Through exali - So Self-Employment Doesn’t Become a Nightmare
But wherever you start your business: You also face completely new risks with the decision to be a freelancer or founder. If you cause damage to your customers or another third party, for example by missing a deadline or damaging their property, you may be faced with compensation claims that can quickly drive your company into a serious financial crisis. There is also a risk of fines, for example due to errors in your terms and conditions or imprint. And as a managing director, you are personally liable!
With Professional Indemnity Insurance through exali, you have a reliable partner at your side should one of these unpleasant scenarios occur - even if you start your business in Estonia! Since 2021, exali has been offering a European insurance solution with Professional Indemnity for Digital Professions for freelancers, the self-employed and companies in the IT, media and consulting industries. It is currently available for 21 European countries – including Estonia. You can find out more about insurance offers in Estonia on our English-language website exali.com.
You’re also welcome to contact our customer advisors directly if you have any further questions. You can reach us by phone on 0821 / 80 99 46 - 0 (Monday to Friday, 9:00 a.m. to 6:00 p.m.) or via our contact form.
Vivien Gebhardt is an online editor at exali. She creates content on topics that are of interest to self-employed people, freelancers and entrepreneurs. Her specialties are risks in e-commerce, legal topics and claims that have happened to exali insured freelancers.
She has been a freelance copywriter herself since 2021 and therefore knows from experience what the target group is concerned about.