As a lifelong entrepreneur and owner of a consulting business, I have extensive experience in starting and running businesses in multiple countries in the EU. Recently, I opened a company in Estonia through its e-Residency program and settled with it for long-term. I had three reasons to do so: minimalism, transparency, and long-term benefits.
Estonian e-Residency business = minimalist heaven
How much time do you spend on admin work? Like, doing paperwork and stuff? Creating your company, setting up the business, issuing invoices, doing annual returns, and so on. I spend 1 hour per month on average on this, even though I still love creating my invoices manually (weird! :D). I have established and operated businesses in the United Kingdom and also in my home country, Hungary. Nothing even comes close to Estonia. Also, prices. I have my lovely legal & accounting partner Nordic Consult in Estonia — no paid endorsement, I love them — who helped me to set up the business, provided a legal address, and they are doing my annual accounting plus offer me full support for all of my weird questions. I pay a couple of hundred Euros which is significantly less compared to anything I paid before anywhere else. I also run my business remotely, which means business without borders. Everything is not just digital — it HAS TO BE digital. Otherwise, I can’t work with it. I have clients from all around the world, and I need access to global payment services and tools which help me to automate, run and manage my business, anywhere I go. With the Estonian company, I have full access to everything. Just an example, it took me weeks to get in line and open a business account with a Hungarian company on Revolut. It took me a day to do the same with my Estonian business. It’s more credible, identity check is more straightforward, everything is in English, and everything is accessible online.
These sound like the norm for everyone, but if you are coming from Southern or Eastern Europe, you are more familiar with the opposite experience. For me, managing my Estonian business is a clean, minimalist way of doing my job, which doesn’t even stress me out — it inspires me to achieve more.
Why transparency matters
I’m from Hungary, but I rarely work with clients from my home country. Every client of mine is from the US or the EU. My background is in digital marketing and business consulting, and I’ve been working remotely for more than four years now, mainly as a gun-for-hire freelancer. I decided to step up and create a full-fledged consulting business to help companies to build and manage their teams remotely and grow beyond their limits through a distributed business model. I created Anywhere Consulting, incorporated in Estonia.
Apart from minimalism, transparency was the second most crucial aspect for me. The reason is simple: let’s be honest, if you are a freelancer, your clients don’t give a thing where your invoices come from unless they contain your banking details. However, if you are running a business and acting as a company, you need trust. I do believe that transparency is the key driver in trust. I do think e-Residency provides a super transparent background for everyone. Everything is online, and you can look up all the companies in English. For some, it’s not a big thing, and they go for a company let’s say in Hong Kong. To me, it was one of the driving forces that moved me to open up shop in Estonia.
Long-term benefits: taxes!
If you are familiar with offshore companies, you may certainly know that everyone can pay 0% on their company earnings if they are doing it right. However, these companies are a) not cheap to operate b) not minimalistic to manage, and c) certainly not transparent, hence the name offshore. Normally when you hear “pay low taxes” and “have a transparent business in the EU” — these two things are not correlated. I think the reason is straightforward: most of the entrepreneurs think as a person when it comes to their business. They think about revenue as a salary or an expense or a dividend. However, I do believe entrepreneurship ultimately means one thing: building your business — and not your wealth.
Estonia has a very generous offer for you. Please note I’m not an accountant though, plus your business taxes can be varied based on where do you do business. If your company’s permanent establishment is in Estonia, you owe taxes for Estonia. In general here is the deal: you pay 0% on reinvested company profits. Meaning: you don’t spend a penny until you invest your company’s profits back into your business. To me, this is called the entrepreneurial spirit. It sounds to me as if someone who’s running a business created the Estonian tax system. There are other perks too: you pay 0% on salaries (if you are not an Estonian and of course, you have to pay your income taxes on this salary at your home country/country of residence). You also pay only 20% on distributed dividends, which is somewhat OK, mainly for those who are paying zero after profits from dividends.
The 0% tax on reinvested company profits is a game-changer. Previously, this was an option only for those who run their business from a non-transparent environment. However, this time, it is entirely OK to reinvest those company profits into your business or even open up an investment account for your business and reinvest & preserve your business capital anywhere.
Overall, this tax system works for those who are thinking long-term with their location independent business and want to build their company from the bottom to the higher ground.
Other minor perks: rule of law, national brand, full access
There are some other minor perks too, apart from minimalism, transparency and long-term benefits. First, the obvious, Estonia is the member of the EU, and this guarantees the rule of law. Tallinn, its capital, is also the center for NATO’s cybersecurity force, which at least to me, means data security. The e-Residency is at full speed, and it has fantastic feedback from everyone. It is pretty cool to own a business like this, so it adds up to the national brand value. I also have full access to everything: I hold business accounts on all mayor fintech companies from Revolut to Transferwise, I could open brokerage business accounts, and I have classic business banking accounts, too. Not a problem ever, actually it was much faster to open these services than it took me with my Hungarian company previously.
It is the most minimalist way to set up a business.
Apply for e-Residency. As far as I know, until you are a human, you can apply. Yes, it’s entirely online, and it takes a couple of minutes only.
After approval, collect your e-Residency card personally from the closest Estonian embassy. In my case, this happened in Vienna, so you might need to travel a little too. I had to show my passport as proof of my identity, plus I had to give my fingerprints. Getting an appointment from the Estonian embassy, showing up and collecting the card took me 10 minutes, if I’m not counting the 2 hours of train-ride (I live in Budapest) + an afternoon of eating schnitzel in Vienna.
Get a service provider to help set up your company. You can do it yourself of course, but time is valuable — pay a small fee and use your energy on other productive tasks. If you’ve managed pick one, decide on the necessaries (e.g., name), pay the fees, wait for it max one day to process and voilà.
Now that your business is ready set up a business bank account. You can choose Revolut, Holvi, Transferwise or literally any new fully online banking service providers — there’s no need to fly over to anywhere and set up a traditional business bank account.
There’s no 5th step… It’s that simple.
Time-wise, approval of your application is done within a month — to me, and it took 2–3 weeks. I requested an appointment at the embassy on a Wednesday, and I got one on the same week’s Friday. On the next week’s Monday, I had my company live and ready. I issued my first invoice a week after.
I would never have imagined that I will write an endorsement for a country’s government program. Seriously, everyone who knows me knows how much genuinely I would not say I like paperwork and inefficient, slow and broken government programs. Moreover, here I’m, writing this article about e-Residency.
I genuinely think e-Residency is the future for everyone. All other governments should treat their countries’ business environment like this little European country does - 100% online, transparent and minimalist. After all, it’s a service for those who want to get things done and do business. Governments should not waste their entrepreneurs’ time and should help them whenever they can to provide services that aid in building fruitful and growing businesses.
This post originally appeared on Estonia's E-Residency blog.