After running the company for a full year, here are our thoughts on this type of setup.
Great things about it:
- 0% tax unless you distribute dividends. This is especially advantageous if you plan to “keep” or reinvest money in the company. Contrasting with other tax systems where you have to pay significant amounts of your revenue and/or profit (e.g. in Indonesia it’s ~23%, even if you reinvest the money or simply keep it in the company).
- Easy, perfectly remote-capable setup. The Estonian government and service providers bill this as a fully location-independent setup and it indeed is. Everything can be signed, reviewed, etc without ever needing to show up in person. This is of course amazing in the midst of a pandemic, but not only.
- Affordable fees. Accounting costs you between fifty and a few hundred euros depending on VAT status and the number of monthly transactions.
- The VAT registration and integrating an online payment gateway (e.g. Stripe) were both super smooth as well.
- If you want to do accounting using your own system (e.g. we run our other companies/projects in Xero), it’s tough to find a provider that will do it well. I went through two different options that initially said they can do it in our own dashboard before I gave up and started using a service provider and with their centralized dashboard/system. This is inconvenient if you don’t like that specific system or want everything to be in one place.
- If you do not actually run an office or operations in Estonia, your only option for banking is generally a digital bank/fintech company (e.g. TransferWise, Revolut, etc), which are usually great options due to low transfer fees, quick transactions, modern interface, etc. The issues with that:
- It can be quite a hassle to open an account. Some of these companies will reject you without providing any reason whatsoever, which seems to happen quite a bit based on reports coming from a variety of e-residents. More on that in my post about opening the company.
- These digital banks will only be able to process payments to certain countries. In our case, we hired a contractor in Belarus and it is effectively impossible to pay them. The only solution seems to be to basically fly to Estonia and try to open a “traditional bank” account, which is very unlikely to be approved by the bank as we have no physical presence in the country. This might seem minor, but it is limiting in terms of paying suppliers/providers and team members, so it can be quite a major nuisance.
All in all, running a company via the e-residency program has been, for us, the perfect setup for a remote team and a service-based business. Hassle-free and financially advantageous, with some limitations, as would of course be the case with any other option.
We hope this helps your entrepreneurial journey, let us know if you have any questions.
Disclaimer: I am not affiliated with the e-Residency program and will not be rewarded if one of our blog readers becomes an e-Resident. What I am: a huge fan of location independence, sustainability & progressive governments, tired of bureaucracy and definitely curious to see what the future of business looks like.