estonian e-⁠residency: from freelancer to global enterprise

Maya Middlemiss • Apr 26, 2021 • 8 min read

A low-risk launchpad for your side-hustle or revolution

Tallinn Estonia is a great digital home for e-resident freelancers or startup founders — Tallinn Old Town. Photo: Kaupo Kalda

Most businesses start with an idea — a way to apply your unique attribute to a situation where you can add value, where someone pays you for that. When inspiration strikes you might have no idea whether you’re looking at a viable side hustle, never mind the next unicorn success story, but you have to start somewhere.

And from such small acorns, dreams of the future can grow.

When inspiration comes knocking, it’s great to know that there exist low-risk and enabling environments to provide a safety net and time for validation and growth.

Estonia has just this kind of business environment, and thanks to e-⁠Residency is open for entrepreneurs from all over the world to grow side-hustles, launch innovative products and services, and manage the administrative side of their businesses with minimal bureaucracy.

What is e-Residency | How to Start an EU Company Online

Join Estonia’s digital nation with e-Residency, register your EU company online, and experience true location independence for your business!

The cost of entrepreneurial thinking

Launching a business in some countries can be complicated or expensive — and risky to test something which is fundamentally uncertain.

I live in Spain, where self-employed social security contributions are very high and subject to a discounted period you can only access once every 5 years. That is a huge disincentive to try a risky idea, even before you explore the possibility of constituting a limited company, which comes with high share capital and administrative costs.

I love the Mediterranean climate and the family orientation, but the business climate? It’s a challenge.

Sometimes you need a limited company though, for various reasons: contractual purposes, to limit personal liability, or to access specific services. Forming a company can streamline your financial administration while also giving you some structural distance between yourself and your work, and it can also help with branding and credibility.

You want to give your idea its best prospect of success, but when legal, administrative, and regulatory costs are stifling where you live, it’s difficult. This is why Sicilian creative entrepreneur Cetti Lipari turned to Estonian e-Residency to found UpNõu, her company specialised in information, research, development, and management of public funding (grant and fund), consulting, and project management in the business, cultural, and non-profit sectors.

To work with global clients and funders she needed the authority position of a distinct business entity, and found the Estonian approach to startup incubation an encouraging breath of fresh air with its flexibility and freedom. She can also administer her own passion-project of photography through this business vehicle.

Join Cetti and countless other e-residents: register a company in Estonia and follow your business dream:

How to Start a Company Online in EU | e-Residency

Want to open a company in Estonia with e-Residency? Find out how easy it is to register an EU-based business fully online at minimal cost.

And Cetti is so impressed by the difference in business climate compared with Italy, that she is actively working to relocate physically to Estonia as soon as international travel relaxes a bit more.

Avoiding hassle, but not tax!

While providing a low-friction framework for international entrepreneurs, however, it’s important for every would-be hustler to understand that Estonia does not offer any kind of tax haven or avoidance for e-⁠residents. Everyone is a tax resident somewhere, and unless you spend 183+ days of the year there this is unlikely to be Estonia itself.

So, you will need to understand and meet whatever responsibilities you have in that location. And, e-⁠Residency is not a tax residency. So, when you take personal income from your Estonian business you’ll need to account for it properly wherever you actually live, including local social security contributions as well. It’s strongly recommended to get professional, specific, individual advice.

Furthermore, while Estonia’s highly favourable corporation tax regime makes it really attractive to open a business there — especially when combined with the low start-up costs, frictionless admin, and deferred share capital — in many cases non-resident founders of Estonian companies may have corporate tax liabilities in other countries.

I spoke with Andra Larin, founder at Priolaunch, a German-based expert in the e-Residency marketplace, who (just like the Estonian Tax and Customs Board) was unambiguously clear on this crucial distinction:

“You’ll need to consider personal taxation and corporate taxation separately, as well as whether your business can be said to have a permanent establishment in your country of residence, regardless of being incorporated in Estonia. Then you need to consider issues of dividends versus salary income, and double taxation agreements in place between Estonia and your tax resident country.

“Estonia is super easy to navigate, the system is very easy overall, and the tax system is very easy to understand and to apply in practice. In addition, every communication with the authorities is made easy and transparent. It is also true that Estonia does not tax the profits that are reinvested or left in the company. But in a way that applies only when there is no permanent establishment in some other country, in which case the tax laws of this other country will apply. So yes, these are the areas which can cause misunderstanding and misinterpretation.”

A truly location-independent business framework

So is it worth it, to operate a business in one country but live in another? To wear a freelance hat where you are located, and trade products and services internationally with a distinct corporate presence?

For thousands of people like Cetti and I, the answer is unequivocally yes.

Operating across borders as a freelancer or small business normally means hugely complicated administration and high costs of compliance. Even the ability to raise invoices and operate banking in multiple currencies can be an extreme hassle, which I honestly could not contemplate tackling in Spain.

Enter e-Residency of Estonia:

What is e-Residency | How to Start an EU Company Online

Join Estonia’s digital nation with e-Residency, register your EU company online, and experience true location independence for your business!

Turnkey enterprise platforms in the e-⁠Residency Marketplace make truly location-independent businesses a reality, dealing with the language, FX and regulatory issues which can so easily consume the time of a solopreneur. All the work you can’t bill any client for, can be slickly outsourced in a single subscription, while you focus on your business.

And that focus is up to you.

For some, freelancing may be the first step to rapid growth and world domination, in which case the Estonian business culture of nurturing and encouraging startup growth will be a great asset. This is why Cetti and countless other entrepreneurs are choosing the tech and business-oriented climate of Estonia to help their dreams grow.

Others will scale on an entirely distributed basis, enabling them to live wherever they choose — including nomadically — and work with the best talent in the world. And this is made possible thanks to their recognisable business entity based in Estonia, but manageable remotely from wherever they are personally located.

For me, e-⁠Residency the perfect vehicle to operate long-term as a solopreneur and company of one. The very international complexity which would make my business a nightmare to account for in Spain, enables me to operate it completely outside the country, and pay my way as a self-employed person here where I live.

It keeps my local fiscal presence simple and legal, streamlines international business administration, and allows me to choose my hours, clients, projects and priorities however I wish. I have an EU-based business — despite my actual EU citizenship being politically stripped away from me — and I am proud to be an e-citizen of the world’s first truly digital nation, and part of an inspiring global community of forward-thinking entrepreneurs.

To get started on your journey, you don’t need to know if you’re building the next global brand, or a lifestyle business of long-term simplicity. You just need to nurture that idea, that creative spark — and give it room to flourish in a favourable environment.

Estonian e-⁠Residency could be the best way to do just that, and you could get started at very low cost and risk within the next few weeks.