understanding your responsibilities as an e-⁠resident of estonia

With great opportunities also come important responsibilities - and understanding them is a crucial step towards your business growth and success

Becoming an e-⁠resident of Estonia offers a gateway to a wide range of opportunities, particularly for entrepreneurs, freelancers, and digital nomads seeking to leverage Estonia's advanced digital infrastructure. With e-⁠Residency you get a unique digital identity that enables access to e-services, and allows individuals to establish and manage a company in one of the most digitally integrated countries in the world, regardless of their physical location.

Whether you are just beginning your journey as an e-⁠resident or already operating a business, being informed about your duties is key to making the most of this innovative journey. With great opportunities also come important responsibilities. In order to guarantee the integrity and security of Estonia's digital ecosystem, it is vital to maintain transparency, uphold legal compliance, and ensure that the e-⁠Residency programme continues to function effectively. Thus, understanding these obligations is a crucial step towards ensuring that your experience as an e-⁠resident is both successful and compliant. 

While e-⁠Residency offers access to Estonia's digital services and business environment, it’s also important to understand what it doesn’t do. E-⁠Residency does not grant citizenship, physical residency, or the right to enter Estonia or the European Union. The e-⁠resident digital ID card is designed for secure online authentication, not as a physical identification or a travel document. Additionally, e-⁠Residency is not a visa and does not permit visa-free travel. While e-⁠Residency opens the door to many business opportunities, it doesn’t replace the legal requirements for travelling or residing in the EU. E-⁠Residency also does not affect your personal tax residency, and does not exempt your company from foreign tax liabilities.

Responsibilities of ALL e-⁠residents (including those without a company)

As an e-⁠resident with an active digital ID you have several obligations you need to keep in mind. This includes e-⁠residents who have not used their digital ID, and those who do not start a company. 

First, it is imperative to keep your e-Residency digital ID card and PIN codes secure. Sharing them with others could lead to misuse or potential security breaches, and in worse case scenarios even end in identity theft. For this reason, it is crucial to protect your digital data with the same level of vigilance and care that you apply to your physical identification documents, such as passports and ID cards. 

Second, if your card is lost or stolen, make sure to get in touch with the Estonian Police and Border Guard Board to close your certificates (add link) if you believe it could be used with malicious intent. This ensures you remain in good standing with the law and avoid potential legal issues. For more in-depth guidance, please see our related article “Broken, lost, destroyed or stolen”. 

Third, in case your name or contact details change, inform the Estonian Police and Border Guard Board to guarantee transparency from both sides and keep your data up-to-date. In these situations, you will also need to reapply for e-⁠Residency to continue using Estonia’s e-services with an updated digital ID reflecting your name or citizenship change. 

Fourth, don’t forget to make sure your digital ID card remains active and that you are using the latest version of the ID software. This ensures your access to Estonian e-services and prevents a situation where a necessary task cannot be completed. Plus, updating your ID software regularly helps to protect your digital identity and keep you cyber-secure.

Fifth, an e-Residency digital ID provides many benefits, but it is also an official Government document, which comes with legal duties. Familiarise yourself with the Identity Documents Act - the relevant Estonian legal code associated with holding a digital ID - as well as any associated activities you plan on undertaking as an e-⁠resident in Estonia. To get started, our Knowledge Base and State Portal are excellent resources.

Responsibilities of e-⁠residents with a company

When you set up a company as an e-⁠resident, your responsibilities will naturally expand. You'll need to manage various aspects of your business, such as legal compliance, financial reporting, and ensuring your operations align with Estonian laws and international standards. These responsibilities are a crucial part of running a successful business, and while they can be challenging, they also signify your growth as a global entrepreneur. Here are a few of the more important duties to be aware of as an e-⁠resident company owner.

Company registration

Once you are ready to start your business, one of the first steps to take is to appoint a contact person for your company. This service is mandatory in Estonia if your management board is located outside the country and can only be sought from licensed service providers. A contact person is in charge of handling and passing on any procedural documents or letters of intent related to your business, however, they are not liable for your company.

You also have the option of nominating a legal address in Estonia for your company. This address will serve as the official location for receiving and forwarding procedural documents or letters of intent, and delivery to this address is deemed as delivery to your company. For most e-⁠residents, the legal address tends to be that of their company's contact person.

When it comes to company registration, you can choose to do it yourself or use the services of a service provider. Many service providers who are licensed to provide the contact person service offer a package of services that also includes company registration and accounting.

Once you have registered your company don’t forget to make your share capital contribution to your company. The share capital can be as small as 0.01€ per shareholder.

Businesses are also required to collect and store data on ultimate beneficial owners (UBOs) and publish this information through the business register. To fulfil this requirement, shareholders or management board members must provide beneficial owner data to the management board, which then submits the information either through the e-Business Register or via a notary.

Bookkeeping obligations

Bookkeeping for your company in Estonia must comply with local accounting and legal standards. The minimum requirement is to file your company’s Annual Report each year, with additional obligations depending on the nature and activities of your business. For example, once your company's turnover reaches €40,000, you must register for VAT and declare monthly VAT returns. Another example is if your company has employees in Estonia, make sure to register these employees and complete payroll returns each month. Finally, if and when your company declares dividends to shareholders, this will also raise a reporting requirement.

Using an accountant who knows the accounting principles and system in Estonia will save you time and energy in running your business. Your choice of accountant for your business is an important and potentially time-saving step in your entrepreneurial journey.

Taxation

Taxation is a complex topic, especially for a business operating across borders. Cross-border taxation of companies will depend on the interplay of several laws and treaties, as applied to the specific facts and circumstances of your individual case.

E-residents will generally need to be aware of Estonian tax laws, the tax laws in their own country of tax residence or where they spend the most time, any relevant inter-country tax treaties, and/or regional tax conventions (e.g. European Commission directives on VAT).

Please keep in mind that e-Residency does not affect your personal tax residency. This will remain where you are registered as a resident, or spend the most time. E-Residency also won't exempt your company from foreign tax liabilities or residencies, meaning other countries might also consider your company a tax resident of theirs (e.g. due to permanent establishment, effective management). In case of dual tax residency, Estonia has signed numerous double tax agreements so you shouldn't be double taxed.

Other obligations

If your company’s contact details or the location of the management board should change make sure to update the Estonian Commercial Register with the latest information. You can read more about changes to your company on the Knowledge Base.

Depending on your company structure and operations, you might also have obligations with respect to labour and intellectual property (trademarks, patents, inventions, or industrial designs). I won't cover these specifically in this article, but you can read an overview in this blog post about legal duties for e-⁠residents.

Other responsibilities may include obtaining specific business licenses depending on your company’s activities and submitting data to Statistics Estonia if requested. These steps ensure compliance with national statistical requirements and help maintain the integrity of the e-⁠Residency programme.

Conclusion

Understanding and adhering to these responsibilities not only ensures a seamless experience as an e-⁠resident but also plays a crucial role in maintaining the integrity of Estonia’s transparent and accessible digital infrastructure for future participants. As you plan for the growth of your business, Estonia offers a compelling foundation, with its commitment to a secure, trustworthy business environment. The country’s alignment with the European Union, coupled with its advanced digital landscape and emphasis on secure data handling, makes it an ideal hub for your operations to thrive, expand, and engage on a global scale. By fulfilling your obligations as an e-⁠resident, you contribute to sustaining this forward-thinking ecosystem that benefits businesses worldwide.