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Ask HN: Anyone doing business using Estonian e-residency?
Do you think it's a viable solution for doing online business? How is that working out for you in general?
- max_ 8y agoI got my E-residency last year & find it kind of useless.
- freedomben 8y agoWhat have you tried doing with it?
- deleted 8y ago[deleted]
- max_ 8y agoI registered my Software Developer company as an Estonian ÖU
- samright 8y agoYou can register a company with it in 1 hour. Then open a bank account with Revolut Business and run it from anywhere in the world. It really depends on what you want to use it for.
- closeparen 8y agoHow long did it take you figure out taxes/permits/liability for the Estonian entity in countries where you and your customers live?
- wyldfire 8y agoWould it be easier to convince EU customers that your US (SaaS?) business is trustworthy if you operated in Estonia?
- ProblemFactory 8y agoI don't think it will make a difference - everyone is used to most internet businesses being from and registered in the US. In my experience of trying to sell a SaaS to small businesses, their only location-based concern is about where the data is hosted and if we are GDPR compliant. If you can offer hosting in some EU AWS or Google Cloud region that will be much more useful.
- sparkling 8y agoAfter looking into it for a while, i decided not to do it. Context: I live in Germany for roughly 2/3 of the year, rest is traveling. Not sure where you are located, but if you spend the majority of your time in a other EU country (e.g. Germany) you will have a very hard time explaining to the local tax authorities that the company entity is not effectively being managed from Germany. And when you fail to explain this, the company entity becomes a german tax resident and you have to deal with all sorts of paperwork and expensive tax consultants. This is especially true when you have no local employees in Estonia.
- istotex 8y agoThis comment should be higher up. If you are a freelancer thinking you could save on taxes by setting up a remote company in Estonia, be aware that your tax authority can (and will) demand that your company be taxed in your home country.
- jonstewart 8y agoThrough a US company, I employed a US citizen residing in Germany, as a contractor. It was terrible! Every German accountant we talked to acted like he was a unicorn and wanted to charge us tens of thousands of dollars to figure it out. We muddled through, no doubt doing it wrong... but it didn’t seem like there’d be any way that’d be right.
- koblas 8y agoWhile I'm not a tax expert, our startup is currently building a platform to help with payouts and tax rules. As I understand it, all you need is to get a W9 from the US resident and then file a 1099-MISC annually for him. He may be subject to tax withholding -- but that's all in the instructions on the IRS forms.
- throw130 8y agoIs it ok to operate an Estonian company from Germany though? Not for tax reasons (assuming you would pay the same tax for either a German or Estonian company as others said in the thread) but for bureaucracy reasons. Skipping the whole German procedure.
- xchaotic 8y agoIn most cases that setup does not absolve you from tax obligations where you live. I can see a benefit in setting up a business or branch in EU in general, if you have customers in EU. Otherwise why Estonia specifically?
- techsupporter 8y ago> Otherwise why Estonia specifically? Because the Estonian government is fairly unique in that it will issue an electronic identification card to anyone who requests it and passes a background check, permitting that person--regardless of nationality--to use most Estonian government services, like business registration and tax filing, from anywhere. https://e-resident.gov.ee/ https://e-resident.gov.ee/
- deleted 8y ago[deleted]
- phragomax 8y agoSovereignty as a service.
- pellefant 8y agoSlavery as a service
- techsupporter 8y agoI suppose, but only in the same sense as governments around the world tend to have mechanisms for non-residents and non-citizens to transact business or own property. An Estonian identity certificate doesn't, on its own, allow someone to enter Estonia or live or work there. That still requires citizenship of Estonia, the European Union, or meeting other requirements.
- closeparen 8y agoOk, but if you don’t physically live in Estonia, who accepts your ID card or permits you to do business using only an Estonian corporation?
- cmews 8y agoIn my experience a lot of freelancers are using it (especially when they like to work in different countries). Personally I’m quite happy using it and it’s a way better experience in comparison with the chamber of commerce in the Netherlands when you start freelancing (had some bad experiences unfortunately when they sold my data to shady companies which will target you with fake invoices/bad deals/spamming). Another great feature is that you are in full control how to pay yourself (salary/board member fee/dividends) which can have serious tax advantages depending on your country’s tax system.
- sparkling 8y agoHow do you avoid that the company becomes a dutch tax resident if you manage it from the Netherlands most of the time?
- cmews 8y agoThere are limitations like I cannot rent an office for longer than six months and my company is registered in Estonia with an Estonian address (I use leapin.eu which takes care of the accounting part). I get your point and when you are selling physical products I cannot see how that would be possible. However if you are doing location independent work like coding or designing it is almost effortless to not become a tax resident. Also the Dutch tax laws don’t care about the company as long as you pay the personal income tax plus some employee insurance tax.
- taxguy 8y agoIn the Netherlands, a corporation is a resident for tax purposes if the management and control of that company is in the Netherlands, regardless of where that corporation is set up. There is no reference to address or office location. I'd be wary of casually dismissing Dutch tax residency of an "online" company--it is not as trivial as most think it is.
- Inquisitiveone 8y agowould this be a good option for a consulting business, or services in IT ?
- blunte 8y agoI too have been curious, and I haven't seen anything beyond "nifty factor" to compel me to set it up. In most cases it won't positively benefit people in terms of taxation. However, it might perhaps be useful for people coming from countries that are looked down upon by some significant EU countries. In that case, having an Estonia registration might increase the credibility of the business from an initial (and sometimes important) external view.
- demarq 8y agoDouble taxation seems to be the main pain point looking at the comments. It will help to google and see if your country has a tax treaty with estonia.
- sparkling 8y agoJust "having" a treaty is not enough. Germany has a treaty with Estonia, but it doesn't protect you. The Estonian company WILL become a german tax resident if the company is being managed by a German citizen living in Germany 99% of the time.
- taxguy 8y agoThis is correct, and this applies to many OECD countries. There's generally little reason to set up a company overseas if you live in an OECD or EU country; foreign affiliate tax rules will get you.
- dbanisimov 8y agoI am an e-resident and I used it to establish a business entity for my startup. It works really well for my particular use case. I am a Canadian resident, my co-founder is an Estonian resident (physical). Both of these may change in the future and the intended market for our startup is global. Estonia was chosen as a common ground with a minimal overhead - it's easy and costs almost nothing. Using government services with an ID-card was a breeze. For banking we use a "physical" Estonian bank, once set up I have no problem accessing it online either. We didn't have any revenue the previous year, so cannot say much about taxation story here. It gets more or less complicated depending on your country of residence, but I don't think that having a business entity in Estonia is fundamentally different from other EU countries here. Slightly more personal and readable story, written by me: https://medium.com/e-residency-blog/how-to-launch-an-estonian-startup-from-the-canadian-mountains-7ae95f1ff11 https://medium.com/e-residency-blog/how-to-launch-an-estonia...
- taxguy 8y agoCorporate taxation is generally based on where the management and control of the business is, not where it is incorporated, although the incorporation jurisdiction is considered. If you had incorporated the Estonian company by yourself without a partner and had been running it from Canada, the Estonian company will be considered a Canadian company for tax purposes and required for file a T2 corporate income tax return. If you are still a Canadian resident, do remember to file T1134. If you own 50/50 in the business, you can perhaps argue that this is a foreign affiliate only, and not a controlled foreign affiliate.
- jdietrich 8y agoOpening a UK limited company is at least as straightforward. Registering takes a couple of hours, it can be done entirely online and the fee is £12 ($15). You don't need to be a UK resident. You do need a registered office in the UK, but a company formation agent will provide one for about £20 ($26) per year. All your tax returns can be filed entirely online and HMRC provide a very helpful tax advice service. It really is fantastically simple. The obvious advantage to registering in Estonia would be the certainty of continued access to the European Single Market. We're still not entirely sure how Brexit will pan out. https://www.gov.uk/limited-company-formation https://www.gov.uk/limited-company-formation https://www.gov.uk/corporation-tax https://www.gov.uk/corporation-tax Another option well worth considering is Stripe Atlas. It's not the cheapest way to start a corporation, but Stripe provide a huge amount of added value. https://stripe.com/atlas https://stripe.com/atlas
- sloaken 8y agoHow are taxes in the UK as coimpared to Estonia?
- istotex 8y agoCorporation tax in the UK is currently at 19%. If you are a UK tax resident, you also have to pay dividend tax which starts at 7.5% (over your allowance).
- frereubu 8y agoMore information here: https://www.gov.uk/tax-on-dividends https://www.gov.uk/tax-on-dividends It jumps significantly (next step up is 32.5%) once you move into the higher income tax brackets, which start at £46k: https://www.gov.uk/income-tax-rates https://www.gov.uk/income-tax-rates
- BerislavLopac 8y agoBut only for the difference.
- gumby 8y agoI set up a company and bank account a couple of months ago. It was very easy. We are in development so don't have any customers yet, so I can't tell you how taxes etc will be but I can tell you the process of dealing with the .ee government so far is paradise compared to the US process.
- rockinghigh 8y agoDid you need a local address and phone number?
- gumby 8y agoNo, you can use a registered agent same as you do in the US when you incorporate in Delaware. You can open a bank account too, though many banks apparently won't participate because of some bank scandals in a nearby baltic country. I happened to be near Estonia and so opened one in person. The scandal problem happened more recently so I am not sure how easy that is right now. The e-residency card comes with a chip reader that plugs into your computer and does a handshake with the bank. There are a bunch of companies who authenticate via the e-e-residency card: https://e-resident.gov.ee/run-a-company/ https://e-resident.gov.ee/run-a-company/
- Inquisitiveone 8y agoWould you say it might work for a consulting and IT services business? did you experience any hidden costs, thanks
- gumby 8y agoIf you live in the EU it's not clear what benefit there might be, and if you're a consultant there might be even less. This doesn't save any taxes, and isn't a strategy to do so. The costs themselves are't that great: a few hundred Euro. The reasons we did were the following: - Ease of doing business with clients and vendors in other EU countries: we have an EU bank account in Euros, can generate all the right VAT paperwork etc. Not huge, but for some businesses critical. We also have a US subsidiary in Delaware and a couple of state registrations because that is how you employ people in the US. Ditto for a third country where one of the founders is moving. - VCs are increasingly comfortable with overseas-registered countries, at least ones not in tax havens. Ten years ago this would have been seen as weird. I've always previously incorporated in Delaware where I've never set foot so this isn't a big deal. - Our lawyer (!!!) in SV suggested we officially HQ the company overseas (I already had an e-residency so we used Estonia). He said as the founding team was all foreigners (though some in the Valley for decades), it was a good hedge against unforeseen changes in the federal government's attitude towards foreigners. TTTT I would have considered it wide-eyed raving except this lawyer has been working at a big law firm in the valley, for 30 years. But what the hell, it's so easy to do these days why not. Not everything you need is in English but tbh I don't interact with Estonia any more than I interact with Delaware and this has never been a problem.
- dpq 8y agoGetting an Estonian bank account is nigh impossible. If you want to do anything AdSense related, go with an Armenian account instead. Less hype, same rules (~), totally worth it.
- alan_wade 8y agoWould this work as a workaround for creating a Stripe account, if I'm living in a country not supported by Atlas?
- jwr 8y agoI considered it for my SaaS business. But at the moment my business is based in Poland, so moving to Estonia doesn't change things much (I still can't economically sell to individuals within the EU because of idiotic VAT regulations). I chose to remain in Poland for the time being. On the plus side: low taxes, EU law, first patent troll doesn't bankrupt my business. On the minus side: Stripe continues to ignore Poland, so I have to deal with Braintree and this is a pain in oh so many ways, VAT MOSS is a disaster, and we have the Cult of the Invoice.
- p49k 8y agoWhat VAT regulations are keeping you from selling to other EU customers?
- linohh 8y agoRecently VAT collection was changed for electronic services. Before you simply charged your countries applicable tax rate, unless a VAT ID was provided. Now you have to charge the VAT rate applicable to your customers country of residence, forcing every vendor to care for and implement correct VAT rates and regulations for all your products and every of the 28 countries in the EU - possibly even more due to bilateral free market agreements with Norway, Switzerland and the like. This is way more complicated than you might think, as improper tax collection may constitute felony charges and fines, leaving small businesses and startups in an awkward spot where not selling to other eu countries is easier than selling to them in a compliant way, putting the idea of a single market ad absurdum. The last thing you would want is pointless market entry barriers affecting every entity offering cross border sales.
- p49k 8y agoSeems like something that could be greatly simplified to the point of being a non-issue by software (either standalone or a service), and if one doesn’t already exist, seems like a good opportunity. This is similar to how state taxes work in the US and many small businesses manage.
- dandare 8y agoIt may not be important for your use case, but Stripe will not work with Estonian company. https://stripe.com/global https://stripe.com/global
- deleted 8y ago[deleted]
- throwaway68373 8y agoSeriously guys, consult an accountant, a tax lawyer or just someone who could have at least a clue what you are trying to do. There are reasons to incorporate companies that are not in your place of residence, for example: vat registration and to have a "front-door" in that country for selling to the public, for procurement, for legal reasons (e.g. if you sell products in the EU, you need to have an EU contact address listed on the product) etc. International taxation is not easy and nobody will explain to you the problems here but there will be for sure problems. If you want to do it right, you usually pay what you saved in registration to the accountant instead. And no, you won't save any tax. Let me be clear, you won't save any tax! If you do, it's either called tax avoidance (punishable in many countries!) or you are an international company that already has a tax accountant/lawyer to structure things properly, has substance in those countries and will for sure not ask questions here.