Estonia for Digital Nomads

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Estonia for Digital Nomads

Estonia is the ideal country for any tech startups, freelancers and digital nomads who would like to start a business in Europe easily and with little incorporation expenses.

It is also well known for its e-Residency program (but you won’t get a real residency in Estonia).

E-Residency is a estonian government issued digital entity that lets you start and manage an EU-based company online from Estonia.

In Estonia, the most common form of business in the country is a private limited company in which the owners’ liability is limited to their share.

There is a 20% flat income tax paid on distributed dividends, hence there’s no corporate tax.

The tax rate is not among the lowest, in fact, jurisdictions such as Malta, Gibraltar and Cyprus are cheaper when it comes to tax, but they have higher incorporation expenses.

Furthermore, these countries are more suited to medium sized and large enterprises.

The VAT rate in Estonia is 20%, and a VAT number becomes mandatory only over €40,000 in sales in a year.

So it’s possible to open a company in Estonia without registering it for VAT purposes.

As part of the European Union, all goods and services sold to other EU companies, located outside the country, are not taxable for VAT purposes.

When you open a company in Estonia through the e-Residency program, check which payment processor supports your business model and your personal residence (or the director’s country of residence).

For example, Stripe supports companies registered in Estonia through e-Residency, but only if the individual associated with the account is located in one of the supported countries.

Estonia is one of best choice for any professional who offers marketing services (for example, SEO, Paid Advertising, Social Media Management, Affiliate Marketing, etc.), bloggers eager to monetise their websites and channels or for small and medium e-commerce startups.

It’s one of the countries with the largest number of active startups registered.

Furthermore, for the sixth consecutive year, the Tax Foundation, the US independent, and non-partisan research institute have positioned the Estonian system at the top of the ranking of the most efficient tax systems in OECD countries.

Each year, in fact, the institute prepares an index, the International Tax Competitiveness Index, which measures the effectiveness of the tax system of the most important countries in the world through the adherence of each system to the criteria of competitiveness and neutrality.

You have surely heard that Estonia was the first country in the world to have established the “digital residence” to attract brains from around the globe and encourage the opening of new businesses.

The e-residency allows “digital nomads” (or remote workers) from all over the world to acquire, under certain aspects, the same rights as an Estonian resident: open a business in Estonia, submit applications and requests for certificates to the public administration, pay taxes, etc.

E-residency isn’t a way to obtain Estonian citizenship, nor to obtain legal residency. Which means that it’s not a way to live abroad and pay Estonian taxes (notoriously low).

Furthermore, the E-resident digital card cannot be used for travel, as an identity card or as a passport.

It’s simply a document within the Estonian system.

When the corporate profits are reinvested in the company, so that there are no distributed dividends, the income tax rate is 0%.

To simplify the concept as much as possible, if you withdraw money in the form of a salary, for example, without distributing dividends at the end of the year, you pay ZERO TAXES!

Do You Want to Live as a Nomad?

If you want to talk about tax advices for digital nomads schedule us a call.

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