Last October, a small Baltic state in Northern Europe called Estonia announced that it would be first country to offer “e-residency” to foreign citizens, allowing them to take advantage of the same digital services as Estonian citizens. The status was initially offered to foreigners living in Estonia, but as of April, it became available to people outside the physical borders of the country.
It’s not surprising that the first country to offer this would be the Baltic republic that likes to tout itself as “E-stonia.” The government has embraced information technology, and the nation’s healthy startup scene birthed Skype.
Few months back, I am honoured to be able to meet the ex-prime minister of Estonia, Taavi Rõivas in person, which is how I get to know about e-residency of Estonia. Rõivas was the youngest government leader in the European Union. Perhaps appropriately for such an experiment like this, I have never been to the physical country of Estonia. While I like to think I have basic knowledge of the country’s politics and history.
Introduction to Estonia
Most people or even Europeans would be unable to find this pinprick on a map, squeezed between its small Baltic Sea neighbour Latvia and mammoth Russia. Its population, just 1.3 million, is less than our Penang island. But its modest size and remoteness belies its clout. It is here that a group of friends, including Heinla, invented the hugely popular Internet calling platform Skype.
Estonia is the most transparent and the least corrupt country in the CEE region (Transparency International Corruption Perception Index 2013, 28th out of 177 countries). Estonia’s economic freedom is regarded as one of the highest in the World and the best in the CEE region (Economic Freedom World Ranking, 11th out of 178 countries).
Starting from 1997, 97% of Estonia schools were online. In 2000, Estonia became the first country in the world to declare Internet access a basic human right—much like food and shelter. The same year, the government cabinet and parliament went paperless (savings as a result of paperless government = 2% of GDP). In 2005, Estonia became the first nation to hold election over the Internet. The country started testing Blockchain technology on 2008, even before the Bitcoin white-paper that first coined the term “Blockchain”, was published. Since 2012, Blockchain has been in production use in Estonia to protect national data, e-services and smart devices both in the public and private sector. In 2014, Estonia is the first country to introduced their ground-breaking e-Residency.
Estonia is arguably the most advanced country in the world when it comes to use of the Internet and related technologies. It is the fastest growing economies in the EU. The country has prioritized its tech sector in matters of economic policy, and followed through with commitment to its goals. The statistics are noteworthy:
• 3 minutes to file taxes, with 95% of tax declarations completed online
• 3 hours to start a company
• 1st country to adopt online voting
• Most start-ups per capita in Europe
• Prescriptions prescribed online: 98%
• Savings as a result of paperless government: 2% of GDP
• Ranking: #1 Tax Competitiveness, #2 Internet Freedom, #9 Economic Freedom
What Is e-Residency?
e-Residency is building a new digital nation where anyone has the opportunity to succeed in business – regardless of where they live or which passport they carry. The program is also particularly popular with location-independent entrepreneurs or ‘digital nomads’ because companies established by e-residents can be run entirely online from anywhere in the world.
It’s a way of accessing Estonia’s government services without ever actually visiting Estonia. You can start a company with all the benefits of the EU legal framework as well as remotely access low maintenance administrative tools such as tax declaration and company formation. In 2009, Estonia broke a world record for the “fastest time to register a new legal entity” – 18 minutes.
In short, this beautiful Baltic country is offering remotely accessible services that would normally only be available to actual residents of Estonia. For digital nomad entrepreneurs that don’t have a fixed location, this is a huge deal and a big step towards full location-independence, and to top it off, it comes with minimal bureaucracy and a clear, desirable tax framework.
The attractive of the e-Residency program created a secure digital identity platform, which the whole country actually work like a startup, provide the follow benefits:
• Online creation and management of companies
• Very low administrative burden (e.g. declare taxes online)
• 0% corporate tax (only pay taxes on distributed profits e.g. dividends)
• Euro- or multi-currency bank accounts
• Modern banking, with well-capitalized Estonian banks in the world’s largest single economy (the EU)
• Use of digital signatures to sign documents/contracts
• Document encryption
• And all these accrue without having to step foot in Europe
For digital nomad entrepreneurs that don’t have a fixed location, this is a huge deal and a big step towards full location-independence, and to top it off, it comes with minimal bureaucracy and a clear, desirable tax framework.
e-Resident entrepreneurs can:
• sign documents and contracts digitally
• verify document authenticity
• encrypt and send documents
• form an Estonian company online
• use banking services (including remote money transfers)
• access online payment providers
• pay Estonian taxes (if applicable)
Already, NASDAQ has announced that it wants to use the e-Residency electronic identity system to offer shareholders of companies listed on its Tallinn Stock Exchange the opportunity to vote in shareholder meetings remotely via the internet. This, a NASDAQ spokesman tells Global Government Forum, is a world-first. The new e-voting will be part of a pilot due to be launched by the summer.
The Reason I applied for e-Resident
I am a technocrat and serial entrepreneur by IT, I am always excited about the prospects of advanced technology, digital society and location-independent businesses. Estonia’s creation of state-level digital infrastructure is a model I hope gains a following in the near future, and the world will be better off adopting its open model of nationality and innovation. Technology has the opportunity to improve the way governments interact with citizens throughout the world and to streamline the creation and operations of business ventures. My primary reason for applying for e-residency is exploratory: as a technologist, I can participate and contribute to a worthwhile digital initiative. In the future, I also hope to establish business(es) to Europe and hope this e-residency will afford me access to some mechanisms of business within the European Union.”
So I filled up a form online including background information, national issued identity documents, qualification, motivation statement, reason for application and contribution, photo plus €100. Once the application submitted, the Estonian Police and Border Guard Board will conduct your background check to ensure the safety and trust of the e-Residency programme. Getting a secure, government-backed digital identity is no small issue – it enables you to operate with a higher level of trust online. As such, you may be asked to provide more information during the background check process.
All being well, about one month later, I received an email saying my e-residency card had been shipped to the country I selected for pick-up. I travel to Singapore for an interview and collection of my ID card. I was issued a packet containing an ID card embedded with an EMV-chip with 2048-bit encryption, used with two-step authentication and a USB chip reader, and a document of pin codes needed to access e-residency services. Last, I have my fingerprints scanned and took a picture, I am finally an official e-Resident of Estonia!
So far, some of the world’s biggest names are among the list of Estonian e-Residents — including Japanese Prime Minister Shinzō Abe, former Apple evangelist Guy Kawasaki, Timothy Draper from the venture capital firm Draper Fisher Jurvetson, formal top executive of Skype Michael Jackson, and Paul Bragiel, the co-founder of Gamefounders.
The Benefits of e-Residency to me
The most obvious benefit of e-Residency for me and other entrepreneurs around the world is the ability to maintain a business in the EU without having to move there. A company established through e-Residency is also a trusted company. In large parts of the world, companies registered locally are unable to access all the tools they need to grow their businesses and are unable to provide consumer protections their customers expect. But an Estonian company benefits from the EU’s legal frameworks and, as such, has access to a very wide range of fintech services. Even the United Nations is now using e-Residency to help aspiring entrepreneurs in developing countries benefit from e-commerce.
The summarized of benefits are:
• A presence in the EU single market, you will be a trusted member of the European Union business community
• Open an oversea bank account that hold money in 27 different currencies
• Access to international payments providers like Google, PayPal etc
• A trusted and transparent business entity that has been incorporated through a simplified setup process
• Access to a simple and fair tax system — 0% corporate income tax as long as you keep your profit earned in the company or reinvest it into growing your business.
• Full remote control – secure access to your bank and company data via e-Residency, location independently
• Paperless administration
• Digital signature and encryption tools that come with a guaranteed high level of security
In a world where businesses, people, and money can move around with relative ease, having a competitive tax code has become even more important to economic success. According to the latest figures released by the US-based Tax Foundation, Estonia has the most competitive tax system in the OECD (International Tax Competitiveness Index Rankings) and shares a place at the top of list for Internet Freedom.
How to Apply
The application process is straightforward: complete the application form, provide all the required information & documents, a passport photo, and pay €100. After three to four weeks, you should hear news that your application has been approved (after a background check), then the ID card will be shipped to an Estonian embassy of your choosing. After a visit to the embassy for fingerprinting, you will be a proud e-Resident of the Republic of Estonia. The whole process took me about one month and is explained in more detail on the official website (https://e-resident.gov.ee/become-an-e-resident/).
At some point in the future, I’ll provide a technical write-up of the e-Residency platform and the government’s plan to move its entire digital infrastructure to the cloud, pioneering the idea of “data embassies” located in foreign countries and protected under the same treaties that regulate traditional embassies.
I’ll also ponder some of the political science implications of location-independent government infrastructure. As well as write about estcoin, a world first state-issued digital national currency introduced by Estonia. And their ICOs. The crypto nerd in me imagines a future where countries and cities compete to provide the best digital infrastructure, and physical borders are trivial. Already, Brexit and other displays of right-wing populism are driving demand for e-Residency.
If time allowed, I will also share the procedures and steps to start a company, open bank account, locate virtual or physical office address, paying tax at Estonia and some advice on the application for e-Residency.
I was still thinking whether to apply for the Mindvalley University bootcamp next year, which will take place at Tallinn, the capital of Estonia. It allows me to learn from the campus and in the same time visit this Baltic country that is the leading society into the digital age. But it will be occupied my entire month there.