Potentially e-residency is a lifeline for many British EU residents, EU nationals in the UK and possibly any other British National looking to safeguard themselves against the risks involved in the UK’s exit from the EU. Frankly, were I still involved in the companies I was in the UK I’d be seriously considering moving the businesses into Europe right now.
Lets get on with it shall we?
Estonia: I can imagine some readers now thinking “where exactly is that?” given the reaction of Elle when I first brought this up with her (geography is not one of her stronger points). Well, Estonia is a small Baltic state with a population of approximately 1.3 million people. To the north is a short hop over the Baltic Sea to Finland, to the east it shares a border with Russia and to the south Latvia. Doesn’t sound all that exciting yet does it?
However, what if I was to tell you that Estonia appears to rapidly becoming something of a European Silicon Valley and is the birthplace of the likes of Skype and TransferWise? It sounds a little more exciting then doesn’t it? But hey, what does have to do with the likes of we small business owners and/or individuals in Spain (or anywhere else for that matter)?
Well, on to the point. On 1st December 2014 Estonia opened up it’s already technically advanced digital system of government to anyone in the world via an ‘e-residency’ which allows access via a highly secure digital signature, enabling virtually anyone to set up and run a company in the country. The whole process of running a company can be done online from registering the company and submitting and paying taxes. It’s also possible to conduct all banking using the same digital signature.
At present (apart from one banking provider) opening a business or personal account in Estonia involves visiting Tallinn for a face to face meeting. A workaround may be by using the ‘borderless accounts’ facility offered by TransferWise (which you can sign up to in a matter of minutes onlune from anywhere). Currently this only works if you don’t need traditional banking facilities like overdrafts and cards etc. If you can operate on a positive (or zero) balance and only need electronic transfers it should work a treat with GBP, Euro and Dollars.
The whole process starts with an application for e-residency itself. I did so a while back. It’s an easy process, all completed online on the Estonia e-residency website. You are required to submit various scanned documents which are run through checks by the Estonian Police before being processed. In my case I sent in the application and attached documents on the 28th October 2016, I received notification it had been granted on the 23rd November 2016, and the confirmation that my card had arrived at the Embassy in Madrid arrived on 11th December 2016. You then have to collect your card from the Embassy because you are required to provide fingerprints and present your original passport for inspection. The cost is €100 and the digital ID is valid for 3 years.
I can set up shop in Estonia any time I want to now. Which can all be handled through the web portal when I’m ready. Whilst it’s claimed you can set up in minutes, it is necessary to engage a local service provider before doing so to use as an office mailing address in Estonia which is fairly inexpensive, and maybe a local accountant depending on your business.
Apart from the convenience of it all – and the advantage of your new company being location independent and not being in the UK or Spain what is the other main advantage?
Zero percent (yes I said 0%) corporation tax.
Estonia only charges 20% income tax on dividends, which to all intents and purposes is your drawings from the business in the case one man/woman businesses and partnerships.
Having researched quite deeply I can see a number of benefits in terms of taxation and location independence given our future plans for the direction of our business. Whether it will work for you – that’s for you to decide. But do make sure to carefully research the e-residency system and how it fits your own circumstances before making any major decisions. And of course always always get independent financial advice.
At the time of writing there are 21,708 e-residents from 138 countries, of which 1,123 are from the UK and 255 – including me – are from Spain.
Some other useful links…
Article: British Entrepreneurs Flock To Estonian E-Residency Amid Brexit Uncertainty (Wall Street Journal 30th June 2017)
I am no accountant or financial expert although in one of my former lives part of my role was to assist SMEs with their operational and financial problems. Please don’t consider anything in this article to constitute ‘advice’, I’m just throwing some of my own ideas out there. If you want to follow up on this it’s imperative you do your own research and due diligence. If you mess up because you haven’t carried out due diligence, it’s not my fault! :)
I’ve tried to keep my political views out of this but they may well have crept in. It’s no secret we here at Spain Buddy are vehemently pro-Europe and resent being used as bargaining chips in these so called ‘negotiations’. As such we’re looking to minimise our involvement with the UK.
We’re all aware of how the rich celebrities, large companies and even politicians themselves involve themselves in tax avoidance. Why shouldn’t the Average Joe be looking for alternative ways to work globally as long as it’s legal?
I have seen some spam email purporting to represent Estonia or be acting as consultants. TRUST NONE of these should they arrive in your inbox. Only visit the official website for information and to apply.