e-Residency of Estonia

Estonia's first e-resident, British journalist Edward Lucas
e-residency identity card

e-Residency of Estonia (also called virtual residency or E-residency) is a program launched by Estonia on 1 December 2014. The program allows non-Estonians access to Estonian services such as company formation, banking, payment processing, and taxation. The program gives the e-resident a smart card which they can use to sign documents. The program is aimed towards location-independent entrepreneurs such as software developers and writers. The first e-resident of Estonia was British journalist Edward Lucas; the first person to apply for and be granted e-residency through the standard process was Hamid Tahsildoost from the United States.[1][2][3][4]

Application

An application for e-residency can be made online by filling in a form, supplying a scan of a national passport and a photograph, and giving the reason for applying (which does not strongly affect the outcome of the application). Kaspar Korjus, managing director of the e-residency programme, said that applicants who had been involved in financial misbehaviour such as money laundering would be rejected. Successful applicants would be invited to an interview in Tallinn or an Estonian embassy about three months after applying, and would then, if successful, be issued with their card.[5] The certificates of the document are valid for three years. After that period, if a person wishes to continue using e-services, they have to apply for a new document. The application process will be the same as when they first applied. A state fee needs to be paid again when they submit a new application.

Benefits and limitations of e-residency

E-residents will have their financial footprint monitored digitally, in a manner stated to be transparent; the reaction to the widespread financial misbehaviour at high level revealed by the Panama Papers leak was suggested to be a factor helping the more transparent Estonian initiative according to Korjus. E-residency itself does not have an effect on income taxation — neither does it establish an income tax liability in Estonia nor does it relieve from income taxation in the resident's home country.[5]

E-residency allows company registration, document signing, encrypted-document exchange, online banking, tax declaration, and fulfilment of medical prescriptions. Other services become available as the scheme is expanded.[6] A smart card issued by the Estonian Police and Border Guard Board in Estonia or at an embassy is used for access to services.

Korjus said that registering an Estonian business was "useful for internet entrepreneurs in emerging markets who don’t have access to an online payment provider", and for startups from countries such as Ukraine or Belarus which suffer financial limitations from their governments.[5]

E-residency is not related to citizenship and does not give the right to physically enter or reside in Estonia.

Background

E-residency was led by Taavi Kotka, the vice chancellor of communications and state information systems in the Ministry of Economic Affairs and Communications.[7] Although the idea of issuing ID cards to non-residents had been discussed at least from about 2007,[8][9] and proposed again in 2012 by Estonian cybersecurity expert Anto Veldre,[10] the concrete proposal ("10 million e-residents by 2025") was presented by Taavi Kotka, Ruth Annus, and Siim Sikkut on an idea contest by Estonian Development Foundation in 2014. The project was initiated with the prize money from the contest. It is developed by a state-owned foundation, Enterprise Estonia.[11][12]

Kotka stated that, while the further goal of the project would be to gain millions of e-residents, its purpose was to increase the number of active enterprises in Estonia. The private sector must be able to develop concrete services on the legal and technical platform provided by e-residency, while the state would continue developing the legal framework according to the needs of the enterprises.[8][13] It has also been discussed in Estonian media that e-residency could be used to spread knowledge about Estonian culture online to develop cultural export.[14] By January 18, 2015, there had been applications from 225 countries, most of them from Finland (224), Russia (109), Latvia (38), the United States (34) and Great Britain (22).[15]

Reception

In general the e-residency project was positively reviewed in the news media, being recognized for its innovativeness and potential.[16][17] Estonia's former Minister of Finance Jürgen Ligi noted in 2014 that it was as yet unclear how e-residency would bring capital to Estonia.[18] Some legal experts warn that using e-residency to incorporate a letterbox company in Estonia might under certain circumstances make that company's profits subject to double taxation, as this is a completely new legal status that has not been considered in the framework of existing international agreements to avoid double taxation.[19]

There has been international interest in different countries, with the issue being covered by media in the United States (The Atlantic,[20] The Wall Street Journal,[21] Ars Technica),[22][23] United Kingdom (The Guardian,[24][25] Wired UK),[26] Finland (Helsinki Times),[27] Australia (ABC),[28] Italy (Wired.it),[29] and others. In neighbouring Finland, it elicited some fear that e-residency might give Finnish enterprises an urge to move to Estonia.[27]

There was an increase in interest after the Panama Papers leak pointed out the need for greater transparency in offshore business. After Britain voted to leave the European Union, companies were seeking options to continue to be able to trade in euros, and others had other reasons: in the two weeks following the referendum, applications from Britain (with 616 e-residents hitherto) increased tenfold.[5]

Security concerns

In 2017, the Estonian government froze[30] the digital ID cards of the e-residency program, two months after discovering a major security flaw that could enable identity theft. ID cards that were issued between October 16 2014 and November 25 2017 were suspended until owners have updated to a new security certificate and have until March 2018 to do so.

The Estonian government first revealed the original flaw in September[31], but gave no details until much later.

Partner services

In May 2017 Finnish online banking service Holvi announced it had partnered with the e-residency programme to enable business banking for e-residents without a necessity to visit Estonia to set up an account.[32][33]

In August 2018 e-Residency announced their latest partnership with one more online digital banking service LeoPay. The main reason is to offer e-residents an even wider range of options, conditions and terms to ensure better services and lower fees for everyone.[34]

See also

Footnotes

  1. ↑ President Ilves annab täna üle esimese e-residendi kaardi Estonian Development Foundation, 1 Dec 2014 (in Estonian) (Accessed on February 6, 2015)
  2. ↑ Eesti avab 2014. aasta lõpus oma e-teenused ülejäänud maailmale Majandus- ja kommunikatsiooniministeerium (in Estonian) (Accessed on February 6, 2015)
  3. ↑ Milliste hüvede osaliseks saab Eesti esimene e-resident Edward Lucas? Eesti Päevaleht, 29 Nov 2014 (in Estonian) (Accessed on February 6, 2015)
  4. ↑ E-residency – up against great expectations E-Estonia.com, 13.01.2015 (Accessed on February 6, 2015)
  5. 1 2 3 4 Maeve Shearlaw (15 September 2016). "A Brexit bolthole? For €100 you can become an e-resident of an EU country you've never visited". The Guardian. Retrieved 15 September 2016.
  6. ↑ "Estonian e-Residency - Which services can I use as an e-Resident?". e-estonia.com. Retrieved 15 September 2016.
  7. ↑ "Eesti infoühiskonna arengukava 2020", pp. 2, 15, 22 (in Estonian) (Accessed on February 6, 2015)
  8. 1 2 Hans Lõugas Taavi Kotka: e-residentsus on üksnes vahend, vaja on paremat majanduskeskkonda Eesti Päevaleht, 14 Oct 2014 (in Estonian) (Accessed on February 6, 2015)
  9. ↑ Kalev Kallemets E-residentsus aitab välisinvestoreid Eestisse Läänlane, 18 Sept 2014 (in Estonian) (Accessed on February 6, 2015)
  10. ↑ Anto Veldre Infoühiskonnast hereetiliselt Postimees, 9 Nov 2012 (in Estonian) (Accessed on February 6, 2015)
  11. ↑ Indrek Kald Arengufondi ideekonkursil kolm võitjat" Äripäev, 12 June 2014 (in Estonian) (Accessed on February 6, 2015)
  12. ↑ "10 miljoni eestlase" idee pääses Arengufondi konkursi kolme võitja sekka ERR, 12 June 2014 (in Estonian) (Accessed on February 6, 2015)
  13. ↑ Taavi Kotka Kui seda ei tee Eesti, siis teeb seda keegi teine Memokraat, 13 Oct 2014 (in Estonian)(Accessed on February 6, 2015)
  14. ↑ Ülo Pikkov E-residentsus ja Eesti virtuaalne kultuuriruum Sirp, 16 Jan 2015 (in Estonian) (Accessed on February 6, 2015)
  15. ↑ Kas e-residentsus toob rohkem venelasi Eestisse kinnisvara ostma? Äripäev (in Estonian), 06.02.2015 (Accessed on February 6, 2015)
  16. ↑ Kaupo Kask Mida kujutab endast e-residentsus? Advokaadibüroo Biin & Biin (in Estonian) (Accessed on February 6, 2015)
  17. ↑ Üks küsimus Äripäev, 15 Dec 2014 (in Estonian) (Accessed on February 6, 2015)
  18. ↑ Ligi: on ebaselge, kuidas e-residentsus raha sisse toob Postimees, 6 Dec 2014 (in Estonian) (Accessed on February 8, 2015)
  19. ↑ Kärt Anna Maire Kelder E-residentsuse varjatud karid ehk mis juhtub teisest riigist juhitud äriühinguga Eesti Päevaleht, 29 Nov 2014 (in Estonian) (Accessed on February 6, 2015)
  20. ↑ Uri Friedman The World Now Has Its First E-Resident The Atlantic, Dec 1 2014 (Accessed on February 8, 2015)
  21. ↑ Liis Kängsepp Estonia to Offer ‘E-Residency’ to Foreigners The Wall Street Journal, Oct. 21, 2014 (Accessed on February 8, 2015)
  22. ↑ Cyrus Farivar Estonia wants to give us all digital ID cards, make us “e-residents” Ars Technica, December 8, 2014 (Accessed on October 26, 2015)
  23. ↑ Cyrus Farivar I’m now an Estonian e-resident, but I still don’t know what to do with it Ars Technica, August 22, 2015 (Accessed on October 26, 2015)
  24. ↑ Nabeelah Shabbir Estonia offers e-residency to foreigners The Guardian, 26 December 2014 (Accessed on February 8, 2015)
  25. ↑ Anthony Cuthbertson Estonia First Country to Offer E-Residency Digital Citizenship International Business Times, October 7, 2014 (Accessed on February 8, 2015)
  26. ↑ Ben Hammersley Why you should be an e-resident of Estonia July 2015 (Accessed on October 15, 2015)
  27. 1 2 Merle Must Estonian e-residency attracts Finnish businessmen Helsinki Times, 12 Dec 2014 (Accessed on February 8, 2015)
  28. ↑ Kirsten Drysdale Estonia offers e-residency to allow non-citizens access to government services and business online ABC, 25 Nov 2014 (Accessed on February 8, 2015)
  29. ↑ Mila Ligugnana e-residency: residenza virtuale e digitale, in Estonia è già realtà Wired.it, ottobre 17, 2014 (in Italian) (Accessed on February 8, 2015)
  30. ↑ "Estonia has frozen its popular e-residency ID cards because of a massive security flaw". Business Insider. Retrieved 2018-03-01.
  31. ↑ Korjus, Kaspar (2017-09-05). "Here's what e-residents need to know about the potential security vulnerability". Medium. Retrieved 2018-03-01.
  32. ↑ "E-residency program announces e-banking partnership with Finland's Holvi". Eesti Rahvusringhääling. 2017-05-25. Retrieved 2016-03-07.
  33. ↑ Eeva Haaramo (2017-05-31). "Borderless banking: Estonia's e-residents can open accounts without going there". ZDNet. Retrieved 2016-03-07.
  34. ↑ Joel (2018-08-09). "LeuPay provides e-residents with more choice for banking". Medium. Retrieved 2018-09-27.
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