e-Residency Estonia – Explained: Easy To Understand

Despite having put out 4 different videos covering the topic of e-Residency in Estonia from various angles, people still have misconceptions about this program, it’s benefits and applications.

If this is the first time you hear about e-Residency, or don’t really know what it is, I highly recommend you watch my previous videos first where cover the following topics:

In these videos I give an introduction to the e-Residency program, highlight the benefits, guide you through the application process.

Plus, I’ll also bring you along on a trip to Estonia’s capital Tallinn where I met with a bank representative at LHV bank to open my business bank account.

What I will cover today are the following topics:

  • What e-Residency is NOT. The biggest misconceptions about the program.
  • What you CAN & CAN’T do once you’re an e-Resident of Estonia. The programs benefits & limitations.
  • Practical applications of the e-Residency program – specifically related to online businesses (Amazon FBA, Shopify, YouTube) but also info on using your business funds for investing or trading (such as Forex trading).
  • Lastly, I will conclude this video by showing you how you can get started today & take the first steps towards attaining e-Residency!

Alright, let’s get started!

e-Residency Misconceptions

I’m not sure if the name of the program was a good choice because most of the misconceptions have to do with the name ‘e-Residency’.

People hear ‘residency’ and instantly think about tax residency, citizenship & various other ramifications that stem from obtaining residency in a country.

e-Residency Estonia Misconceptions

That’s why people ask questions such as,

  • Do I also get a passport with the e-Residency program?
  • Does the e-Residency program allow me to travel visa-free to the European Union?

The answer to both questions is no.

As I’ve mentioned in my extensive e-Residency Guide, becoming an e-Resident doesn’t confer citizenship or tax residency.

It’s probably best if you disregard the name and pretend the program is called e-Business Estonia because that name would give you a better idea of what the program is about.

e-Residency is simply a program through which you (a non-Estonian) can access some of the services that are otherwise only be available to Estonians.

What can you do with e-Residency?

  • Establish an company in the EU (in Estonia). This would otherwise be more difficult or impossible – especially if you’re not a EU citizen.
  • Set up a business bank account in Estonia. Again, very difficult to do otherwise.
  • Sign documents online and run your business remotely. You never actually need to show up in Estonia.

Let’s talk about what you can & can’t do once you are an Estonian e-Resident so you will understand why being able to establish a company in the EU can be very beneficial.

e-Residency Limitations

Here’s what you can NOT do …

Avoid paying income tax in your country of residency. I’ve pointed out already that e-Residency doesn’t confer tax residency, that also means it doesn’t change your tax status/rate in your home country.

Use it as a personal ID. The e-Residency card you get is for business-purposes only (mainly to be used with the card reader). It’s not a personal ID or travel document. You can’t use it for traveling or to identify yourself.

e-Residency Benefits/Applications

Now to the e-Residency benefits and – depending on where you are from – there are many!

e-Residency Estonia Benefits

Generally-speaking, if you’re from a third world country, you can benefit more than someone who is already a EU-citizen.

To show you what I mean, let’s take the example of someone who has gotten in touch with me because he had a few questions about the program.

This person would like to get started with Amazon FBA. However, he lives in Pakistan and as such he is not able to open an Amazon Seller account.

The same would apply to many other online or business opportunities where he’d be barred from entry simply based on his residency.

Bypass (Business) Restrictions

When you run an Estonian company, you can bypass many of these restrictions because now everything is run under your company’s name and that company resides in Estonia.

You are also able to open a PayPal business account and make withdrawals to your Euro bank account.

If you have clients and need them to send you money, they are able to transfer money to your EU bank account which makes the process a whole lot easier.

Imagine you have a potential client and he can decide between 2 offers. One from you and one from another business located in the U.S.

Your offer might be better but I can tell you if he has to send money to Pakistan, that will probably be a deal-breaker.

With your Estonian bank account, you are able to receive payments in Euro and hold cash in multiple currencies such as USD & GBP.

Invest Tax-Free

In your home country, you’d pay capital gains tax on any of your investments. That tax slows down the compound interest effect.

Now you can simply transfer money into your business bank account & start investing or trading. As long as you keep the investment, there’s no capital gains tax.

e-Residency Application Process

The general application process & requirements, I have already covered in another article (just search for it using the sidebar).

However, I have received some additional questions in regards to this process.

e-Residency Getting Started

When signing up for e-Residency how detailed was your motivational statement? I only want to join so that I’m able to sell via Amazon FBA which I’m currently not able to do because my country of residence isn’t accepted on the platform.

My motivation statement was very basic – just the essentials, a few sentences long.

I would simply state that you plan on doing Amazon FBA, perhaps what niche & if you have prior experience, you can mentioned that as well.

I wouldn’t mention the country restriction issue …

In regards to the e-Residency application, do I need to submit screenshots, a proper business plan and how rigorous is the screening process?

Again, mine was very basic. No detailed business plan. Just state what you plan on doing & basically how the business will operate (in rough terms).

I got approved & was able to pick up my e-Residency card at the closest Estonian embassy within a few weeks.

The meeting with the bank representative for the business bank account was just to show up in person because it’s required by law.

It’s not a real interview – everything is set up already, you simply get your debit card and a folder with additional information.