Can residency in Estonia help you do business there?
Becoming a resident of Estonia is connected with a number of advantages. The most important advantages include: access to education, obtaining legal employment, the right to benefit from social assistance, but most of all the right to have a biometric ID-Card.
This document is used to establish identity in the electronic environment and to make a digital signature, so having the status of an Estonian resident definitely makes doing business there easier.
ID-Card for Estonian residents – what are its advantages?
Estonia has by far the best developed national ID card system in the world. The ID-Card is more than just a legitimate photo ID card – it also provides digital access to all secure electronic services in Estonia, regardless of citizenship. The chip on the card contains embedded files, and thanks to 384-bit ECC public key encryption, it can be used as the ultimate ID card in an electronic environment. The card is part of everyday transactions in the public and private sectors. Estonian residents use their IDs for digital signatures, i-Voting (online voting), checking medical records, filing taxes, using e-prescriptions, accessing health information, paying bills, signing contracts, shopping, among other things. Residents in Estonia can also use their Mobile-ID on a smartphone or Smart-ID app. Digital identity holders do not necessarily have to be Estonian citizens.
Possibility of opening a private bank account in Estonia for Estonian residents
ID-Card holders are treated equally to Estonian citizens, which in turn allows them to open a private bank account and then a business account. The card is used as an identity card when logging in to bank accounts – using it you can authorize transfers, sign agreements with the bank, at the same time being assured of the safety of transactions. As a non-resident of Estonia it is more difficult to open a bank account, and even if you manage to do it, the account maintenance costs about 150 EUR per month. Furthermore, a Polish bailiff cannot seize a foreign account, because the scope of his/her activities is limited to the territory of Poland.
Having the status of Estonian resident increases the credibility of the company on the market, because in the Estonian Registry and Information Systems Centre it is visible that the company is run by an Estonian resident.
Substance vs. residency in Estonia
Another argument of having resident status in Estonia is building substance. Substance is the extent to which a company or organization conducts operations and business in a particular country. If an organization does not meet a country’s standards for substance, it may face higher tax burdens, loss of tax treaty benefits, denial of local tax residency, and other penalties. Without these basic structures, tax authorities may conclude that a company lacks economic substance. So it makes sense to have Estonian resident status when doing business there.
Common Reporting Standard and resident private bank account in Estonia
The Common Reporting Standard (CRS) is an information standard for the automatic exchange of information between tax authorities regarding financial accounts on a global level. Its purpose is to combat tax evasion. Only non-residents of Estonia are reported to the CRS. Residents in Estonia are treated equally to Estonian citizens and thus there is no obligation to report their bank accounts to the Common Reporting Standard.
Work and social security of Estonian resident
Estonian resident can take up a job in Estonia and be a participant of health care and social security system. Estonian residents are also able to exchange their driver’s license for an Estonian one and use it throughout the world.
Since running a company in Estonia is very popular and Estonia is a world leader in digital government, it is definitely worth combining running a business in this country with becoming an Estonian resident.