Nikita SavchenkoNikitaSavchenkoeverywhere

Open a 0% Tax Company with Estonian e-Residency Card

Apr 7, 2025Estonia#business #tech

The Estonian e-Residency card enables creating a remote digital business with significant advantages. Think of it like a gym membership in another city - full access to business infrastructure remotely, but no key to sleep in the building.

How to Get Started

The process is straightforward:

  1. Apply online - fill out the application form
  2. Pay the state fee (~100-120 EUR)
  3. Wait for approval (~3-4 weeks)
  4. Pick up your card at the nearest Estonian embassy (~1 month total)

The card uses an older USB smart card reader for digital signatures. It does not grant physical residency rights - it's purely for business administration.

Understanding Taxation

Here's where it gets nuanced:

Estonian corporate tax: 0% on retained earnings. Your Estonian company pays no tax on profits kept within the company. Tax (20%) only applies when you distribute dividends.

But your home country's tax rules still apply. This is the critical part many overlook:

  1. Personal income tax - As an individual, you pay taxes in the country where you're a tax resident. If you're tax resident in Estonia, you benefit fully from the 0% retained earnings model. Otherwise, comply with your local tax laws when taking salary or dividends.

  2. CFC rules (Controlled Foreign Corporation) - Many countries (US, UK, Germany, France, Australia, and others) have anti-avoidance rules that can tax you on your foreign company's profits even if you don't distribute them. If your country has CFC rules, the 0% retained earnings benefit may be nullified entirely.

  3. Permanent establishment risks - If you perform substantial work from your home country, tax authorities may argue the company has a taxable presence there.

The bottom line: The tax benefits depend heavily on where you're a tax resident and your country's specific rules. Some jurisdictions are very favorable, others will tax you regardless of the Estonian structure.

Consult a tax professional familiar with international structures and your specific situation. The Estonian Tax and Customs Board has resources for e-residents.

Recommended Stack

  • Estonian company + Stripe + Revolut Business
  • One of two most popular options for remote business (along with Delaware)

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