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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 he/she 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 from The Economist; the first person to apply for and be granted e-residency through the standard process was Hamid Tahsildoost from United States.
Contents
Application
An application for e-residency can be made over the Internet, 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.
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. Residents pay tax in their home countries—which provide them with the everyday services they use—not Estonia.
e-Residency allows: company registration, document signing, encrypted document exchange, online banking, tax declaration, fulfilment of medical prescriptions. Other services become available as the scheme is expanded. 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.
e-Residency is not related to citizenship and does not give the right to 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. Although the idea of issuing ID cards to non-residents had been discussed at least from about 2007, and proposed again in 2012 by Estonian cybersecurity expert Anto Veldre, 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.
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. 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. 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).
Reception
In general the e-residency project was positively reviewed in the news media, being recognized for its innovativeness and potential. 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. Legal experts have warned that e-residency might create some risk of 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.
There has been international interest in different countries, with the issue being covered by media in the United States (The Atlantic, The Wall Street Journal, Ars Technica), United Kingdom (The Guardian, Wired UK), Finland (Helsinki Times), Australia (ABC), Italy (Wired.it) etc. In neighbouring Finland it elicited some fear that e-residency might give Finnish enterprises an urge to move to Estonia.
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.