Hacker News new | comments | ask | show | jobs | submit login
Ask HN: Anyone doing business using Estonian e-residency?
158 points by Crazyontap 48 days ago | hide | past | web | favorite | 71 comments
Do you think it's a viable solution for doing online business? How is that working out for you in general?



Opening a UK limited company is at least as straightforward. Registering takes a couple of hours, it can be done entirely online and the fee is £12 ($15). You don't need to be a UK resident. You do need a registered office in the UK, but a company formation agent will provide one for about £20 ($26) per year. All your tax returns can be filed entirely online and HMRC provide a very helpful tax advice service. It really is fantastically simple.

The obvious advantage to registering in Estonia would be the certainty of continued access to the European Single Market. We're still not entirely sure how Brexit will pan out.

https://www.gov.uk/limited-company-formation

https://www.gov.uk/corporation-tax

Another option well worth considering is Stripe Atlas. It's not the cheapest way to start a corporation, but Stripe provide a huge amount of added value.

https://stripe.com/atlas


Wow. That's a lot cheaper than opening a company in Estonia.

How about the banking system for companies opened by non-residents? Can one get a multi-currency bank account easily?


Multi currency in UK with regular banks is dead. Some time ago, you were able to have USD, EUR and GBP , now they don't open new ones easily.

Alternatives likes Transferwise or Revolut would be the norm for operating across different currencies.


It’s also worth mentioning a UK LLP, which is a pass-through entity similar to what US LLC is to single non-residents. Quite viable.


Why? An LLP is supposed to be for lawyer partnerships, dental practices, etc. and has all sorts of limitations a ltd company doesn't.

You can't sell equity in an LLP being a big, obvious, one, so basically you can't raise money.


How are taxes in the UK as coimpared to Estonia?


Corporation tax in the UK is currently at 19%. If you are a UK tax resident, you also have to pay dividend tax which starts at 7.5% (over your allowance).


More information here: https://www.gov.uk/tax-on-dividends

It jumps significantly (next step up is 32.5%) once you move into the higher income tax brackets, which start at £46k: https://www.gov.uk/income-tax-rates


But only for the difference.


After looking into it for a while, i decided not to do it. Context: I live in Germany for roughly 2/3 of the year, rest is traveling.

Not sure where you are located, but if you spend the majority of your time in a other EU country (e.g. Germany) you will have a very hard time explaining to the local tax authorities that the company entity is not effectively being managed from Germany. And when you fail to explain this, the company entity becomes a german tax resident and you have to deal with all sorts of paperwork and expensive tax consultants. This is especially true when you have no local employees in Estonia.


This comment should be higher up. If you are a freelancer thinking you could save on taxes by setting up a remote company in Estonia, be aware that your tax authority can (and will) demand that your company be taxed in your home country.


Through a US company, I employed a US citizen residing in Germany, as a contractor. It was terrible! Every German accountant we talked to acted like he was a unicorn and wanted to charge us tens of thousands of dollars to figure it out. We muddled through, no doubt doing it wrong... but it didn’t seem like there’d be any way that’d be right.


While I'm not a tax expert, our startup is currently building a platform to help with payouts and tax rules. As I understand it, all you need is to get a W9 from the US resident and then file a 1099-MISC annually for him. He may be subject to tax withholding -- but that's all in the instructions on the IRS forms.


Same kind of thing here in India. As per Indian tax authorities, if your "effective place of business" is India, you will be taxed as per Indian laws.

I believe many countries would have DTAA with Estonia.

Tax-wise Estonia may not be right for you, but starting a company is a lot easier depending upon where you live. In India, it takes about 30+ days to open a company, not to mention stupid, useless forms and KYC-terrorism.


Is it ok to operate an Estonian company from Germany though?

Not for tax reasons (assuming you would pay the same tax for either a German or Estonian company as others said in the thread) but for bureaucracy reasons. Skipping the whole German procedure.


It is "okay", but you will end up with more bureaucracy. If, as mentioned, you are living in Germany 99% of the time and spend close to zero time in Estonia, the german tax authorities will (sooner or later) argue that the company is effectively being managed from Germany. Then you have to deal with tax nonsense in two countries and finding a tax consultant who will deal with this is rather expensive. Some basics (if you understand German), are explained here: https://www.ihk-berlin.de/blob/bihk24/Service-und-Beratung/r...


Seriously guys, consult an accountant, a tax lawyer or just someone who could have at least a clue what you are trying to do. There are reasons to incorporate companies that are not in your place of residence, for example: vat registration and to have a "front-door" in that country for selling to the public, for procurement, for legal reasons (e.g. if you sell products in the EU, you need to have an EU contact address listed on the product) etc. International taxation is not easy and nobody will explain to you the problems here but there will be for sure problems. If you want to do it right, you usually pay what you saved in registration to the accountant instead. And no, you won't save any tax. Let me be clear, you won't save any tax! If you do, it's either called tax avoidance (punishable in many countries!) or you are an international company that already has a tax accountant/lawyer to structure things properly, has substance in those countries and will for sure not ask questions here.


I considered it for my SaaS business. But at the moment my business is based in Poland, so moving to Estonia doesn't change things much (I still can't economically sell to individuals within the EU because of idiotic VAT regulations). I chose to remain in Poland for the time being. On the plus side: low taxes, EU law, first patent troll doesn't bankrupt my business. On the minus side: Stripe continues to ignore Poland, so I have to deal with Braintree and this is a pain in oh so many ways, VAT MOSS is a disaster, and we have the Cult of the Invoice.


Can you elaborate on how does being in Poland protect you from patent trolls?


I'm not the OP, but a company I worked for once had reason to set up a US presence, but decided against it because once you have a US entity, patent trolls have someone to sue in their jurisdiction.


Exactly. This is also one of the big reasons why Stripe Atlas is not necessarily a good idea for companies from outside the US.


It's not being in Poland that helps, it's being outside the US that matters. USA is the only country I know where you can successfully run small companies into the ground just by suing them (for pretty much anything, but patents are a good vehicle for this). The legal system is such that small companies are at a distinct disadvantage (because of complex precedent-based law and legal fees).


What VAT regulations are keeping you from selling to other EU customers?


Recently VAT collection was changed for electronic services. Before you simply charged your countries applicable tax rate, unless a VAT ID was provided. Now you have to charge the VAT rate applicable to your customers country of residence, forcing every vendor to care for and implement correct VAT rates and regulations for all your products and every of the 28 countries in the EU - possibly even more due to bilateral free market agreements with Norway, Switzerland and the like.

This is way more complicated than you might think, as improper tax collection may constitute felony charges and fines, leaving small businesses and startups in an awkward spot where not selling to other eu countries is easier than selling to them in a compliant way, putting the idea of a single market ad absurdum. The last thing you would want is pointless market entry barriers affecting every entity offering cross border sales.


I found the VAT place of supply rules to be inconvenient but reasonably straightforward to comply with. Several billing platforms will collect VAT across the EU on your behalf, or there are third-party solutions that will integrate with your own payment gateway.

I have no idea what the situation is in Poland, but there's no such thing as a "felony" in my country; an honest mistake on my tax return is an honest mistake, not a criminal offence. I'd only be criminally liable if I was unreasonably negligent or acted with the deliberate intent to deceive. As long as I a) record the customer's country for each transaction and b) fill out my VAT MOSS return accordingly every quarter, the tax authorities (HMRC) are perfectly happy.

https://quaderno.io/resources/eu-vat-guide/


Fines yes but felony charges? Any references to that for the weird EU VAT of that actually happening unless it was deliberate, large scale avoidance? I messed up with it a lot but (obviously) accidentally and on a small scale; I get a slap on the wrist and some back taxes when audited. Not even fines.


I don't know about other countries, but in Poland the tax authorities are pretty strict, especially where VAT is concerned. It's good, because things are becoming clean and predictable, but you really do not want to get things wrong. You won't go to jail of course (unless you've defrauded bajillions), but fines and regular inspections will hurt your business pretty quickly.

Doing VAT wrong is really not an option.


Yep. Of course you’ll have to be negligent if not willfully wrong in your returns. But VAT ain’t nuthin’ to fuck with. It will come back to you.


Well, I know a lot of small companies in NL from friends and people I met who are simply sloppy and negligent with VAT and taxes in general but not willfully wrong and nothing at all happens. Slap on the wrist and fines. Same in Spain (much higher fines).

So ok, I see in theory it can happen but is there any case where this actually happened in the EU unless it was willfully wrong or fraud in some huge company with an accountants scandal?


At least in Germany this highly depends on your responsible internal revenue office (Finanzamt) which May Even vary within city limits. And of course there have been trials for seemingly trivial amounts of money never justifying the cost of persecution or tax auditing. While it may not put you on top of the most wanted list, there still is a risk and it’s not to be underestimated. Even though cum ex etc show ridiculously failing the checks and balances are


Seems like something that could be greatly simplified to the point of being a non-issue by software (either standalone or a service), and if one doesn’t already exist, seems like a good opportunity. This is similar to how state taxes work in the US and many small businesses manage.


Gumroad handles VAT-EU for you[0] but I didn't tried it. If anyone worked with them, here are some questions I have:

- do they send one monthly payment? If so, from which country?

- is VAT-EU number needed?

- if I don't register for VAT (don't reach yearly selling threshold), do I get full payout? Are clients charged for VAT in such scenario?

- what documents do I get from them, in case of tax office review?

- is 3.5% + $0.30 fee applicable to EU customers or is there some additional cost (I assume not, but I ask just to be sure)?

- if I sell digital product, what should I do about e.g. Canadian/Indian/Japanese/whatever sell taxes?

[0] http://blog.gumroad.com/post/110080508463/vat


Isn't it just as simple as tax it if you have an actual store in-state and don't if not?


The need to keep track of all VAT rates across the EU, charge all individual customers their respective VAT, gather everything into VAT MOSS reports, pay everything with appropriate conversion rates chosen. It's not impossible, just complex, and in general not worth the effort if you're charging several dollars a month.

If you think this is easy, tell me how much VAT (and in which currency) you will charge a customer from AX today, and what you'll do about a customer from GB in March. None of this is obvious, and it all changes quickly.

As others have pointed out, there are services that supposedly help with this. I looked at everything that was available a couple of years ago and none of the available solutions did this easily and correctly. It's not an easily outsourceable problem, either, as it has to integrate closely with your billing.

For B2B customers this is not an issue: you don't charge VAT (reverse charge) and you're done.


I am an e-resident and I used it to establish a business entity for my startup. It works really well for my particular use case.

I am a Canadian resident, my co-founder is an Estonian resident (physical). Both of these may change in the future and the intended market for our startup is global. Estonia was chosen as a common ground with a minimal overhead - it's easy and costs almost nothing.

Using government services with an ID-card was a breeze. For banking we use a "physical" Estonian bank, once set up I have no problem accessing it online either.

We didn't have any revenue the previous year, so cannot say much about taxation story here. It gets more or less complicated depending on your country of residence, but I don't think that having a business entity in Estonia is fundamentally different from other EU countries here.

Slightly more personal and readable story, written by me: https://medium.com/e-residency-blog/how-to-launch-an-estonia...


Corporate taxation is generally based on where the management and control of the business is, not where it is incorporated, although the incorporation jurisdiction is considered. If you had incorporated the Estonian company by yourself without a partner and had been running it from Canada, the Estonian company will be considered a Canadian company for tax purposes and required for file a T2 corporate income tax return.

If you are still a Canadian resident, do remember to file T1134. If you own 50/50 in the business, you can perhaps argue that this is a foreign affiliate only, and not a controlled foreign affiliate.


In my experience a lot of freelancers are using it (especially when they like to work in different countries). Personally I’m quite happy using it and it’s a way better experience in comparison with the chamber of commerce in the Netherlands when you start freelancing (had some bad experiences unfortunately when they sold my data to shady companies which will target you with fake invoices/bad deals/spamming). Another great feature is that you are in full control how to pay yourself (salary/board member fee/dividends) which can have serious tax advantages depending on your country’s tax system.


How do you avoid that the company becomes a dutch tax resident if you manage it from the Netherlands most of the time?


There are limitations like I cannot rent an office for longer than six months and my company is registered in Estonia with an Estonian address (I use leapin.eu which takes care of the accounting part). I get your point and when you are selling physical products I cannot see how that would be possible. However if you are doing location independent work like coding or designing it is almost effortless to not become a tax resident.

Also the Dutch tax laws don’t care about the company as long as you pay the personal income tax plus some employee insurance tax.


In the Netherlands, a corporation is a resident for tax purposes if the management and control of that company is in the Netherlands, regardless of where that corporation is set up. There is no reference to address or office location. I'd be wary of casually dismissing Dutch tax residency of an "online" company--it is not as trivial as most think it is.


would this be a good option for a consulting business, or services in IT ?


It depends on the size and the structure of the company/business you want to start. Imho I think it is excellent for freelancers, but I would seriously think about another option when you want to start a company with other people and give out stocks to employees in the future.


You can register a company with it in 1 hour. Then open a bank account with Revolut Business and run it from anywhere in the world. It really depends on what you want to use it for.


How long did it take you figure out taxes/permits/liability for the Estonian entity in countries where you and your customers live?


Getting an Estonian bank account is nigh impossible. If you want to do anything AdSense related, go with an Armenian account instead. Less hype, same rules (~), totally worth it.


Would it be easier to convince EU customers that your US (SaaS?) business is trustworthy if you operated in Estonia?


I don't think it will make a difference - everyone is used to most internet businesses being from and registered in the US.

In my experience of trying to sell a SaaS to small businesses, their only location-based concern is about where the data is hosted and if we are GDPR compliant. If you can offer hosting in some EU AWS or Google Cloud region that will be much more useful.


Double taxation seems to be the main pain point looking at the comments. It will help to google and see if your country has a tax treaty with estonia.


Just "having" a treaty is not enough. Germany has a treaty with Estonia, but it doesn't protect you. The Estonian company WILL become a german tax resident if the company is being managed by a German citizen living in Germany 99% of the time.


This is correct, and this applies to many OECD countries. There's generally little reason to set up a company overseas if you live in an OECD or EU country; foreign affiliate tax rules will get you.


I got my E-residency last year & find it kind of useless.


What have you tried doing with it?


I registered my Software Developer company as an Estonian ÖU


In most cases that setup does not absolve you from tax obligations where you live. I can see a benefit in setting up a business or branch in EU in general, if you have customers in EU. Otherwise why Estonia specifically?


> Otherwise why Estonia specifically?

Because the Estonian government is fairly unique in that it will issue an electronic identification card to anyone who requests it and passes a background check, permitting that person--regardless of nationality--to use most Estonian government services, like business registration and tax filing, from anywhere.

https://e-resident.gov.ee/


Ok, but if you don’t physically live in Estonia, who accepts your ID card or permits you to do business using only an Estonian corporation?


Anyone who wants to can accept the card (technically, the certificate stored on the smart card). For example, I use a domain registrar who registers .ee domains--thus requiring a digital signature from an Estonian ID--and can also use the card as a login mechanism. To be clear, the card isn't an ID in the sense of "here's my ID in person" (the card doesn't have a picture); it is a smart card with two digital certificates stored on it.

More to the point, though, is that Estonia provides a digital identity and signing system that, among other purposes, allows you to access Estonian government services like forming a company. Since you can form a business under Estonian law, you operate as part of the European Union single market.


With an Estonian (electronic) ID card, you can incorporate and run the business online. An Estonian corporation is permitted to do business anywhere in the EU.


Sovereignty as a service.


I suppose, but only in the same sense as governments around the world tend to have mechanisms for non-residents and non-citizens to transact business or own property. An Estonian identity certificate doesn't, on its own, allow someone to enter Estonia or live or work there. That still requires citizenship of Estonia, the European Union, or meeting other requirements.


I too have been curious, and I haven't seen anything beyond "nifty factor" to compel me to set it up.

In most cases it won't positively benefit people in terms of taxation.

However, it might perhaps be useful for people coming from countries that are looked down upon by some significant EU countries. In that case, having an Estonia registration might increase the credibility of the business from an initial (and sometimes important) external view.


I set up a company and bank account a couple of months ago. It was very easy.

We are in development so don't have any customers yet, so I can't tell you how taxes etc will be but I can tell you the process of dealing with the .ee government so far is paradise compared to the US process.


Would you say it might work for a consulting and IT services business? did you experience any hidden costs, thanks


If you live in the EU it's not clear what benefit there might be, and if you're a consultant there might be even less.

This doesn't save any taxes, and isn't a strategy to do so. The costs themselves are't that great: a few hundred Euro.

The reasons we did were the following:

- Ease of doing business with clients and vendors in other EU countries: we have an EU bank account in Euros, can generate all the right VAT paperwork etc. Not huge, but for some businesses critical. We also have a US subsidiary in Delaware and a couple of state registrations because that is how you employ people in the US. Ditto for a third country where one of the founders is moving.

- VCs are increasingly comfortable with overseas-registered countries, at least ones not in tax havens. Ten years ago this would have been seen as weird. I've always previously incorporated in Delaware where I've never set foot so this isn't a big deal.

- Our lawyer (!!!) in SV suggested we officially HQ the company overseas (I already had an e-residency so we used Estonia). He said as the founding team was all foreigners (though some in the Valley for decades), it was a good hedge against unforeseen changes in the federal government's attitude towards foreigners. TTTT I would have considered it wide-eyed raving except this lawyer has been working at a big law firm in the valley, for 30 years. But what the hell, it's so easy to do these days why not.

Not everything you need is in English but tbh I don't interact with Estonia any more than I interact with Delaware and this has never been a problem.


This would be more of a family business, nothing special really, would you recomend a place where to get the right info, if you were in touch with any of those companies, dont want to trouble you with the info :) thanks


Did you need a local address and phone number?


No, you can use a registered agent same as you do in the US when you incorporate in Delaware. You can open a bank account too, though many banks apparently won't participate because of some bank scandals in a nearby baltic country. I happened to be near Estonia and so opened one in person. The scandal problem happened more recently so I am not sure how easy that is right now.

The e-residency card comes with a chip reader that plugs into your computer and does a handshake with the bank. There are a bunch of companies who authenticate via the e-e-residency card: https://e-resident.gov.ee/run-a-company/


It may not be important for your use case, but Stripe will not work with Estonian company. https://stripe.com/global


Would this work as a workaround for creating a Stripe account, if I'm living in a country not supported by Atlas?


Stripe does not seem to support Estonia.

https://stripe.com/global


Check out the UK LLP.




Applications are open for YC Summer 2019

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: