e-Residency and taxes: where you and your OÜ pay

What is e-Residency?

e-Residency is a digital identity issued by the Estonian government. With its card you can authenticate yourself online and sign documents with a secure electronic signature, from anywhere in the world.

For a founder its point is practical: it lets you start an Estonian company and handle its paperwork without being in Estonia.

The programme’s own words are worth keeping in mind: e-Residency is “a government-issued digital identity”. It opens Estonia’s online services to you. It is not a status that moves your life, or your taxes, to Estonia — the programme says plainly that it does not affect your personal tax residency.

Once the card is set up, the same ID logs you in to Estonia’s e-services and signs documents: the company’s papers, and the reports it files online. That is what makes an Estonian company workable from another country — and it is where the benefits end and your own country’s rules begin.

This guide draws that line. First what e-Residency does and doesn’t do, then where you and your company are taxed, then the practical points — an address, a bank, and what to check before you found anything.

What can you do with e-Residency?

With e-Residency you can found an Estonian company fully online, from anywhere, in the e-Business Register for a state fee of €265.

After that you run it the same way: sign documents digitally, and approve and file the company’s annual report online every year, from wherever you are.

The state fee is the charge for founding a private limited company electronically, through the e-Business Register. Founding through a notary is the other route, and it costs more.

The annual report shows how far the card reaches. The register’s e-reporting environment works with an ID card, Smart-ID or Mobile-ID, and the e-Residency card is a digital ID card. When the report is approved and filed there by securely identified people, it needs no separate digital signature — unless it is audited.

A board member can also give an accountant the right to enter and submit the report. The accountant files it; approving and signing it stay with the board.

What doesn’t e-Residency give you?

e-Residency isn’t citizenship, and it isn’t tax residency, physical residency or a right to enter Estonia or the EU without a visa where one is needed. The card is no travel document and no physical ID.

Nor does it guarantee a bank account: banks and payment institutions run their own checks.

The programme lists these limits itself, and the first one matters most. Holding e-Residency leaves your personal tax position where it was, so the questions about your own income tax are answered by the country you are resident in — not by your card.

The card works online only. It isn’t valid as physical identification and can’t be used as a travel document, so your passport still does those jobs.

Where do you pay personal income tax?

Estonia treats a person as resident if their place of residence is in Estonia, or if they stay in Estonia at least 183 days within 12 consecutive months. e-Residency counts towards neither.

So holding it leaves your tax residency exactly where it was, and so does running an Estonian company from abroad.

Those days are days spent in Estonia. Running your Estonian company from abroad, however much of your year it takes, adds none of them — and neither does signing its documents with your e-Residency card.

The two columns are deliberately separate. You and your company are two taxpayers, and different rules decide where each one is resident — for the company, the law it was founded under. Most of the mistakes made with e-Residency come from treating the two as one.

Where does your company pay tax?

An Estonian OÜ is an Estonian resident company because it was founded under Estonian law, wherever its owner lives. Estonia taxes its profit when it is distributed, not when it is earned.

But a company run from another country may also be taxed there: EMTA says a company managed from abroad will probably have a permanent establishment there.

Estonia’s own test is simple: where the company was founded. Profit it keeps is taxed at 0%, and corporate income tax falls due only when profit leaves the company.

EMTA’s page for companies founded by e-residents spells out the other side. If the company’s business is carried on only outside Estonia, the income it earns abroad is taxed abroad, and Estonia prevents double taxation. Where the company has a permanent establishment in another country, taxation there follows the tax treaties.

And e-Residency is no shield. In EMTA’s words, it “does not give an automatic exemption from foreign tax liabilities”. Whether the country you run the company from taxes it, and how, is a question for that country’s law and any treaty it has with Estonia.

Running the company from your home abroad is still running it from abroad. EMTA’s expectation of a permanent establishment there is about where the company is managed, not where it is registered.

What happens when you pay yourself?

When an Estonian OÜ pays out profit as a dividend, the company pays corporate income tax of 22% of the gross amount. If you receive the dividend as a natural person, Estonia withholds nothing more on an ordinary dividend.

What you then owe on it is a matter for the country you are tax resident in.

So the Estonian side of an ordinary dividend is settled by the company. You report the dividend in your own country’s income tax return, under that country’s rules.

EMTA adds a caution worth knowing before you plan around a treaty: in most cases, an e-resident can’t use the income tax the Estonian company paid for double-taxation relief at home, because that tax was paid by a different person — the company.

How the Estonian tax is counted on a payout, what else counts as taking profit out, and the conditions a dividend must meet first are in the guide to Estonian corporate income tax.

Does your company need an address in Estonia?

No, but it needs someone in Estonia if its address is abroad.

An Estonian company whose address is outside Estonia must designate a contact person, and only a notary, an advocate or law-firm owner, a sworn auditor or audit firm, a tax representative of a non-resident, or a licensed trust and company service provider can be one.

What decides it is the company’s address in the register, not where its board members live. A company with an address in Estonia needs no contact person.

The contact person’s term is entered in the register, and when it runs out, their details are removed from the register automatically. A company with an address abroad is then without the contact person it must have.

That gap has consequences. The registrar sets a time limit to appoint a new one, with a warning that the company may be deleted from the register; if the limit passes with no contact person, deletion can follow. The registrar can also start compulsory dissolution instead. So treat the term like a deadline of its own, and renew it before it ends.

Who can act, and what the role does and doesn’t cover, is on the contact person and legal address page.

Will e-Residency get you a bank account?

Not by itself. e-Residency doesn’t guarantee access to banking: banks and payment institutions run their own onboarding and risk checks, and each decides whether to take your company on.

Plan for that step early — before the company’s first invoice needs somewhere to be paid.

The card proves who you are online; it doesn’t vouch for your business. What a bank or payment institution asks for is its own decision, and the same company can be welcomed by one and turned away by another.

More on running an Estonian company as an e-resident — and on keeping its books from a distance — is on the page for e-residents.

What should you check before you start?

Before founding an Estonian OÜ with e-Residency, check four things: where you will live and run it from, whether that country treats a company managed there as its own resident, where its address will be, and whether VAT starts early.

• Where you will live, and where the company will really be run from.
• How that country sees a company managed on its soil.
• Where the company’s address will be.
• Whether VAT starts early.

Where the company is really run from matters because EMTA expects a company managed from abroad to have a permanent establishment in that country, where its profit may then be taxed. And that country may see the company its own way: Estonia looks at where the company was founded; the country you live in may apply its own test. That is something to check, never something to assume.

If the company’s address is abroad, the company must have a contact person in Estonia for as long as the address stays abroad. And VAT can start early: a company registers once its turnover in Estonia passes €40,000 in a calendar year, and buying listed services from foreign businesses not registered in Estonia can require a limited registration whatever the turnover — the VAT guide walks through both.

None of these depends on e-Residency. The card makes the company easy to run from abroad; these four decide what running it from abroad means.

Questions about e-Residency