Estonia offers investors startup visa and unique e-residency

By Uglobal Staff

The competition for obtaining international talent is growing. The Baltic country of Estonia, the birthplace of Skype, has introduced two initiatives to attract that talent; the Estonia startup visa and e-residency.

“Estonia is a very business- and startup-friendly state,” said Valter Gencs, who heads international business law firm, Gencs Valters Law Firm, with offices in Latvia, Estonia and Lithuania. “It has the biggest number of start-ups per capita in the world. It is also famous for a corporate income tax, which is applied to the company only when profits are distributed.”

With the collapse of the Soviet Union in 1991, Estonia regained independence and has emerged as an economically prosperous eastern European member of the European Union. Through its initiatives, the government seeks to establish Estonia as a new European startup hub.

“E-residency is meant for all digital nomads, who are looking for a location independent business environment, which Estonian digital society offers,” said Mari Vavulski, head of Startup Estonia. “Startup visa is meant for non-EU startup founding teams to relocate to Estonia.”

The Estonian Startup Visa, launched in January 2017, is designed for non-EU startup founders who want to work in startups, relocate an existing startup, including employees, or found a new startup. Bypassing immigration officials, applicants are instead evaluated by the Estonian startup community. If they get the green light, they can choose between applying for a one-year visa with the option of extending it for an additional year, or a permit for startup entrepreneurship for five years.

“Startup visa program is cheaper and easier to acquire in comparison to traditional business visa and it also allows an Estonian startup to hire members from abroad easier,” said Gencs. “Therefore, it helps not only the creators of the startup who want to develop it in Estonia, but also the foreigners who want to work for an Estonian startup,”

Those interested in a temporary residence permit for business for five years, have three options, said Kristine Akopdžanjan, a lawyer for Estonia-based KRM Advisor, which provides company formation and accounting related services in Estonia.

The first option is to invest at least 65,000 euros of capital in their Estonian company and she says the “company`s equity capital, subordinated liability and registered fixed assets can be regarded as an investment.” In this case, Akopdžanjan said the company should be operating for five to six months prior to applying for the permit and a business plan in Estonian or English is required with the application. Two applicants can invest into the same Estonian company, for 65000 euros each, she said.

The second option is to apply as a major investor and requires a direct investment of at least 1 million euros in an Estonian company or investment fund, that invests mostly into the Estonian company, Akopdžanjan said, adding that a business plan is not required.

And the third option, she said, is to apply as a start-up, which does not require a business plan. It requires previous evaluation from the expert committee, which she said “is quite strict and gives quite a lot of refusals.” In the first three months, she said 106 applications were submitted from 29 countries, 62 of which received a negative evaluation.

Seeking to create a borderless digital society, the e-residency program is an initiative the government of Estonia introduced in 2014. Estonia is the first country in the world to offer e-residency, a government-issued digital ID that offers the ability to start and manage a location-independent business online using Estonia’s digital services. It costs 100 euros to apply for the e-residency card.

“The main benefit of the Estonian e-residency program is the ability to access all the services, payments and other functions required for conducting a business through the internet and without any physical presence,” said Gencs.

E-residents are provided a digital ID card and have access to a variety of Estonian public and private sector services and resources, and can remotely sign documents and encrypt files.

“There are more than 20, 000 e-residents in Estonia and within one year we have received more than 200 applications for the Startup Visa program,’ said Vavulski.

The Estonian government has set the goal of reaching 10 million e-residents worldwide by 2025.

More than 3,000 companies have been created using e-residency, according to investinestonia.com. E-residency allows investors to establish a company online, run the company remotely and have location independence.

While e-residents are not citizens, the government sees the initiative as helping to contribute to the economy via Estonian banks and through the creation of Estonian companies. With just 1.3 million citizens, Estonia is a small country but may be on its way to becoming Europe’s Silicon Valley.

“With its population equipped with digital ID’s, Estonia is an extremely online country, or as it is also called, e-Estonia,” said Gencs.