E-Stonia: Wired & Well Ahead of the Curve

December 1, 2014

By: Kelly Diamond, Publisher

estoniaI wrote about this over 5 months ago (“Portugal: A Glimpse into America’s Future”), but it looks like Estonia is getting their affairs in order quickly to offer their e-Residency to businesses around the world. In contrast to other countries like Portugal, Estonia is taking several creative and breaking measures to get the economic edge where they can!

Back in June, it wasn’t entirely clear what the e-Residency was going to be, and it seems like while its purpose is being better defined, I don’t think they are closed off to the idea of the e-Residency being something more than its current scope.

This is part of an overall initiative to streamline Estonia’s government services. Estonia has, in just a few decades, become known as one of the most “wired” countries in the world. (And I’m not talking caffeine!)

For example, e-Cabinet is meant to expedite the cabinet meeting and decision-making process by simply organizing the meeting agenda items in advance for the members to review ahead of time. They can either indicate they are fine with the measure or object, and indicate they would like to speak on and debate the matter. If the measure is unanimously uncontested, it passes. So whereas these meetings were taking four to five hours each, now they take under two hours.

They are doing away with a lot of paperwork and moving everything to an online location… right down to children’s progress reports in school. Meanwhile, we have people working in caves in Pennsylvania to process government retirees. I dare not even start on the popularity and success of Healthcare.gov.

And while MOST of the world still largely relies on hard copies, physical delivery of paperwork in triplicate, and the physical presence of all parties in the room to sign off, Estonia is doing away with that. If you look at the full menu of things being housed on the internet, it is a little unnerving. I would be lying if I said I wasn’t concerned about online prescriptions and medical information living on a government server. Moreover, I do have a problem with electronic voting because there is no way to avoid glitches that could miscount… as has happened here in the US already.

BUT, I am a huge fan of making the government more transparent. There is a feature called “e-Law” that allows you to look up any draft law on the books since 2003. Cop pulls you over? Show me the law that I am violating.

They are expediting government processes and services by shifting them online, which I also support. If the government is going to create all these rules and protocols to go about living, then the least they could do is come up with a more expeditious means of doing so. One that doesn’t chip away at the economy in the process would be nice.

I mean, imagine how much grief could be averted if only we could switch our drivers’ licenses and register our cars online rather than having to wait in line. How much money would be saved eliminating the office job of the government employee who processes all that with the attitude of a honey badger?

One of the more important and interesting features Estonia is offering is a series of services that allow not only its citizens, but people from around the world, to enjoy the benefits of doing business in Estonia and the EU:

three things

As an e-Resident, you can take advantage of these things. The whole point is that you don’t HAVE to live in Estonia to do it. In fact, it has nothing to do with becoming a physical resident or citizen of Estonia. Its sole purpose is to facilitate business. Basically, it’s what the US Commerce Clause USED to be.

Here is the gist of Estonian e-Residency:

This will not entail full legal residency or citizenship or right of entry to Estonia. Instead, e-residency gives secure access to Estonia’s digital services and an opportunity to give digital signatures in an electronic environment. Such digital identification and signing is legally fully equal to face-to-face identification and handwritten signatures in the European Union.

“As an e-resident you can use and enjoy the same great digital services that allow Estonians to do anything and everything digitally – sign all documents, launch and manage companies, do the banking, encrypt files, etc.”

Imagine getting access to the EU without the cumbersome and costly additives of consultancy fees and other overhead often incurred trying to tap that market! One person points out in this coverage of e-Residency:

Yeah, well I guess we’ve signed up to do business in other countries and its pretty massive overheads. You have to pay consultancy companies thousands of dollars to set up entities for you. You have to pay people to be on your directors list, like just $4,000 a year or something like that, just to sit there doing that, which is pretty much nothing. So I think, yeah, having an e-version of that where you can just do it all online and potentially lower the costs to get into the EU market would probably be quite good.”

For now, a one-time visit is required to set up the biometrics and do the background check. But even that is set to go away in a little over a year, where Estonian Embassies will become equipped to offer this same service to people around the world!

Becoming an e-resident of the EU is nothing short of a very big deal… especially for Americans who tend to be on a banking blacklist due to the advent of FATCA. That’s right: e-residents can set up EU bank accounts with a LOT more ease than just an American asking for one.

In an article released earlier this year, here is what deputy secretary general for communication and state information systems Taavi Kotka thinks about the implications in banking: “Right now, if you want to open an account in a bank you have to physically visit the bank so that a cashier can perform a face-to-face identity check. … If a person has already validated their identity at an Estonian embassy or consulate abroad, and passed the background check and been given Estonian e-identity with the e-resident ID card, this second verification step is unnecessary.”

In summary, here is what you can look forward to:

  • The opportunity to create a company and bank account in the European Union in as little as one day
  • The country’s fully online tax system
  • Estonia’s highly developed internet banking infrastructure.
  • Any profit reinvested in Estonia is tax-free.
  • Digital signatures are as legally binding as wet signatures in the EU, so you can use Estonia’s online services to facilitate this
  • Low cost, low overhead with access to the EU market.

This is an amazing ground-breaker, and the first of its kind in the world. I LOVE where this is headed! The Australian piece suggests that this might be the beginning of the end of the nation state. It is very possible that the office based white collar job is going the way of the Do-do, but it seems as though residency is taking a similar course. Physicality is being supplanted by the virtual. Physical borders and all the paperwork that they entail might also become obsolete one day.

If you are interested in learning more about e-Residency in Estonia, please go here. If you have any further information to share on the matter, first hand or otherwise, by all means please feel free to share in comments or email!

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