Is the Estonian E-Residency a Bunch of BS?

estonian e-residencyJune 11, 2015

by Bobby Casey

Earlier this week I read an article from one of the other offshore newsletter writers titled, “Estonian E-Residency Makes No Sense”.

I read a lot of newsletters and articles everyday to keep myself informed about what is going on, as well as others’ opinions of the offshore world.

The author of this article typically writes some pretty good stuff, but here he is WAY off base. Or at least short sighted in his view.

He uses the example of an American man who obtained Estonian E-Residency to qualify for the FEIE (foreign earned income exclusion) by being outside of the US 240 days per year.

In order to qualify for the FEIE, you must qualify in one of 2 ways:

  1. Be physically outside the US for 330 days in a 12 month period (can be pro-rated if not a perfect calendar year); or
  2. Obtain bonafide residency status in another country that you maintain as your primary home (which allows you to be in the US up to 122 days per year)

The mistake the American man in the author’s example made was to wrongly assume that Estonian E-Residency qualifies as bonafide residency. It does not.

The Estonian E-Residency program is merely a digital id card that allows you to conduct business in Estonia by verifying your identity with your E-Residency card.

From this perspective, the author was completely correct.

The error the author makes is assuming that residency is the ONLY benefit of obtaining Estonian E-Residency.

It is not. And here is where the author was short sighted.

Estonia is an excellent place to do business. And an excellent place to register a company for doing international business.

Remember, when we discuss the subject of internationalizing your life, your business and your wealth – what we are really talking about is planting multiple flags.

Yes, residency is one of those flags. And hugely important (by the way, if you are interested in planting this flag in Panama, click here to learn more).

But residency is not the ONLY flag that matters.

Doing business internationally is another VERY IMPORTANT flag to plant as well.

We are huge proponents of using offshore companies for your geographical diversification strategy – offshore corporate services is one of our biggest services we offer to clients after-all.

But we also understand some of the complications of doing business with pure offshore structures as well. Sometimes the banks available for pure offshore companies can be limited in service offerings and the fees can be higher.

There is also the issue of negative perception with some business models. Some of our clients want the “front end” of their business to be in the US or EU to give a higher perceived value of the business.

Here is where Estonia offers an excellent option for those needing this type of strategy.

Once you obtain your Estonian E-Residency id card, you can go online and form your company in about 15 minutes. Now you can even get your id card from the Estonian embassy without having to visit Estonia.

However, you will need to visit Estonia to open your bank account. You can provide the bank staff with your Estonian E-Residency id card for company verification along with your passport and in minutes your account is open.

From that point on, you can conduct 100% of your business transactions online using your Estonian E-Residency card as your verification.

Here is where it gets interesting. Estonia has no corporate tax. And personal tax is only owed on salaries and profit distributions to owners who are actual residents of Estonia. With your Estonian E-Residency card, you can go online in minutes to complete your tax filing (with zero tax owed).

In other words, you can register your company in the EU with a prestigious address and get excellent and low cost banking services while still being about to retain earnings tax deferred in your Estonian company.

I would say this is a pretty good deal indeed.

If you are interested in reading one of our earlier articles on the subject, you can see it here.

For our GWP Insiders members we published a full how-to guide to obtain Estonian E-Residency, which Estonian banks to work with and which ones to avoid, and how to properly structure the company to minimize or virtually eliminate your tax burden. To become a member, click here to register.

Until next time, live well.

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