Could Estonia’s e-residency program offer a way out of Britain’s Brexit bind? Kaspar Korjus, director of the country’s program thinks that digital nomadism could be the way forward for Britons and British companies.
Since the referendum result in the UK and the impending Brexit, there’s been a rush of Britons trying to obtain residency within other EU countries so as to remain part of the EU. But the strict criteria often prevents many of them qualifying for an easy route. Now though, the Republic of Estonia might offer a way out of that bind. It has been offering e-residency permits for a couple of years as part of a wider program of e-government. This summer the country saw a jump in the number of Britons applying so they, or their companies, could continue trading as EU entities. DW talked to Kaspar Korjus, Estonia’s e-residency program director.
Deutsche Welle: What exactly is e-residency?
Kaspar Korjus: E-residency in the larger context is the new nation state; we are building a whole new digital nation for global citizens. That means that every person on this planet can become an e-resident of this nation. By becoming an e-resident each person gets a digital identity, contained in a smart ID card. Once you get a smart ID card you can log in to the nation state services, you can digitally sign everything and you can be part of this new community.
Why did Estonia decide to adopt this method? It’s not just e-residency, but the whole thing is part of a wider program E-government.
Yes, so E-government has been in Estonia for the last 15 or so years. All Estonians have been voting on line, declaring taxes, getting e-prescriptions, signing all contracts, establishing companies; everything is done using that digital identity. Now we’ve just opened the borders to everyone else, so that everyone can be part of this.
The reasons are twofold: firstly, it’s purely economic, so that Estonia can be bigger. Estonia has a population of just 1.3 million and the internal market compared to Germany for example is so small that we just need more customers outside of Estonia. Secondly, it doesn’t add too much cost for us to open these things.
There are billions of people today all around the world who lack access to financial services or lack access to proper business services. For us to open these gates to them, it just doesn’t cost us much extra. We already have the legal system, we already have the infrastructure and we already have the services, so we can just offer the same services to them also.
How many e-residents do you have at the moment?
KK: We have over 13,000 e-residents today, and we are still in a beta phase. To become an e-resident each person needs to pay 100 euros and apply online at e-resident.gov.ee and then have one face-to-face meeting at the Estonian embassy. This takes approximately two months and then a person could become an e-resident and access all the services.
Did you see the numbers shoot up after the referendum in Britain because of the threat of Brexit?
That’s true, a few days after the Brexit referendum we had a ten times increase in applications from the UK. They were mainly from the start-up and entrepreneurship world. Many start-uppers were afraid of what Brexit could bring, whether they’d still be able to work with EU companies, whether they’d still be able to have employees from the EU. E-residency in that sense allows them and helps them to still run EU-based companies whilst living in the UK.
Because essentially it gives them EU membership?
It gives them an EU company, an EU bank account and EU regulations. So you don’t need to apply to each separate EU country for a set of regulations as you would have the Estonian EU entity. Through that entity, you can sell all your services and regulations apply there. That means that none of the Brexit people need to move from the UK to Europe to deal with EU businesses, because they can stay living in the UK and deal with the EU through their e-residency and business in Estonia.
What do you expect from E-residents? Will there be any kind of tax burden?
E-residents usually pay taxes in the countries where they are living and creating value. E-residency does not mean tax residency. It means that e-residents can just use the platform and the business environment to facilitate their businesses.
So is that how you make sure that this doesn’t become a kind of tax haven type scheme or a “letter box” company?
Yes, it is exactly the opposite. This is the opposite of something like Panama where people might have gone to try and hide their taxes and hide their companies; because e-residency is a transparent business. Each shareholder and manager is available as information to the public. We are also sharing the tax revenues with local countries and other governments. As everything is digital and so all the transactions leave digital footprints there is no way to hide, or protect any wealth you might have. That’s why e-residents who join are those kinds of people who want to share transparency and show they can be trusted.
What do e-residents receive in return?
If a person is outside of the EU, from an emerging market, the main benefit is access to financial services, access to bank accounts, to online payment providers and access to crowd-funding sites etc. Most of the people today can’t offer this kind of online business. The second thing is that through Estonia, people and companies have access to the EU business environment. Estonia makes all that very easy and convenient because it is all done digitally. So establishing a company takes just 10 minutes; you can open bank accounts online, everything can be signed digitally, all the contracts and taxes so it is pretty much cost free. The third reason why people apply is the freedom which an e-residency provides. Even if your country offers all the services and is pretty cost effective, people in today’s world travel a lot. Sometimes those people’s own countries might still require them to be physically present to sign something or declare something, but now people travel all around the world, digital nomadism is everywhere and e-residency helps run your business without having one fixed place of abode.
Have other countries enquired about whether or not they could offer a similar kind of program?
Yes we are actually helping many other governments to adopt this. We don’t see this as a competition but rather a partnership because the more governments which offer this kind of services, the more players will be on the network and then the more value it brings to the network. We know that Lithuania is about to adopt it, we are helping Singapore, Japan and the Netherlands. Once a country starts serving its own citizens digitally as Estonia has been doing for the last 15-17 years then there is really no reason why you can’t start serving other citizens too who want to take part in your business environment.
Kaspar Korjus is director of Estonia’s e-residency program. If you are interested in applying for e-residency, you can go online to e-resident.gov.ee