the easiest way to set up a business in Europe?

Everyone loves a life shortcut or hack. For UK companies looking to improve the way they do business with the EU, a program offered by Estonia seems to be one of the best. Estonia is the pioneer of e-residency, a kind of honorary citizenship. This comes with the possibility of opening a business in Estonia, capable of trading throughout the EU.

It removes the paperwork that prevents invoices from crossing the EU-UK border, simplifies tax and administration, and best of all, can be done without leaving our shores.

Setting up an Estonian business via e-residency is quickly becoming the most efficient way to trade with the EU.

One entrepreneur to take advantage of is Rhian French. She is the founder of a PR agency called Three Trees and a Map, which operates in the niche of digital mapping and geospatial industries. Its clients include Ordnance Survey, Brussels-based EuroGeographics and German satellite imagery company UP42.

E-residence does not mean automatic tax residence. If you are based in the UK, your personal taxes are always paid in the UK. Corporate taxes depend on your business model

When it became clear that the UK was leaving the single market, French realized his business was in jeopardy: “I wondered how I was going to keep working. My clients are mostly European. They were concerned about the complexity of buying services in the UK. »

At a conference, she had heard a delegate from Estonia mention the e-residency program. It had attractive details. Estonian e-residents receive an Estonian identity card, which gives access to 5,000 online services. One of the options available to e-residents is the right to found a registered company in Estonia through the country’s legendary online interface. A key detail is the absence of any physical requirements – it can be done remotely. In fact, e-residents do not get any physical rights: visa requirements to live and work in the EU remain unchanged.

She studied various post-Brexit strategies. “It was intimidating,” French says. “Terribly adult and complicated. So I looked at the Estonian e-residency.

She applied in early 2020. She was approved. picked up his card. And then founded a new company in Estonia. “I thought I had misunderstood. It was so easy. I couldn’t quite believe that was the answer.

To make life even easier, she used the official website to find an agency that specializes in helping freelancers and small businesses, called Xolo. “It was so fast and efficient,” French says. “I’m not one to give away free publicity, but they’re fantastic.”

She connected her Xolo account to a euro bank account provided by fintech company Wise. From now on, she can invoice her customers in euros from her new Estonian company.

“I couldn’t work without it,” she says. “I take a monthly salary, as advised by Xolo, which pays my bills and VAT. It’s really simple for someone who likes words, not numbers.

And she still hasn’t been to Estonia: “I can’t wait to go! My expectations are very high!

So, who is the diet for? The Estonian e-residency team is admirably upfront about what they can and cannot do. You cannot, for example, escape the rules of origin concerning manufactured goods. You also cannot escape tariffs or quotas, if any.

“We have two major groups that use it: business consulting and IT,” explains Katrin Vaga, spokesperson for the Estonian e-residency program. “Anything related to digital services, digital products and e-commerce.”

Estonia offers a 20% flat tax on dividends. If the profits are retained, there is no tax to pay. Whether tax is payable in the UK or in Estonia, a tax specialist should advise you. “E-residency does not mean automatic tax residency,” says Vaga. “If you are setting up a business via e-residency and you are based in the UK, your personal taxes are still paid in the UK. Corporation taxes depend on your business model.

The line is that Estonia is not a tax haven, it’s an administrative haven. The Tax Foundation ranks Estonia first in the world for tax efficiency, calculated on 40 parameters. Raw paper and PDF forms were phased out years ago. HM Treasury can only dream of Estonia’s digital mastery. It is a country where 99.6% of banking transactions are done electronically and 96.3% report income online.

Estonia is so efficient when it comes to taxation and company law that 40% of new businesses in the country are formed by EU residents, with Germany being the top source. It says something that Germans prefer to register a business in Estonia rather than in their home country. There is a parallel with Delaware in the United States, where two-thirds of the Fortune 500 are registered. “We have research that compares us to Delaware,” reveals Vaga – which has yet to be published, but will likely be supportive, judging by her huge smile.

I thought I misunderstood. It was so easy. I couldn’t quite believe that was the answer

Are there rivals? Portugal launches e-residency. Lithuania launched e-Residency in 2021, with upgrades planned for the summer. Lithuania models its scheme on that of Estonia. Aušrinė Armonaitė, Minister of Economy and Innovation, said: “Lithuania is implementing the e-Residency program from July. British entrepreneurs will be able to set up a business in Lithuania without leaving their offices in London. Our goal is to minimize the bureaucracy associated with setting up and running a business that is part of the mission to make Lithuania the most entrepreneurial nation in the EU.

The economic gains brought to Estonia by e-residents are a clear motivation. One in five new Estonian businesses is created by e-residents.

“Lithuania is committed to supporting our new e-residents,” says Armonaitė. “We want them to start with online residency and use it as a bridge to learn more about our country, and perhaps in the future to visit and invest.”

So far, 4,048 Britons have opted for Estonian e-residency, with 857 businesses created. For the French, this was a lifeline. “I want to go to Tallinn and personally thank the e-residency team,” she says. As the news spreads, she will not be alone.



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