Imagine you could open a company from anywhere in the world and do business as a European citizen, taking advantage of the most advanced digital infrastructure any country has on offer. Estonia has allowed entrepreneurs to do just that for nearly six years. It’s called e-Residency and, after applying and being approved, all you had to do was swing by the local Estonian consulate or embassy and pick up your encrypted ID card and you were good to go.
Until the pandemic hit and everything closed down. Then becoming an e-resident became more complicated. Yet there was a silver lining to this COVID-19 cloud too. It pushed the program to be more innovative.
“Naturally, COVID-related lockdowns made it more difficult for new e-residents to collect their cards from the embassies and consulates,” acknowledged Katrin Vaga, head of international public relations for the e-Residency program. “Therefore, there was a drop in new e-residents.”
The Estonian state institutions behind the program scrambled and put their heads together. The first solution they arrived at was to give e-residents an additional six months to collect their cards in light of the lockdowns. Another idea floated was to create more pick-up points for digital ID kits in cities where there are Estonian consulates and embassies. The program hopes to achieve this aim soon.
Yet another aim is even more ambitious: to create an e-Residency scheme that does not rely on digital identity cards at all. This is already in the works, though Vaga says it could take years.
“It’s a big challenge because we want to maintain the same high level of security,” she said.
The world was forced to change
Other than challenges in getting digital IDs to newly minted e-residents, the program appears to be healthy and, in some ways, has even benefitted from the global shift to working remotely.
“In terms of company creation, there was more or less the same activity,” said Vaga. She noted that the pandemic citizens of EU countries hit particularly hard have been even more interested in becoming e-residents to set up companies in Estonia.
“This validates our product for people who need additional income or the possibility to work remotely,” Vaga said. She added that Estonian companies created by e-residents became more active during the first few months of 2020, with taxes paid by companies created by e-residents paying roughly 50 percent more than for the corresponding period in 2019.
“This was a clear indication that during uncertain times, e-Residency offers greater value,” said Vaga.
A golden time for e-residents?
Estonia rolled out its e-Residency program in December 2014 with a clear mission: to empower location independent entrepreneurs worldwide and underscore Estonia’s role as a nation of digital evangelists, bringing its high tech infrastructure to the masses. Initially, the program was envisioned as a way to make e-services that had been developed for ID card-holding Estonian citizens available to foreign investors, managers, and entrepreneurs based in Estonia. However, soon after, the founders of the program discovered non-residents wanted in, some of them entrepreneurs, others just digital society enthusiasts. “It kind of snowballed,” remarked Vaga.
As such, the program has always been in a state of flux, with new improvements fashioned along the way. At first, digital ID kits were only available within Estonia, meaning that becoming an e-resident meant at least one visit to one’s new digital motherland. In 2015, though, it became possible to collect kits from embassies and consulates after providing biometric data for authentication. In 2018, President Kersti Kaljulaid led an initiative to drum up new proposals for the program. The resulting e-Resident 2.0 White Paper was published at the end of the year, and most of the recommendations have since been adopted or will be soon realized, Vaga said.
72K e-residents, 14K companies
A community has developed around the program too. In May 2019, e-residents the Estonian e-Residents International Chamber Association (EERICA), which serves as a nonprofit to represent the interests of this like-minded community of location-independent entrepreneurs. Today, according to Vaga, e-Residency involves a sprawling community of 72,600 e-residents responsible for the creation of 14,000 companies, with a cumulative turnover of 1.6 billion.
Some e-residents themselves say that things have never been better, with or without the pandemic.
“In my opinion, during a pandemic, e-Residency is especially in demand, since life does not stop,” said Alexander Storozhuk, founder and CEO of PRNEWS.io and an e-resident since March 2018. “It’s indispensable for conditions of widespread isolation,” he said. “In general, I would call this a golden time for e-Residency.” Why? Because more people are turning to the program for help, he said. “The changing market conditions are sending a huge number of talented people to find themselves in different professions,” said Storozhuk. “Many of them will apply their talent as freelancers, someone will start a new business, and the easier it is to do it, the better,” he said. “To set up a company in a few clicks via e-residency, what can be easier?”
Brexit pushed to find a solution in e-Residency
There are, of course, other crises to contend with. Victoria Brock has been CEO of Glasgow, Scotland-based Vistalworks since she co-founded the company last year. Given the uncertainty created by the UK’s exit from the EU, finding a new home for the data technology startup, which offers a platform for checking the validity of goods and services, became paramount. e-Residency offered Vistalworks the ability to remain an EU company, whatever deal London and Brussels eventually agree to. But it also entwined Vistalworks within the Estonian business community, leading the firm to consider establishing a permanent Estonian office, a new move.
“Brexit made finding someone to adopt us a necessity, but I think what has been a pleasant surprise has been the extent to which we have become an Estonian business,” said Brock. “This is not just a virtual, arms-length thing for us. We have been working with the e-Estonia Briefing Centre and other bodies to build a network and client base in and around Estonia, and will soon be making our first hires.”
Pandemic has oddly been good for business
The pandemic has also oddly been good for business. As more people do business online, there has been a corresponding spike in demand to check the origin of illegally sold goods using the Vistalworks platform. As soon as next year, the company might set up a base in Tallinn, Brock said. “Who knows,” said Brock, “maybe 2021 will see us evolve beyond being e-residents.”
That physical move to Estonia has been undertaken by numerous e-residents, actually. Storozhuk, a Ukrainian national, used his e-resident status to rent an apartment in Tallinn and relocated in May 2019. Arzu Altinay, a Turkish citizen and professional tour guide, similarly became an e-resident and then relocated to Estonia, where she operates Walks in Europe, a travel company that offers tours only in the EU and for whom e-Residency has “worked like a charm.”
Altinay also praised the e-Residency program’s willingness to innovate and implement new changes over time. “There’s been a lot of effort put into it over time trying to cover more entrepreneurs who wish to operate online,” she said. If any changes need making, she suggested that the program could further innovate for payment gateways and banking.
All digital nomads welcome
One new initiative that overlaps with e-Residency and can make some transitions smoother is the Digital Nomad Visa program. Under previous legislation, a person had to have an employer registered in Estonia to work in the country, and professional visas were for workers with fixed contracts. Estonia also offers a startup visa for entrepreneurs who want to create companies in Estonia, but not for digital nomads, itinerant professionals who wish to work from the country, and take advantage of all it offers but aren’t employed by a local firm or plan to create a new one.
Enter the Digital Nomad Visa, which was approved by parliament in June and introduced in August. Ruth Annus, head of the citizenship and migration policy department at the Ministry of the Interior, said there had been plans afoot to introduce the new visa program sooner. Still, these were curtailed by travel restrictions related to the pandemic. Nevertheless, the ministry has pressed on to make Estonia a haven for laptop-toting digital nomads, keen to work from its cafes, which, for the time being, still cater to maskless patrons.
“Having the Digital Nomad Visa will help us to attract people who would prefer to work legally while traveling and use our services without any concerns,” said Annus. She said the new visa allows digital nomads to work and travel in Estonia for up to a year. They also get access to the Schengen Area, enabling them to travel to other EU member states for up to three months within six months, an appealing bonus.
Another e-community project: the Digital Nomad Visa
Under the new program, digital nomads may have a contract with a foreign employer, run a foreign-based company, or mainly do business with companies outside Estonia as freelancers or consultants. Annus said that the Digital Nomad Visa program was another e-community project for the digital nation and serves as a vehicle to attract more skilled people to the country, which should improve the economic opportunities in Estonia as a whole.
Yet uptake has been limited thus far in light of ongoing restrictions. As of 28 September, just 30 digital nomad visa applications had been submitted, and 14 received a favorable decision — 3 US citizens, 3 Indians, 2 South Africans, 2 Iranians, 1 Singaporean, 1 Australian, 1 Indonesian, and 2 Canadians. The others are in process. No digital nomad was available for an interview at this time.
While the Digital Nomad Visa program is not directly linked to e-Residency, Annus said the Ministry does have ideas to roll the two into a single offering in the future. E-Residency’s Vaga also noted some overlap between the programs, as applying for e-Residency provides more value for location-independent professionals and entrepreneurs outside of the Schengen Area who have obtained Digital Nomad Visa to live in Estonia.
“This gives them a chance to experience digital society first hand even if only staying here for a year,” said Vaga. She also noted that e-Residency and various stakeholders had lobbied to create a new visa to attract more talented workers to the country. That process might only accelerate as more people move to work remotely due to the pandemic and are eager to find the best frameworks and environments to support the digital nomad’s wandersome lifestyle.