Ten years ago, Estonia became the first country in the world to introduce electronic or virtual residency for citizens of other countries. Today, the number of e-residents is almost equivalent to the population of Estonia’s second-largest city, Tartu (121 000 e-residents vs there are around 101 000 citizens). Ukrainian businesses were quick to appreciate the transparency and simplicity of the remote e-residency process. Ukraine remains the leading country by the number of e-residents, ranking alongside Germany and Spain in the top three fastest-growing markets for the program.
It’s no surprise that many well-known Ukrainian companies and individuals, especially in the IT sector, are among Estonia’s e-residents. But what exactly is e-Residency, and why do tech companies from around the world choose it? Liina Vahtras, Managing Director of e-Residency, shared more details with 
.
Liina Vahtras, Managing Director of e-Residency
: What is e-Residency?
E-Residency is a digital or virtual residency for citizens of other countries, introduced by Estonia ten years ago. It provides access to Estonia’s digital services and allows people to establish location-independent companies within the EU, making it as convenient as carrying a business in your rucksack.
: Why is Estonia’s business environment attractive to e-residents?
Running a business in Estonia is relatively easy and affordable. For example, in Germany, starting and managing a company is both expensive and time-consuming due to high administrative overhead, the need to hire tax advisors and accountants, and frequent visits to a notary, all of which are compounded by extensive bureaucracy. In Estonia, everything can be done online, significantly reducing costs. Additionally, e-residents can order accounting services from our marketplace for just 75 euros a month. Estonia also does not tax reinvested profits, nor does it automatically grant tax residency.
: Why do people choose e-Residency to run their businesses?
Initially, we thought the program would primarily attract people outside the EU, as it provides access to the single European market, grants, and financing options. However, as of early January 2025, approximately one-third of the 121.1 thousand e-residents are EU citizens, with the rest coming from around the world. Roughly 50% of the 33.8 thousand companies created by e-residents are based in EU member states.
: How does the e-Residency program benefit Estonia’s economy?
New companies under the e-Residency program are not required to pay taxes immediately. Tax obligations arise when e-residents hire employees in Estonia, at which point they are responsible for paying employee taxes. Additionally, when dividends are distributed abroad, e-residents must pay income tax in Estonia. The tax rate increased to 22% this year (2025).
Some e-resident companies have not paid any taxes in Estonia yet, and that's perfectly fine. We hope they continue to grow, hire Estonians, and create jobs here. Perhaps one day they will distribute dividends.
In 2023, e-residents contributed €67 million to Estonia’s budget, accounting for 0.5% of the national budget.
: How does e-Residency support startups?
As mentioned, income tax obligations only arise when profits are withdrawn from the country. Estonia does not tax reinvested profits, allowing startups to use their earnings to further develop their businesses. Typically, they start contributing to the national budget within three to four years.
: Which economic sectors are most popular among e-residents?
The most popular sectors are IT and services, with many e-residents working as programmers and developers. E-commerce and trade come in second. Other industries include publishing, financial services, scientific and technical research, advertising, information and marketing agencies, and business consulting. There are also creative professionals, translators, online educators, and other micro-businesses offering services online.
: What are the criteria for obtaining e-residency?
Applicants submit their e-Residency applications online. Initially, all applications are reviewed by the police, and if any issues arise during the identity check, the applicant will be denied e-residency and the documents returned. Around 10% of applicants are rejected, typically due to a lack of cooperation between Estonian authorities and security or police services in the applicants' home countries.
The police and security service check takes two to four weeks. If everything is in order, the applicant will receive their e-resident ID card. Currently, this process takes about two months, but we plan to reduce it to two weeks by introducing remote online biometric verification, allowing fingerprint submission via phone. We also aim to add an electronic signature feature for non-residents, similar to the functionality available in Ukraine's "Diia" app. Notably, similar features, such as Smart-ID, are already available to Estonian citizens.
: How does e-Residency ensure the security of personal data?
E-residents’ data is protected in the same way as that of Estonian citizens. Cybercriminals have never breached the electronic business registry or other systems. There have been no recorded data leaks. Estonia is highly experienced in cybersecurity, and state institutions hire "white hat" hackers to check systems for vulnerabilities.
: The e-Residency application is submitted online. Have there been attempts to register companies using stolen or fake documents?
Yes, there have been attempts to use someone else’s identification data for e-residency. However, to my knowledge, none of these attempts have succeeded.
E-Residency Does Not Grant Residency in Estonia
: Does e-Residency make it easier to obtain citizenship or tax residency in Estonia?
No, e-residency does not offer any special privileges for obtaining citizenship or tax residency. It is simply digital access to services, and the ID card doesn’t have a photo on it.
Some e-residents may decide to move to Estonia, but that’s a separate process. E-residency is not a visa or a residence permit.
In the early days of the program, some people mistakenly thought it was equivalent to an Estonian ID card. They went to the airport and tried to board a plane using this ID, which of course, didn’t work.
Ukrainians and e-Residency – A Perfect Match
: Why are there so many Ukrainians among the e-residents?
Ukrainian businesses quickly recognized the transparency and simplicity of remotely obtaining e-residency. Ukraine was one of the two markets where the program grew the fastest (According to data from the last three months, Spain overtook Ukraine in the number of new ID and company registrations, but Ukrainians still make up the largest group of e-residents in Estonia – ).
The percentage of Ukrainians creating companies through e-Residency is higher than in other countries. It’s a perfect match for us – a great market because e-residency facilitates company formation and provides access to the EU single market.
Most importantly, everything can be done online. Ukrainians can create companies in the EU and manage them remotely without having to travel to Estonia. It’s simple, free of bureaucracy, and relatively affordable.
: How does e-Residency help Ukrainians during the war?
We want Ukrainians, especially those who have stayed in the country and are fighting for freedom – not just for Ukraine but for all of Europe – to have the opportunity to earn money by creating companies and offering their services both in Ukraine and abroad. At the same time, while Ukraine has been rapidly innovating its state services in recent years, Ukrainian emigrants and refugees residing in other EU countries (excluding Estonia) often find e-Residency essential for pursuing freelance careers or entrepreneurship. It offers a faster, more affordable, and less bureaucratic solution compared to the systems available in many central EU countries.
When Russia’s full-scale invasion of Ukraine began, the Estonian government made e-residency free for Ukrainians as a show of support. We suspended promotional campaigns in Ukraine because it didn’t feel ethically appropriate at the time. But even without marketing efforts, Ukrainians continue to join the program, and we’re seeing organic growth.
When a Ukrainian applies, they pay the application fee, but we later reimburse those costs from Estonia’s budget.
: How many Ukrainians are e-residents, and what is their contribution to the economy?
Over ten years, 7,580+ Ukrainian citizens have obtained Estonian e-Residency, which is around 6.3% of all e-residents. They have established over 2,660 companies. In 2023, Ukrainian e-residents paid €6.2 million in taxes to Estonia, including employment and corporate taxes.
e-Residency Incompatible with Money Laundering, Terrorism, Russia, and Belarus
: Does e-Residency accept Russian and Belarusian citizens?
No, immediately after Russia's full-scale invasion of Ukraine, Estonia stopped granting e-Residency to citizens of Russia and Belarus.
Before this, there had been cases where Russian citizens established companies that raised concerns, such as operating without proper licence or engaging in financial schemes like pyramid structures. We've updated legislation to make the process of revoking e-Residency very easy in such cases.
: What actions are taken in cases of misuse by e-residents?
If misuse of the system is detected, we revoke the offender's e-Residency. The companies are closed – not immediately, but following the necessary legal procedures. If a company provides financial services unlawfully, its licence is revoked.
Afterward, they must go through legal processes to resolve these issues.
: Can you recall any notable cases where e-Residency was revoked?
One example involved a British citizen who established a company to publish books and pamphlets. It was later discovered that he was printing materials supporting the Norwegian murderer Breivik. His e-Residency was revoked, and the company was dissolved.
Another case involved Palestinian citizens who openly supported Hamas on social media. Their e-Residency was also revoked.
: Does e-Residency accept companies from the gambling sector? At one point, online casinos became a significant issue for our economy. Moreover, major players in Ukraine's gambling market include companies registered in Belarus, Russia, Cyprus, or – loosely – in the Baltic states.
We do not make exceptions for specific types of companies. If a business is law-abiding and pays taxes, it can obtain e-Residency. Compliance with the law is strictly monitored by tax and customs authorities, and there are multiple layers of oversight. Estonia's Financial Intelligence Unit (FIU) actively combats financial crimes and detects money laundering schemes.
: Is it true that Estonia was once considered a crypto haven?
The global cryptocurrency boom began around 2018, and Estonia, like many other countries, initially lacked appropriate legislation. These crypto-entrepreneurs were tech-savvy and quickly recognized how beneficial our e-Residency could be. As a result, many crypto companies were established here.
However, Estonia later regulated the cryptocurrency market, and nearly all of these companies disappeared. Today, only around 50 licensed crypto companies remain. With upcoming re-licensing under new regulations, this number will likely decrease further.
e-Residency is Not a Tax Optimisation Scheme but a Stable Business Environment
: Are there similar programs in other countries?
Our neighbour, Lithuania, offers a program similar to Estonia's but with notable differences. Unlike Estonia’s e-Residency program, Lithuania’s program requires applicants to travel to the country to apply and collect their residency. Lithuania also provides tax benefits for small businesses: entities with fewer than 10 employees and annual gross revenue below €300,000 can qualify for a reduced corporate income tax (CIT) rate of 0% in the first year of operations and 5% in subsequent years, provided certain conditions are met.
By contrast, in Estonia, e-residents are not required to pay taxes immediately – we offer startups the freedom of choice. Estonia’s e-Residency also remains unique, offering legal and remote access to the EU business ecosystem and enabling businesses to serve EU clients while minimising bureaucracy. As of February 1, 2023, there is no minimum share capital requirement for private limited companies (OÜ) in Estonia.
In Portugal, where many Ukrainians now reside, residency can be obtained through Golden Visa schemes, which typically require purchasing property or making substantial investments. Similar programs exist in many other countries, including the UK, Spain, and Montenegro. However, Golden Visa schemes are controversial as they often lead to rising living costs, negatively impacting local communities. In contrast, initiatives like e-Residency focus on benefiting local communities by creating jobs, attracting talent, and generating revenue for local service providers without requiring physical residence or property investment, thereby avoiding an increase in the cost of living.
Some countries allow you to start a business in a special economic zone by paying €5000. During the first five years, businesses enjoy tax benefits and pay little to no taxes, but after that, they face the full burden of taxation.
For a company, five years is often not enough time to achieve significant growth. Thus, these short-term schemes may be less appealing.
Estonia offers a stable environment where businesses can grow without unexpected changes. I believe our model is the most sustainable, providing a location-free way to create and run an official EU company with minimum bureaucracy. Estonia is a "bureaucracy haven," not a "tax haven," as all EU tax requirements still apply. Our tax laws apply equally to both Estonians and e-residents. It’s important to note that e-Residency does not grant automatic tax residency. To benefit from Estonian tax advantages, a business owner must establish substantive business operations in Estonia.
It doesn't matter where the entrepreneur is from – Ukraine, Spain, or Brazil. What's important is that you know exactly what you're committing to, and you won't encounter sudden rule changes in the future.
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