Estonia 'e-residency' offers Brexit Brits EU loophole

Yahoo – AFP, Mike COLLIER with Mary SIBIERSKI in Warsaw, August 13, 2017

Taavi Kotka, Estonia's chief information officer, presents the e-residency IDs
project. As Brits brace for the upheaval that Brexit could bring, some are turning to
Estonia's e-residency digital ID programme to keep doing business across
the EU. (AFP Photo/RAIGO PAJULA)

Tallinn (AFP) - As Brits brace for the upheaval that Brexit could bring, some are turning to Estonia's e-residency digital ID programme to keep doing business across the European Union.

Using its knack for digital innovation to capitalise on the global explosion in e-commerce, the small cyber-savvy Baltic eurozone state became the first country to offer e-residency identification cards to people worldwide in 2014.

Touted as a "trans-national government-issued digital identity", e-residency allows users to open a business in the EU and then run it remotely with the ability to declare taxes and sign documents digitally.

It does not provide citizenship, tax residency, physical residency or the right to travel to Estonia. Applications can be made online via the www.howtostayin.eu website and cost 100 euros ($112).

Just over 22,000 people from 138 countries across the globe have become e-residents so far, including around 1,200 Brits and last year's Brexit vote triggered a boom in applications from the UK.

Before it, only three British citizens applied per week, but that shot up to over 50 in its aftermath. There was also a 75 percent spike in UK traffic on the website after Prime Minister Theresa May triggered the Article 50 EU exit clause in March.

A "soft Brexit" would mean that Britain could retain access to the European single market like non-EU member Norway. But the "hard Brexit" option that has prevailed so far would see Britain leave the European single market and the customs union, creating a nightmare scenario for UK businesses as there would no longer be free movement of goods and services.

"The UK may have chosen to leave the EU, but its entrepreneurs can still choose to remain inside the EU's business environment" through e-residency, programme director Kaspar Korjus told AFP.

E-residency spokesman Arnaud Castaignet explaind that if a British entrepreneur becomes an Estonian e-resident and establishes a company producing goods in Estonia then they "will have the same access to the EU market as any EU company."

So far the majority of companies established by e-residents are in consultancy services, IT programming, web developing, business support services.

'Insurance policy'

Winners of the Mayor of London's 2017 Entrepreneur competition say they signed up for e-residency to mitigate the risk Brexit poses for their business, a startup making environmentally-friendly wet wipes.

Ellenor McIntosh and Alborz Bozorgi both live in London but say they took up e-residency in order to be able to keep their company, Twipes, inside the EU's single market.

Billing Twipes as "the future of toilet paper", its owners say they have registered it both in the UK and Estonia to boost investor confidence.

"We had discussions with many investors from across Europe, Cyprus and Estonia in particular, and they view the uncertainty of Brexit as a huge risk," Bozorgi told AFP via email.

"We had to incorporate in both the UK and EU as a method of hedging risk," he added.

If Britain loses access to the single market, however, the company would need to source materials and produce Twipes inside the EU to keep duty free access to the bloc.

Brit Dirk Singer established his Rabbit digital marketing agency six years ago in the UK, but wary of Brexit he digitally relocated it to Estonia last year thanks to e-residency.

"I applied for e-residency shortly before the EU referendum last year. Essentially, I was not so optimistic that we would vote to stay and so I saw this as an insurance policy," Singer told AFP.

"Two of my five biggest clients are from the EU. I'm concerned that as a small UK service-based business, Brexit could start to make life difficult for me."

British writer Will Mawhood who runs the "Deep Baltic" culture website says he jumped at the opportunities and flexibility e-residency offers, especially having his company registered in a eurozone member.

"I split my time between the UK and Latvia, but since all my work is online, I often spend prolonged periods of time in other countries," he told AFP.

"People involved in my company are based in a variety of countries, so having to sign important documents in person would be unnecessarily time-consuming and complicated," he added.

Digital banking

An upgrade to the e-residency programme in May saw Finnish fintech company Holvi team up with Estonia to launch , eliminating the need for e-residents to travel to take care of business banking.

Korjus told AFP that there are signs that this uniquely Estonian digital innovation is catching on abroad.

"We've had interest from governments around the world who are keen to understand the programme and even introduce their own versions of e-residency."

He insists that safeguards are in place to prevent the programme from being abused for tax evasion or money laundering, including police checks of applicants.

ABN Amro to fund its online banking unit MoneYou for expansion

DutchNews, March 7, 2017

ABN Amro is to provide additional funding to expand its digital banking subsidiary MoneYou, the Financieele Dagblad said on Tuesday. 

The state-owned bank hopes to attract hundreds of thousands of new clients throughout Europe to add to its present customer base of 500,000, which is largely in the Netherlands.

‘We plan to make MoneYou into an online bank of European proportions,’  said Frank Verkerk, who as chief digital officer at ABN Amro is partly responsible for MoneYou. The online unit was mentioned only once in the bank’s last 80-page quarterly report. 

In eight years, MoneYou has accumulated 500,000 customers in the Netherlands, Belgium, Germany and Austria with a total of €20bn in deposits. This represents about 25% of the savings deposited with ABN Amro itself, the FD said.

Related Articles:

Could e-residency offer a way around Brexit?

Could e-residency offer a way around Brexit?

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.

Deutsche Welle, 25 Sep 2016

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.

Estonia has 13,000 e-residents currently
and hopes for 10 million by 2025

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.

Britons can live in the UK and work
with companies in the EU via Estonian
e-residency and services

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.

The more people and countries connected, the higher the value of the network

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