Ask HN: Founders of estonian e-businesses – is it worth it?
140 comments
I've had companies in a few different jurisdictions, including a Delaware C Corp[1] and currently an OÜ through Estonia's e-residency program.
Yes, it is fantastic and delivers on all of the promises. The only potential headache is that you must collect your e-residency card from an embassy which, depending on your location, might require travel to a nearby country.
I used Xolo but there are lots of agents in the directory. I like and recommend Xolo. No idea what the supposed issue with banking is, all of the agents have banking relationships and you can also use Revolut and Wise. My bank account was opened same day as the company.
Your details are published on the public register. The moment your registration is published you'll get lots of emails offering services, like banking (some people pretend to be Revolut but are actually just sending you affiliate links). Don't publish an email address you care about.
[1] The problem with forming a U.S. company is that all of the formation agents are layers on top of a convoluted nightmare. The formation agent can do their best to abstract away the complexity but the moment you have to peak behind the curtain you'll find yourself face to face with something very scary. The Estonian e-residency program is integrated all the way through.
Yes, it is fantastic and delivers on all of the promises. The only potential headache is that you must collect your e-residency card from an embassy which, depending on your location, might require travel to a nearby country.
I used Xolo but there are lots of agents in the directory. I like and recommend Xolo. No idea what the supposed issue with banking is, all of the agents have banking relationships and you can also use Revolut and Wise. My bank account was opened same day as the company.
Your details are published on the public register. The moment your registration is published you'll get lots of emails offering services, like banking (some people pretend to be Revolut but are actually just sending you affiliate links). Don't publish an email address you care about.
[1] The problem with forming a U.S. company is that all of the formation agents are layers on top of a convoluted nightmare. The formation agent can do their best to abstract away the complexity but the moment you have to peak behind the curtain you'll find yourself face to face with something very scary. The Estonian e-residency program is integrated all the way through.
Did the actual business registration and bank thing require travel? I might be remembering wrong but I thought that was a requirement a few years ago.
The U.S. is not a great place for offshore business registration mostly because the reporting requirements around taxation for foreign-owned businesses are so severe. It's just a lot of useless paperwork.
You said you are from Germany but not where you are now. If you are still in Germany, forget it. Just because you incorporate outside of Germany does not exempt your from any taxes (and its beauraucracies) in Germany. That is, even with an estonian corporation, you will owe german corporate taxes (plural - one goes to the state one to the county - a.k.a. Körperschaftsteuer and Gewerbesteuer). That implies you will have to do the same tax paperwork as with a german GmbH and file them official with the tax authorities (Steuererklärungen, Umsatzsteuerjahresabschluss) and the Bundesanzeiger (Jahresabschlussbilanz). Nothing gets easier with that setup.
You're not wrong, but you're missing the best part.
Estonian company does not pay taxes (*). As long as the money stays within the company he's golden. The company can pay for his car, his apartment/office, etc.
It is only when he decides to withdraw the money the problem occurs.
What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay taxes over there.
Here's the tricky part.
Estonia is part of Schengen Area. Which means you can travel there and back without passport. There's no paper trail of your arrangements. You can easily create a reality in which you reside there for majority of time.
But again, that's not the selling part of Estonian LTD. Which is - it's extremely easygoing and as long as money stays in the company you're not paying taxes.
It is only when he decides to withdraw the money the problem occurs.
What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay taxes over there.
Here's the tricky part.
Estonia is part of Schengen Area. Which means you can travel there and back without passport. There's no paper trail of your arrangements. You can easily create a reality in which you reside there for majority of time.
But again, that's not the selling part of Estonian LTD. Which is - it's extremely easygoing and as long as money stays in the company you're not paying taxes.
> You can easily create a reality in which you reside there for majority of time.
Cautios when dealing with German tax officers: They are checking the 183-day-limit very very strictly, includin invoices/bank statements if required, hotel bookings etc. They even apply intelligence colleagues if in doubt for big fishes.
Cautios when dealing with German tax officers: They are checking the 183-day-limit very very strictly, includin invoices/bank statements if required, hotel bookings etc. They even apply intelligence colleagues if in doubt for big fishes.
183-days rule is NOT a thing in germany for corporate taxes, and I think it is not in income taxes either. It may be an indicator, but it is not a hard proof. Important is, where you have your social life set up ("Lebensmittelpunkt"). That is, you can reside more than 183 days abroad, but if you have a family, golf club membership, permanent residence, your stock brokerage account etc. still in germany, you still count as a german tax resident. There are no hard laws with X days around it, german law revolves a lot around that "Lebensmittelpunkt" which will be decided on a per-case basis.
Its a little bit more complicated:
https://www.vlh.de/wissen-service/steuer-abc/183-tage-regelu...
https://www.vlh.de/wissen-service/steuer-abc/183-tage-regelu...
That articles refers to employees (Arbeitnehmer) which is something completely different.
Yes, and if you are a company owner, you usually have a contract between you and yourself? (https://www.hensche.de/Rechtsanwalt_Arbeitsrecht_Handbuch_Ge..., "Geschäftsführeranstellungsvertrag")
So OP has to clarify on both layers: natural person himself, legal entity, and the relation between them. And the result is affected by the questions OP raised?
So OP has to clarify on both layers: natural person himself, legal entity, and the relation between them. And the result is affected by the questions OP raised?
If you are a shareholder director (“Gesellschaftergeschäftsführer”) you have a contract but are still treated as self employed for most laws. The 183days rule does not apply in that case.
Have you never heard of fringe benefits tax?
Have you read my post?
Let say I am a junior SWE in EU. I incorporate in Estonia and issue my employer with an invoice from said company. That company pays for my house, my car, my dental service and whatnot, and what's left I take as a employee salary.
I pay local tax for that salary, but that's only a fraction of what I've billed my employer.
Let say I am a junior SWE in EU. I incorporate in Estonia and issue my employer with an invoice from said company. That company pays for my house, my car, my dental service and whatnot, and what's left I take as a employee salary.
I pay local tax for that salary, but that's only a fraction of what I've billed my employer.
That's just tax fraud though.
There's also the CFC rule, which means that within the EU, if you control a foreign corporation, your country of tax residence can tax undistributed profits.
Often tax offices don't bother and you might not get caught, but 'not getting caught' is not the same as it being legit.
There's also the CFC rule, which means that within the EU, if you control a foreign corporation, your country of tax residence can tax undistributed profits.
Often tax offices don't bother and you might not get caught, but 'not getting caught' is not the same as it being legit.
> that company pays for my house, my car, my dental service and whatnot, and what's left I take as a employee salary ... I pay local tax for that salary
Until you get audited by your local tax authority who rules that all of that is disguised salary, or the Estonian tax authority says that that's technically (taxable) profit being paid to the director.
If you're currently doing this, I suggest throwing yourself at the mercy of your local tax authority with the help of a lawyer and an accountant, as it's possible they'll show some leniency if you go to them first and not add penalty fines in addition to needing to back-pay the tax and late payment fines.
You've got to get up pretty early in the morning to fool The Revenue.
Until you get audited by your local tax authority who rules that all of that is disguised salary, or the Estonian tax authority says that that's technically (taxable) profit being paid to the director.
If you're currently doing this, I suggest throwing yourself at the mercy of your local tax authority with the help of a lawyer and an accountant, as it's possible they'll show some leniency if you go to them first and not add penalty fines in addition to needing to back-pay the tax and late payment fines.
You've got to get up pretty early in the morning to fool The Revenue.
That would not be possible at in Germany, everything you just listed is considered a "geldwerter Vorteil" and falls under income tax - even if the company gives you a car that you need to do your job, you will have to pay taxes on it.
To me it feels disgraceful to live in a country, benefit from the taxes that everyone else pays there, and try to avoid paying the taxes yourself. It is true that the ultra-wealthy do this. What we should do is try to make them pay their due taxes as well, not try to imitate them. That paths leads to an impoverished country where you have to live in a gated community with armed guards.
Totally agree! My goal also wasn't to avoid paying taxes. I just would like to have a fully digital and less bureaucratic system for it. But well, I guess I have to wait until Germany finally gets that.
Pretty much every country has a concept of benefit in kind. Some countries will allow some expenses to be covered (Part of your phone/internet subscription if you work from home, meals vouchers. Some countries codified some WFH arrangements) but you absolutely won't be able to pay for everything tax free.
You'd be far better-off jumping between countries to leverage the 30% ruling/Beckham Law/HSM tax arrangements if you can.
You'd be far better-off jumping between countries to leverage the 30% ruling/Beckham Law/HSM tax arrangements if you can.
Oh boy, are you in for a shock..
So, tax fraud?
I still live in (and don't plan to change it) in Germany. So I guess the whole thing doesn't really work for me. The goal of the whole operation would have been to make bureaucracy easier, but that doesn't seem to work. So ... it's a no do, unfortunately.
Exactly. I'm German and simulated the constellation some year's ago. Verdict was, if you are inside the EU it won't pay out. The Estonian model is for people trying to participate in the EU market from outside.
It is about where the actual "effective management" is considered to be located: If you live in Germany permanently, the tax office can decided to tax you as if you were a Germany company - and yes, most of the times they do it.
If you travel regularly and have an office in Estonia and you make the effective management decisions there, you are obliged to Estonian tax system only.
If you travel regularly and have an office in Estonia and you make the effective management decisions there, you are obliged to Estonian tax system only.
This is why I was wondering what the point was. Surely most countries will claim taxes from you if you work there, so having an Estonian entity will do little?
Can someone explain the actual benefit of sitting in a developed country and charging via Estonia?
Can someone explain the actual benefit of sitting in a developed country and charging via Estonia?
I suppose there is one possible rather significant benefit, depending on where you live. If you're going to be an independant contractor, a freelancing "gun for hire", you may want a corporate entity to be your front: As a sole proprietor[1], you'd be personally liable for all your business liabilities -- debts, as well as, say, prosecution. A joint-stock company[2], OTOH, is a legally independent entity, that carries its own assets and liabilities independent of the stockholders. So "as a business", you'd perhaps want not to "be yourself", but rather "be" a joint-stock company.
Those can, AIUI, in many countries be hard, bureaucratic, or expensive to set up. The great advantage of Estonian "electronic residency" (again, only AIUI) is that it enables you to easily and cheaply set up an Estonian "electronic stock company", which might not be so easy and cheap where you live.
It's not just about "charging"; it's about shielding.
___
[1]: https://en.wikipedia.org/wiki/Sole_proprietorship
[2]: https://en.wikipedia.org/wiki/Joint-stock_company
Those can, AIUI, in many countries be hard, bureaucratic, or expensive to set up. The great advantage of Estonian "electronic residency" (again, only AIUI) is that it enables you to easily and cheaply set up an Estonian "electronic stock company", which might not be so easy and cheap where you live.
It's not just about "charging"; it's about shielding.
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[1]: https://en.wikipedia.org/wiki/Sole_proprietorship
[2]: https://en.wikipedia.org/wiki/Joint-stock_company
For customer, unless you are a true digital nomad e.g. have no residency anywhere the benefit is: none.
For Estonia who uses services like Xolo to promote this for unaware people the benefit is: money (in a form of dividend tax, e-residency registration fees and so on).
For Estonia who uses services like Xolo to promote this for unaware people the benefit is: money (in a form of dividend tax, e-residency registration fees and so on).
This is the best answer. Internally, we have to deal with bureaucracies of every country for employment and residencies. Separately.
This should be higher up. Xolo deliberately hides this under small-print with vague statement about this issue.
If you manage your company in, let's say, Germany, it is de-facto German company in the eyes of German tax authorities. When German tax authorities will find this out they will make you open UG/GmbH and pay back the corpo-tax, plus possibly a fine.
Now you will be stuck with 2 companies - Estonian and German, which is way bigger hassle. Not to mention Estonian company becomes useless/liability.
I also want to mention that practically every country has offshore-company laws like this, even places like Thailand and other SEA countries. It's not only EU.
If you manage your company in, let's say, Germany, it is de-facto German company in the eyes of German tax authorities. When German tax authorities will find this out they will make you open UG/GmbH and pay back the corpo-tax, plus possibly a fine.
Now you will be stuck with 2 companies - Estonian and German, which is way bigger hassle. Not to mention Estonian company becomes useless/liability.
I also want to mention that practically every country has offshore-company laws like this, even places like Thailand and other SEA countries. It's not only EU.
Not answering your question directly but accounting and taxes are a thing everywhere. EU rules make accounting for companies quite complicated.
Focus on your business, open the smallest and simplest entity you can to validate your product before spending time and money optimizing or scaling things. That being said, I’m familiar with GmbHs in Germany and I would advise against going this route unless funding is available. Try a sole proprietorship instead if possible.
Focus on your business, open the smallest and simplest entity you can to validate your product before spending time and money optimizing or scaling things. That being said, I’m familiar with GmbHs in Germany and I would advise against going this route unless funding is available. Try a sole proprietorship instead if possible.
"accounting and taxes are a thing everywhere. EU rules make accounting for companies quite complicated" >> this is the most wrong thing ever. You cannot compare the one click accounting in estonia with german kafkaesk absurdity designed to grind you down. How things are implemented are drastically different in countries even if both in the EU.
If you have a company in estonia but you reside and fully control it from Germany, you might be liable for taxation in Germany due to CFC laws.
[deleted]
Thank you! Yes, that's why I'm looking for a simpler and less bureaucratic alternative. I'm totally fine with general accounting and taxes. But I would be happy if there was an alternative somewhere where you don't have to go to a notary for every little change and don't necessarily need a tax advisor because you have to talk to five different tax offices. Germany really makes it more complicated than it needs to be.
edit: just stumbled upon this really good blog post about the topic, in case anyone is interested: https://eidel.io/posts/estonias-e-residency-is-awesome-and-s...
edit: just stumbled upon this really good blog post about the topic, in case anyone is interested: https://eidel.io/posts/estonias-e-residency-is-awesome-and-s...
Haha, thanks for linking to my website! Happy to answer any questions.
Skimmed this thread and I'm quite surprised how few people are aware of the permanent establishment problem.
Quick primer on the permanent establishment problem: You would technically have to pay taxes for your company in the place you're living (not Estonia). For example, if you're living in Germany, your Estonian OÜ would technically have to file for German taxes, too, because it's being run from Germany and it now has a permanent establishment in Germany.
So, roughly speaking, the Estonian OÜ is only useful if:
- You are in a country which doesn't have a permanent establishment problem and maybe even offers tax benefits for foreign companies (e.g. the non-dom rules of Malta, Cyprus, etc.)
- You are in a country which doesn't have a permanent establishment problem because they don't crack down on foreign company ownership (e.g. most developing countries)
In all other countries, the Estonian OÜ is likely going to cause you many tax headaches in the long run. In practice, this means:
a) Your local tax authorities don't notice or don't understand, and you're still fine, even though you'd need to file for taxes;
b) Your local tax authorities crack down on you and you need to go looking for a very expensive international tax advisor versed in Estonian and your local tax law.
Skimmed this thread and I'm quite surprised how few people are aware of the permanent establishment problem.
Quick primer on the permanent establishment problem: You would technically have to pay taxes for your company in the place you're living (not Estonia). For example, if you're living in Germany, your Estonian OÜ would technically have to file for German taxes, too, because it's being run from Germany and it now has a permanent establishment in Germany.
So, roughly speaking, the Estonian OÜ is only useful if:
- You are in a country which doesn't have a permanent establishment problem and maybe even offers tax benefits for foreign companies (e.g. the non-dom rules of Malta, Cyprus, etc.)
- You are in a country which doesn't have a permanent establishment problem because they don't crack down on foreign company ownership (e.g. most developing countries)
In all other countries, the Estonian OÜ is likely going to cause you many tax headaches in the long run. In practice, this means:
a) Your local tax authorities don't notice or don't understand, and you're still fine, even though you'd need to file for taxes;
b) Your local tax authorities crack down on you and you need to go looking for a very expensive international tax advisor versed in Estonian and your local tax law.
Thanks for chiming in and also many many thanks for the great blog post :)
Yes, I came to the same conclusion. It's a nice construct, but not for EU residents like me. So I guess I'll go for a german UG/GmbH or cancel the whole project at all.
I professionally have been helping folks set up and maintain e-Residence and businesses, and all said here in the comments so far tracks: Estonia is absolutely unsurpassed qua administrative ease (this giving you a clear and lasting business advantage), the tax advantages are real, and the jurisdiction only gets better.-
Banking and being scrupulous on your personal taxes at your place of personal residence are issues, but nothing insurmountable, far from it.-
Banking and being scrupulous on your personal taxes at your place of personal residence are issues, but nothing insurmountable, far from it.-
I've considered it as a Spanish resident, but don't you have to live six months there to be considered a fiscal resident? Are people regularly operating them from outside Estonia?
(Not a tax professional so don't take my word for it) But I think you're talking about individual fiscal residency. A company you create can technically not be resident where you live so long as you can demonstrate that the principal activities of the company do not take place where you live. So with Spain, if a decent percent of your customers are Spanish and you're the only member of the company, then Spain would have reasonable recourse to consider the company Spanish and require you to register it there and pay Spanish corporate taxes. However, if you have say, 6 employees all over the world, your customers are not substantially Spanish etc then they have a lot harder job proving that the fiscal residency of the company is Spanish. In any case, there is always an outside chance that they could investigate you which is enough of a pain on its own, so may not be worth it!
I was discussing similar topics with a lawyer once over some beers.
Basically it would be best if you have no customers from Spain or country of your residence.
Basically it would be best if you have no customers from Spain or country of your residence.
The keyword to look for is CFC (controlled foreign corporation). The details depend on the country.
The "e" in eResidency does a lot of work. The scheme will not give you any residency rights or obligations in the physical sense. Just forming and running a company in the EU, including tax and banking systems that are aware of your non-resident status and making running a company easier.
As others have said, it mostly makes sense for people outside of the EU. If you have personal residency in Spain then it is questionable whether the easier paperwork in Estonia will offset the need to do some paperwork in Spain as well.
As others have said, it mostly makes sense for people outside of the EU. If you have personal residency in Spain then it is questionable whether the easier paperwork in Estonia will offset the need to do some paperwork in Spain as well.
Can also confirm it is great. The community is also quite nice and helpful. Also worth noting, because that comes up all the time, is that Estonia has a digital data embassy in Luxemburg, so if god forbid, russia would take increase its aggression, there is a copy of everything that would keep running your business. The main issue germans have is you cannot really get rid of german accounting as long as generating the business value there while living there. Once getting used to how smooth things can be, I could not bear having to deal with the german bureaucracy in any other area of life.
Oh there will be a lot of issues in the future because Germany says thst your company is in Germany because you work from there. So you have to do taxes in Estonia and in Germany. And prepare for a lot of tax issues if you dont have a good tax advisor.
>Germany says that your company is in Germany because you work from there.
Forgive my ignorance, I have never really thought about this before and I may be missing something very obvious here.
Isn't that kind of true, though? For instance, if I am a citizen of Japan, live there, and run my remote business from there, but the business that I run exclusively makes money from people in Portugal and Brazil, it would be true that my revenue is being generated in those other countries, but in my own life, I am enjoying the benefits and protections of being a Japanese citizen. Right?
It isn't so much that I would want to be taxed in: Portugal, Brazil, and Japan, but rather that, the nature of how I am choosing to operate my business kind of makes the issue my own burden to bare. If I continue to live in Japan for whatever reasons that may tie me there (family, friends, children in school, business isn't stable enough, other commitments, etc.) it seems like there is a kind of debt to pay back some of my earnings to the Japanese government because they have provided me an environment to build and maintain that business within their country even though the profit made is exclusively outside of Japan. That is to say, the government may not have seen the money directly, but they provided me a safe and stable environment in which I was able to run and operate that business; isn't that kind of the fundamental role of government? I.e., to protect the nation and its citizens, so they may do as they will.
Put another way, suppose the top 1,000 richest people in the world all opted to all move to a tiny nation with very low taxes, and continued to run their businesses remotely from that place without being required to contribute anything back to that nation through taxes. That seems wrong to me. It seems good that they would be asked to pay back into the place that they live and reside, regardless of where their revenue is gotten. They have a home, and that home is ultimately defended and it's property rights upheld by the government that recognizes it.
I'd be interested to hear how others see it. Like I said, I haven't really thought about this too much before, and may be missing something more fundamental and obvious.
Forgive my ignorance, I have never really thought about this before and I may be missing something very obvious here.
Isn't that kind of true, though? For instance, if I am a citizen of Japan, live there, and run my remote business from there, but the business that I run exclusively makes money from people in Portugal and Brazil, it would be true that my revenue is being generated in those other countries, but in my own life, I am enjoying the benefits and protections of being a Japanese citizen. Right?
It isn't so much that I would want to be taxed in: Portugal, Brazil, and Japan, but rather that, the nature of how I am choosing to operate my business kind of makes the issue my own burden to bare. If I continue to live in Japan for whatever reasons that may tie me there (family, friends, children in school, business isn't stable enough, other commitments, etc.) it seems like there is a kind of debt to pay back some of my earnings to the Japanese government because they have provided me an environment to build and maintain that business within their country even though the profit made is exclusively outside of Japan. That is to say, the government may not have seen the money directly, but they provided me a safe and stable environment in which I was able to run and operate that business; isn't that kind of the fundamental role of government? I.e., to protect the nation and its citizens, so they may do as they will.
Put another way, suppose the top 1,000 richest people in the world all opted to all move to a tiny nation with very low taxes, and continued to run their businesses remotely from that place without being required to contribute anything back to that nation through taxes. That seems wrong to me. It seems good that they would be asked to pay back into the place that they live and reside, regardless of where their revenue is gotten. They have a home, and that home is ultimately defended and it's property rights upheld by the government that recognizes it.
I'd be interested to hear how others see it. Like I said, I haven't really thought about this too much before, and may be missing something more fundamental and obvious.
Isn't that more or less how it works? You pay tax where you live, with the justification being, as you say, that you are benefitting from the social structure there?
The big country that is an exception is the US. Their citizens have to pay tax regardless of them being elsewhere, and the difference is dealt with via various taxation treaties. I imagine the justification is something like "we help our citizens everywhere, so they owe us tax".
> I'd be interested to hear how others see it. Like I said, I haven't really thought about this too much before, and may be missing something more fundamental and obvious.
The big thing that's missing is corporations. They are imaginary entities, with a bunch of rules about what they are allowed to do, how they pay tax, etc. Once you create a corporation (or several), you can move profits around according to various accounting rules, which are often disconnected from how ordinary people interact with an entity. Are you buying coffee from Starbucks on Oxford Street, or Starbucks UK, or Starbucks Luxembourg? Most people don't think about that when they buy a coffee, but the accountants do.
You can also change what kind of tax you are paying. If you have a company, you can pay yourself a salary or a dividend. It's still money either way, but depending on jurisdiction taxed differently.
The big country that is an exception is the US. Their citizens have to pay tax regardless of them being elsewhere, and the difference is dealt with via various taxation treaties. I imagine the justification is something like "we help our citizens everywhere, so they owe us tax".
> I'd be interested to hear how others see it. Like I said, I haven't really thought about this too much before, and may be missing something more fundamental and obvious.
The big thing that's missing is corporations. They are imaginary entities, with a bunch of rules about what they are allowed to do, how they pay tax, etc. Once you create a corporation (or several), you can move profits around according to various accounting rules, which are often disconnected from how ordinary people interact with an entity. Are you buying coffee from Starbucks on Oxford Street, or Starbucks UK, or Starbucks Luxembourg? Most people don't think about that when they buy a coffee, but the accountants do.
You can also change what kind of tax you are paying. If you have a company, you can pay yourself a salary or a dividend. It's still money either way, but depending on jurisdiction taxed differently.
For Japan in specific, you’ll want to look into JCFC. Not a tax or legal advice, but IIRC it boils down to: if your company (assuming 100% ownership) is paying less taxes than a Japanese company would, and you’re a Japanese tax resident, you would need to pay the difference in Japan. It is probably similar in other jurisdictions that have CFC laws.
Also do read up on permanent establishment rules as well.
Also do read up on permanent establishment rules as well.
Ah, sorry. I was using Japan as an example of "living somewhere very far outside of the EU" to highlight the sense of distance between the two. I have listened to a little bit about how difficult it is to open a business in Japan (as a foreigner, at least) and how stressful tax time can be [1], but I'm not well versed in the specifics of how they do things.
[1] https://youtu.be/XpvTyyfcBaw?t=416
[1] https://youtu.be/XpvTyyfcBaw?t=416
Japan as an example of anything not specific to Japan is problematic.
Almost nothing is handled in a similar means or approach to Japanese standard practices, anywhere else.
Speaking as someone with 30+ years experience in both Japanese and non-Japanese business dealings and having had and being currently in the process of renewing work and residence permission in Japan under a different classification than before, and having visa sponsors who just finished 'Tax Season' there; the system is both at once extremely linear, and somehow opaque, and the actual paperwork is more easily measured in centimeters than in numbers of pages.
However; that being said, the actual costs of taxes and other fees including retaining the services of an administrative scrivener (not quite the same as a paralegal accountant) are very logical and reasonable for the resultant social/infrastructure outcomes.
But, if one is not already fully fluent in Japanese and does not have a driving requirement to reside and do business in Japan; the system is simply not designed for participation from the outside like the EU or US. When foreigners attempt to participate directly, even the Japanese know that the local system is complex in puzzling ways, and the most common comment I have personally observed is, "Why would you voluntarily do this; we all do it because we must, but if you don't have to, WHY?"
Almost nothing is handled in a similar means or approach to Japanese standard practices, anywhere else.
Speaking as someone with 30+ years experience in both Japanese and non-Japanese business dealings and having had and being currently in the process of renewing work and residence permission in Japan under a different classification than before, and having visa sponsors who just finished 'Tax Season' there; the system is both at once extremely linear, and somehow opaque, and the actual paperwork is more easily measured in centimeters than in numbers of pages.
However; that being said, the actual costs of taxes and other fees including retaining the services of an administrative scrivener (not quite the same as a paralegal accountant) are very logical and reasonable for the resultant social/infrastructure outcomes.
But, if one is not already fully fluent in Japanese and does not have a driving requirement to reside and do business in Japan; the system is simply not designed for participation from the outside like the EU or US. When foreigners attempt to participate directly, even the Japanese know that the local system is complex in puzzling ways, and the most common comment I have personally observed is, "Why would you voluntarily do this; we all do it because we must, but if you don't have to, WHY?"
I’d assume most foreigners are doing this because they want to live in Japan :-) I was researching it for the very same reason.
but you still pay your personal income tax in the country that you live in
> For instance, if I am a citizen of Japan, live there, and run my remote business from there, but the business that I run exclusively makes money from people in Portugal and Brazil, it would be true that my revenue is being generated in those other countries
That really depends on the nature of your business. If you're hosting a web application in Japan then I'd argue you're still doing business in Japan. Same if you're a contractor for companies or individuals abroad. A grey area is if you host an application abroad. You technically do business abroad, but it's unlikely anybody will come after you for tax.
You clearly owe tax abroad if you operate legal entities that are incorporated abroad. Then we enter the vast and diverse field of how to (ab)use taxation and corporate law of different countries to structure your business to avoid as much tax and bureaucracy as possible. How much of that is morally appropriate according to the points you raised is a whole different question.
Disclaimer: I'm neither a lawyer nor a tax advisor.
That really depends on the nature of your business. If you're hosting a web application in Japan then I'd argue you're still doing business in Japan. Same if you're a contractor for companies or individuals abroad. A grey area is if you host an application abroad. You technically do business abroad, but it's unlikely anybody will come after you for tax.
You clearly owe tax abroad if you operate legal entities that are incorporated abroad. Then we enter the vast and diverse field of how to (ab)use taxation and corporate law of different countries to structure your business to avoid as much tax and bureaucracy as possible. How much of that is morally appropriate according to the points you raised is a whole different question.
Disclaimer: I'm neither a lawyer nor a tax advisor.
I collected my Estonian non-citizen id card from Madrid. I found their income reports misleading and highly subjective. Plus you have to pay someone to dump the data in Estonian. You are subject to fines on a phone line. Not much security from an owner POV. I finally closed the entity which was much more expensive than opening.
At the end, these kind of stuff is done so they can charge entrepeneurs heftly and throughly with invoices on services which could not be needed if you were in their jurisdiction.
Not worth it.
PD. I forgot to add the ID card is valid for 5 years or so so you might run out of identity while your company is running, risky business.
At the end, these kind of stuff is done so they can charge entrepeneurs heftly and throughly with invoices on services which could not be needed if you were in their jurisdiction.
Not worth it.
PD. I forgot to add the ID card is valid for 5 years or so so you might run out of identity while your company is running, risky business.
Overall it costs me around 60 euros a month in accounting/virtual office.
Also if you use the mobile app authenticator you can do everything needed even while your ID card has expired. I prefer to use the smartcard instead of another app, but you have that option.
Also if you use the mobile app authenticator you can do everything needed even while your ID card has expired. I prefer to use the smartcard instead of another app, but you have that option.
It is mentioned a bit in other comments: be aware that in the country where you live, the tax authorities can argue that your 100% owned company in country X is managed by you. This means it is taxable in your country. It is then up to you to counter their point of view…
And they wouldn't be wrong.
Except it does not work that way in the US, you can freely incorporate in any state without worrying about this kind of tax drama. The EU really needs to improve the integration of their single market, as this is precisely the kind of barrier preventing people from exploring what other EU states have to offer.
It does here, at least in California. eg if you live in CA and own a DE llc, that llc will have income apportioned to CA.
Not quiet. Your profits from the business will just get taxed as a CA resident to your personally.
If an LLC does activity in California, it's subject to income apportionment in CA.
If an LLC does activity in California, it's subject to income apportionment in CA.
> As somebody from Germany, establishing a company is a bit tedious and bureaucratic.
I'm fairly sure the German tax authority will claim that you have a local German branch office since you live and work there.
That might be OK tax wise?
But I'd recommend starting with the tax situation in Germany.
Having limited liability through some kind of corporation can be nice.
But on the other hand, it becomes harder in Germany to pay out a varying salary as profits fluctuates throughout the year since the German tax authorities will see that as an illegal dividend payment from your company.
From this perspective it can be easier to set up some kind of sole proprietorship. Easier accounting etc and can pay out profits easier. But you get the personal liability.
This is not hard advice, just some things to point out that it gets complicated fast. So I'd recommend spending a few hundred euros on getting advice from a tax professional to begin with.
I'm fairly sure the German tax authority will claim that you have a local German branch office since you live and work there.
That might be OK tax wise?
But I'd recommend starting with the tax situation in Germany.
Having limited liability through some kind of corporation can be nice.
But on the other hand, it becomes harder in Germany to pay out a varying salary as profits fluctuates throughout the year since the German tax authorities will see that as an illegal dividend payment from your company.
From this perspective it can be easier to set up some kind of sole proprietorship. Easier accounting etc and can pay out profits easier. But you get the personal liability.
This is not hard advice, just some things to point out that it gets complicated fast. So I'd recommend spending a few hundred euros on getting advice from a tax professional to begin with.
> I'm fairly sure the German tax authority will claim that you have a local German branch office since you live and work there. That might be OK tax wise?
If you work from home, your office at home usually does not qualify as a company office unless you make it one. In particular, that alone would not force you to pay Gewerbesteuer to the city, which is the tax specifically addressing local presence.
However, you're touching upon a very important point: If you live in Germany and your Estonian company pays you a salary (as opposed to dividends), you will be a proper employee and your company will also have to pay social security for you, and this might complicate matters significantly. In fact, this will likely (in the German tax authorities' eyes) establish that your Estonian company partially operates in Germany (which is a much broader thing than having an actual physical branch office). This then brings you back to square 1 – your company having to file taxes in Germany, too. Someone below linked https://eidel.io/posts/estonias-e-residency-is-awesome-and-s... which seems to confirm this.
> German tax authorities will see that as an illegal dividend payment from your company.
Could you elaborate? How is this illegal if you declare taxes?
If you work from home, your office at home usually does not qualify as a company office unless you make it one. In particular, that alone would not force you to pay Gewerbesteuer to the city, which is the tax specifically addressing local presence.
However, you're touching upon a very important point: If you live in Germany and your Estonian company pays you a salary (as opposed to dividends), you will be a proper employee and your company will also have to pay social security for you, and this might complicate matters significantly. In fact, this will likely (in the German tax authorities' eyes) establish that your Estonian company partially operates in Germany (which is a much broader thing than having an actual physical branch office). This then brings you back to square 1 – your company having to file taxes in Germany, too. Someone below linked https://eidel.io/posts/estonias-e-residency-is-awesome-and-s... which seems to confirm this.
> German tax authorities will see that as an illegal dividend payment from your company.
Could you elaborate? How is this illegal if you declare taxes?
> Could you elaborate? How is this illegal if you declare taxes?
Dividends are treated differently from the salary by tax laws.
Dividends are treated differently from the salary by tax laws.
> Could you elaborate? How is this illegal if you declare taxes?
As someone else mentioned, the taxes are different.
Namely: Salary is taxed lower than dividends. So the German tax authorities checks very carefully that you don't pay salary instead of dividends. If they determine that you paid out dividends as a salary, then you'll be charged with tax fraud.
Now you might say, "I don't care about paying a bit extra in taxes, so I'll pay it as dividends as they wish"
The problem is that you can only pay dividends the year after you earn the money.
If you can set a fixed salary which you can keep paying throughout, and then wait for the dividend payments next year, that's fine.
But what if you want to pay yourself wildly different amounts of money each month based on how much you managed to charge your customers? You can't just keep adjusting your salary up and down every month with a corporation.
So here's where something like a sole proprietorship may be simpler from that aspect?
Another thing you want to look at is "how easy will it be to dissolve the operations?" With a GmbH/UG it takes several years and potentially many thousands of euros in accounting fees. Not sure about the foreign corps. I think German sole proprietorships are simpler in either case?
Also, Germany has a "Moving away tax" where you get taxed on the fictious value of your company if you move away from Germany. This fictious value can be quite a lot more than what you'd actually get if selling the company.
Yet another thing: Depending on your setup, you may be covered by different rules regarding health insurance and pensions. If you don't make a lot of money in the beginning, it may be best to stay in the government insurance. But if you think you'll make a lot of money, it can be better to be able to do private insurance instead? There are rules on how you can move back and forth between government/private, so this is another area to consider carefully.
This is my understanding as a layman, please check this with a competent local tax expert before acting on any advice here.
As someone else mentioned, the taxes are different.
Namely: Salary is taxed lower than dividends. So the German tax authorities checks very carefully that you don't pay salary instead of dividends. If they determine that you paid out dividends as a salary, then you'll be charged with tax fraud.
Now you might say, "I don't care about paying a bit extra in taxes, so I'll pay it as dividends as they wish"
The problem is that you can only pay dividends the year after you earn the money.
If you can set a fixed salary which you can keep paying throughout, and then wait for the dividend payments next year, that's fine.
But what if you want to pay yourself wildly different amounts of money each month based on how much you managed to charge your customers? You can't just keep adjusting your salary up and down every month with a corporation.
So here's where something like a sole proprietorship may be simpler from that aspect?
Another thing you want to look at is "how easy will it be to dissolve the operations?" With a GmbH/UG it takes several years and potentially many thousands of euros in accounting fees. Not sure about the foreign corps. I think German sole proprietorships are simpler in either case?
Also, Germany has a "Moving away tax" where you get taxed on the fictious value of your company if you move away from Germany. This fictious value can be quite a lot more than what you'd actually get if selling the company.
Yet another thing: Depending on your setup, you may be covered by different rules regarding health insurance and pensions. If you don't make a lot of money in the beginning, it may be best to stay in the government insurance. But if you think you'll make a lot of money, it can be better to be able to do private insurance instead? There are rules on how you can move back and forth between government/private, so this is another area to consider carefully.
This is my understanding as a layman, please check this with a competent local tax expert before acting on any advice here.
> Namely: Salary is taxed lower than dividends.
That very much depends on your tax bracket but at high income levels salaries are usually taxed quite a bit higher (42% vs. ~27%). 42% being the highest tax bracket of course; the first ~69k€ of your salary are taxed at a lower rate.
> If they determine that you paid out dividends as a salary, then you'll be charged with tax fraud.
This might be the case if the company were in Germany, and then it might not even be the taxman that'd complain but social security since you don't pay social security fees on capital gains. However, I doubt German authorities can do much about an Estonian entity paying dividends.
> You can't just keep adjusting your salary up and down every month with a corporation.
Yes, you can. Many companies do that – it's called fixed vs. variable salary (bonuses).
> The problem is that you can only pay dividends the year after you earn the money.
You're right in general (and I assume also in the case of an Estonian entity). Though at least in Germany – surprisingly – this is not correct, look up "Gewinnvorabausschüttung".
Either way, this is not a huge obstacle if you're pursuing this long-term: You only have to make it through the first year without any income. Afterwards you can live off of last year's dividends.
That very much depends on your tax bracket but at high income levels salaries are usually taxed quite a bit higher (42% vs. ~27%). 42% being the highest tax bracket of course; the first ~69k€ of your salary are taxed at a lower rate.
> If they determine that you paid out dividends as a salary, then you'll be charged with tax fraud.
This might be the case if the company were in Germany, and then it might not even be the taxman that'd complain but social security since you don't pay social security fees on capital gains. However, I doubt German authorities can do much about an Estonian entity paying dividends.
> You can't just keep adjusting your salary up and down every month with a corporation.
Yes, you can. Many companies do that – it's called fixed vs. variable salary (bonuses).
> The problem is that you can only pay dividends the year after you earn the money.
You're right in general (and I assume also in the case of an Estonian entity). Though at least in Germany – surprisingly – this is not correct, look up "Gewinnvorabausschüttung".
Either way, this is not a huge obstacle if you're pursuing this long-term: You only have to make it through the first year without any income. Afterwards you can live off of last year's dividends.
> Having limited liability through some kind of corporation can be nice.
I think this is the main point and benefit of the whole thing. It can be difficult and/or expensive to set up a limited liabilty company in many countries; as an e-Stonian, it's apparently cheap and simple.
Any possible tax benefits are just a bonus.
I think this is the main point and benefit of the whole thing. It can be difficult and/or expensive to set up a limited liabilty company in many countries; as an e-Stonian, it's apparently cheap and simple.
Any possible tax benefits are just a bonus.
In some countries, it's common to register a sole proprietorship in addition to a limited liability company and bill the company from the sole proprietorship to avoid double taxation. However, I suppose this would not be allowed in Germany.
I don't see how the German tax authorities would allow this since it would completely circumvent their rules about "disguised profit payments"?
https://de.wikipedia.org/wiki/Verdeckte_Gewinnaussch%C3%BCtt...
https://de.wikipedia.org/wiki/Verdeckte_Gewinnaussch%C3%BCtt...
Idk where you are coming from but I am Greek and compared to Greece there is ZERO bureaucracy. You send your documents pretty much whenever you like, you don't get fined for stupid things and you just need to prepare the financial report once per year. We are talking about a very clear and flat system. 20% tax on dividend and for good tax payers it can go as low as 14% as far as I remember. The only "bureaucracy" things is that you have to travel all the way to your country's Estonian embassy to get your e-residency card.
Last but not least, don't count on Estonian banks. They don't like e-residents and even if they like them today, don't trust them.
reply
Here's a newer post from a German who previously was a fan of the Estonian e-business, saying things changed for the worse in 2025:
https://denationalize.me/emigrate/goodbye-estonia-how-a-popu...
https://denationalize.me/emigrate/goodbye-estonia-how-a-popu...
This seems to only raise issues about taxes but none about the bureaucracy side?
That just seems like an ad for their LLC incorporating service.
Ok, road tabbaco alcool taxes have risen in Estonia in 2025. But wtf does that matter for an e-resident?! Or that there are going to be harder ways to "secretly distribute profits". But that's just tax avoidance and they are leading with these ideas on their blog?
2% tax on profits to support the military, and 2% extra on VAT is what changed in 2025 and important for e-Residents.
Ok, road tabbaco alcool taxes have risen in Estonia in 2025. But wtf does that matter for an e-resident?! Or that there are going to be harder ways to "secretly distribute profits". But that's just tax avoidance and they are leading with these ideas on their blog?
2% tax on profits to support the military, and 2% extra on VAT is what changed in 2025 and important for e-Residents.
I've been running a saas like this for the past couple of years.
I'm using Xolo which do the accounting and local representative. 99% of my bureaucracy is uploading pdf invoices to the Xolo system. Once a year I have to spend like one hour on the anual report. That's pretty much it.
Every 5 years you have to renew your digital id. It costs a little money and if you are in the EU there will be a pickup location not far away (I had to travel internationally).
I also have to deal with my personal taxes but that's another matter.
I'm using Xolo which do the accounting and local representative. 99% of my bureaucracy is uploading pdf invoices to the Xolo system. Once a year I have to spend like one hour on the anual report. That's pretty much it.
Every 5 years you have to renew your digital id. It costs a little money and if you are in the EU there will be a pickup location not far away (I had to travel internationally).
I also have to deal with my personal taxes but that's another matter.
My 2 cents
In 2023 tried to register a business in Estonia.
I had to first get the e-residency.
This worked, (took 6 weeks I believe), but then I had to travel to another country (which had an Estonian embassy) to collect it.
Then I would have had to travel to Estonia itself to register the actual business and bank account (something like that -- it was a while ago).
(There are "done for you" business services, but from what I recall they were quite expensive, and I think would have still required the travel.)
It was theoretically doable, but due to life circumstances I wasn't able to travel at the time, so it didn't work out.
Meanwhile a few days ago, finally worked up the courage, and registered a business in the UK via a formation agent.
It took 25 minutes and $150. (Business was registered within 2 business days.) From the comfort of sitting on mine own ass, on the other side of the sea. So... yeah xD I like this way a bit better so far.
In 2023 tried to register a business in Estonia.
I had to first get the e-residency.
This worked, (took 6 weeks I believe), but then I had to travel to another country (which had an Estonian embassy) to collect it.
Then I would have had to travel to Estonia itself to register the actual business and bank account (something like that -- it was a while ago).
(There are "done for you" business services, but from what I recall they were quite expensive, and I think would have still required the travel.)
It was theoretically doable, but due to life circumstances I wasn't able to travel at the time, so it didn't work out.
Meanwhile a few days ago, finally worked up the courage, and registered a business in the UK via a formation agent.
It took 25 minutes and $150. (Business was registered within 2 business days.) From the comfort of sitting on mine own ass, on the other side of the sea. So... yeah xD I like this way a bit better so far.
I can't speak to how things were in 2023 but today you do not need to visit Estonia.
Registering a company in the U.K. is very easy but the tax treatment is less favourable compared to Estonia. The U.K. leaving the European Union is also disadvantageous (although the full consequence of that is yet to be seen). All company filings in the U.K. are public, much more information about your company is public compared to Estonia.
Registering a company in the U.K. is very easy but the tax treatment is less favourable compared to Estonia. The U.K. leaving the European Union is also disadvantageous (although the full consequence of that is yet to be seen). All company filings in the U.K. are public, much more information about your company is public compared to Estonia.
Creating a company is the easy part in the UK. Need to do HMRC and house of company reports. And now his Majesty revenue and custom requires purchasing "approved" tax software and submit expenses adhering to new regulations. And to verify your identity
and if you like access the online service you've got to wait 2 to 3 weeks for them to send a code in a physical post letter (no other way). And part of those services are mysteriously unaccessible from an IP outside the UK.
And it costs double to dissolve the entity than it did to create it. VAT is 20%, put someone on Payee: employee pays 20% to 45% (over 50k per year starts to fall into the high tax rate) + 9% insurance and as a company you also pay roughly 30% on top for taxes and insurance. Of course there is corporate tax on any profit. If with all of those taxes you somehow manage to be profitable.
and if you like access the online service you've got to wait 2 to 3 weeks for them to send a code in a physical post letter (no other way). And part of those services are mysteriously unaccessible from an IP outside the UK.
And it costs double to dissolve the entity than it did to create it. VAT is 20%, put someone on Payee: employee pays 20% to 45% (over 50k per year starts to fall into the high tax rate) + 9% insurance and as a company you also pay roughly 30% on top for taxes and insurance. Of course there is corporate tax on any profit. If with all of those taxes you somehow manage to be profitable.
I'm curious why you used a formation agent to register your UK company instead of doing it directly on the government's web site.
https://www.gov.uk/limited-company-formation/register-your-c...
https://www.gov.uk/limited-company-formation/register-your-c...
I realized I had been putting it off for years due to hating paperwork, then realized the whole point of a business is that you can pay people to do stuff you don't like. So for me, the first order of business was to outsource the formation itself :)
I get it for things that are a hassle. But the process to register a business in the UK is really straightforward. I haven't used the process for many years now, but the last time I did I was impressed at how they'd made it as simple as possible whilst collecting all the necessary information.
I can't imagine how a formation agent would make the process any simpler or easier for you.
I can't imagine how a formation agent would make the process any simpler or easier for you.
Whole point of a business is making a profit my guy! :-)
Please read up on what a permanent establishment means from a tax perspective. Most countries tax laws, especially EUs unambiguously state that the Estonian company will be taxed as if it was a company in your primary residence country.
The e-residence website repeats this many times, with many examples focusing on Germany.
https://learn.e-resident.gov.ee/hc/en-gb/articles/3600025428...
The whole e-residence thing only makes sense if you are from a non-EU country which doesn’t model its tax code on the OECD model.
People do get away with it until they get audited.
The e-residence website repeats this many times, with many examples focusing on Germany.
https://learn.e-resident.gov.ee/hc/en-gb/articles/3600025428...
The whole e-residence thing only makes sense if you are from a non-EU country which doesn’t model its tax code on the OECD model.
People do get away with it until they get audited.
There are a handful of countries listed there but you expand the criteria to all EU countries, which is not the case.
I don't have the issues you're talking about, I pay corporate taxes in Estonia, and I pay income taxes in Romania.
I thought Germany was a well-known country that is incopatible with this model (curious how things will change with EU Inc), but asking an accountant in your home country of tax laws and double taxation treaties will be better than random internet people.
I don't have the issues you're talking about, I pay corporate taxes in Estonia, and I pay income taxes in Romania.
I thought Germany was a well-known country that is incopatible with this model (curious how things will change with EU Inc), but asking an accountant in your home country of tax laws and double taxation treaties will be better than random internet people.
I hate to say it, but you don't have any issues mainly because the romanian tax office is just more relaxed than the german one.
> A company is considered tax resident in Romania if it has its ‘place of effective management’ (POEM) in Romania.
All EU countries have the same laws in this regard, as it is a precondition for joining the EU.
> A company is considered tax resident in Romania if it has its ‘place of effective management’ (POEM) in Romania.
All EU countries have the same laws in this regard, as it is a precondition for joining the EU.
> but you don't have any issues mainly because the romanian tax office is just more relaxed than the german one.
I'd argue because I'm not a resident of those 2 EU countries out of 27. Hence my previous comment.
You can't take only place of effective management in account because double taxation treaties also kick in.
I'd argue because I'm not a resident of those 2 EU countries out of 27. Hence my previous comment.
You can't take only place of effective management in account because double taxation treaties also kick in.
> non-EU country which doesn’t model its tax code on the OECD model.
It's a very narrow list of countries then. Only reason where it would really work if the owner is digital nomad with no tax residency anywhere.
It's a very narrow list of countries then. Only reason where it would really work if the owner is digital nomad with no tax residency anywhere.
Yes, the specific details are outlined in the bilateral tax treaties between Estonia and the given country, but it is almost always tax evasion.
It mostly makes sense for people from countries with weak corporate tax enforcement that need a limited liability entity in a reputable jurisdiction like Estonia.
It mostly makes sense for people from countries with weak corporate tax enforcement that need a limited liability entity in a reputable jurisdiction like Estonia.
I once asked a similar question but from the Indian side of things. People here mention how double-taxing might be an issue from a more german-Estonian side of things, but I wonder what are people's thoughts on the Indian-Estonian side of things
Admittedly, US makes LLC's much easier to form as compared to EU. But I sort-of like the EU's privacy perspective for the most part and feel like if I do ever end up making a business, having an EU/Estonian company might make more sense but it also charges a lot in the start compared to the US counterpart.
What are people's thoughts and is there any real tangible value from say a non EU citizen perspective in creation of an EU company as compared to US company when there is a sizable difference in the amount of money needed to form a company?
I hope EU really simplifies the business creation and some stock market related things as well as it does feel to be a little bit fractured. I had heard that there were some proposals regarding that, Let's hope that those start to take place.
(Also although EU feels good for privacy, it's a little concerning to me on how Chatcontrol was denied but then it was asked again in a rare occurence which makes me wonder about the privacy aspects of EU, I do think that EU cares about privacy somewhat more than the current US govt but it should also work on anti-measures to prevent such laws from being passed by giving privacy as a right for example, so to me, the EU's chatcontrol feels a bit concerning and I think that EU citizens might agree with that as well.)
Admittedly, US makes LLC's much easier to form as compared to EU. But I sort-of like the EU's privacy perspective for the most part and feel like if I do ever end up making a business, having an EU/Estonian company might make more sense but it also charges a lot in the start compared to the US counterpart.
What are people's thoughts and is there any real tangible value from say a non EU citizen perspective in creation of an EU company as compared to US company when there is a sizable difference in the amount of money needed to form a company?
I hope EU really simplifies the business creation and some stock market related things as well as it does feel to be a little bit fractured. I had heard that there were some proposals regarding that, Let's hope that those start to take place.
(Also although EU feels good for privacy, it's a little concerning to me on how Chatcontrol was denied but then it was asked again in a rare occurence which makes me wonder about the privacy aspects of EU, I do think that EU cares about privacy somewhat more than the current US govt but it should also work on anti-measures to prevent such laws from being passed by giving privacy as a right for example, so to me, the EU's chatcontrol feels a bit concerning and I think that EU citizens might agree with that as well.)
What are you comparing it to in Germany? Have you tried services like https://www.firma.de that don't make it much more complicated than the Estonian option these days. I have not tried it myself, but I have friends who had good experiences with it.
If some bureaucracy is what keeps you from realizing the idea or not, then the idea, and the earningspotential seems quite bad. If you are going to start a company, make sure there is some good earningspotential. That way, a bit of bureaucracy in the begining will not be so tough, especially when the money comes rolling in.
So I think the fact that you worry about bureaucracy signals that maybe you should rethink your idea.
For hobby projects, don't bother with a company. It is possible in any country to earn money on the side as a hobby. Sure, if you live in the EU, the taxes will eat away most, if not all the profit, but it's a hobby and learning opportunity.
Once you tested, and see potential for serious money, just pay someone to start the company for you. Easy peasy!
So I think the fact that you worry about bureaucracy signals that maybe you should rethink your idea.
For hobby projects, don't bother with a company. It is possible in any country to earn money on the side as a hobby. Sure, if you live in the EU, the taxes will eat away most, if not all the profit, but it's a hobby and learning opportunity.
Once you tested, and see potential for serious money, just pay someone to start the company for you. Easy peasy!
Here's what I've seen. First you’ll need a service provider (you can’t really avoid it) we tried grouhub,Manuel the guy was very kind. 500€ for the incorporation and he referred us to get the bank account . On the other hand, don’t incorporate too early. If you’re still validating, you’re just paying overhead for nothing(180€/month).
On initial capital: you can set it at €10k as it helps if you plan to structure/share ownership more seriously later, but plenty of people start smaller and adjust when needed.
You don't need a service provider other than a "contact person".
The actual minimal cost of getting e-residency is a one time €150 state fee (I guess you have to renew the physical card every 5 years, which is €150 again?). If you also want to incorporate an Estonian company (which you probably do in this context here), then the registration for this is a €265 one time state fee.
There are no other mandatory fees, except you have to find a "contact person" who's responsible for receiving official government communication on behalf of your company (don't worry, I have never gotten any physical communication from any gov agencies during my 10 years of having a company here so this "contact person" won't actually be doing anything and is just a formality). After a 3 minute google search, this service can be had for €7 / month.
If you don't want to file taxes yourself then you'd also need to hire a local accounting firm. That'll start from somewhere around €50/month for a micro-SaaS. If you really want to, you can file taxes yourself for free but.. your call if your time spent learning the Estonian tax code is worth the saved money..
The actual minimal cost of getting e-residency is a one time €150 state fee (I guess you have to renew the physical card every 5 years, which is €150 again?). If you also want to incorporate an Estonian company (which you probably do in this context here), then the registration for this is a €265 one time state fee.
There are no other mandatory fees, except you have to find a "contact person" who's responsible for receiving official government communication on behalf of your company (don't worry, I have never gotten any physical communication from any gov agencies during my 10 years of having a company here so this "contact person" won't actually be doing anything and is just a formality). After a 3 minute google search, this service can be had for €7 / month.
If you don't want to file taxes yourself then you'd also need to hire a local accounting firm. That'll start from somewhere around €50/month for a micro-SaaS. If you really want to, you can file taxes yourself for free but.. your call if your time spent learning the Estonian tax code is worth the saved money..
You're going to make life much harder for yourself, not easier, because you'll still need German legal advice but now you need an expensive multi-national lawyer/firm. Anyone cheaper will refuse to touch it.
Germany cares about where the management of your company actually happens, not just where the entity is incorporated. So you're not going to avoid German bureaucracy, it's going to be worse not better.
Germany cares about where the management of your company actually happens, not just where the entity is incorporated. So you're not going to avoid German bureaucracy, it's going to be worse not better.
I was an e-resident for 10 years, had a company and paid all taxes, but this year they refused to prolong it due to my nationality. So, I don't recommend Estonia at all, they can easily screw you over at any time. :(
Since I'm looking for a replacement atm, what's the best US state to register a simple and cheap LLC for a foreigner?
Since I'm looking for a replacement atm, what's the best US state to register a simple and cheap LLC for a foreigner?
The classic answer is Delaware because that's what everyone else does so there are scale effects. Practically this means that Delaware's legal and banking system is extremely experienced with business customers.
At the level of having, say, a mom and pop LLC, most states are about the same, eg you need to do about the same amount of minimal paperwork to register the name, have an agent in state who can receive legal notices for you, etc. Virginia for example isn't much more work than DE.
If you really don't want to do a lot of leg work, there are services like Stripe Atlas that will do it all for you. I haven't used them but they seem to be targeting the startup/HN crowd.
Finally Wyoming and Nevada have some features of LLCs that you might find attractive, such as keeping the ownership structure out of public records. Personally, and unfairly to NV, I think of NV LLCs as slightly sketchy because for a couple of years all the ones I saw were weird businesses that promised "incredible investment opportunities!!!" in some revolutionary technology or other, thermodynamics be damned.
At the level of having, say, a mom and pop LLC, most states are about the same, eg you need to do about the same amount of minimal paperwork to register the name, have an agent in state who can receive legal notices for you, etc. Virginia for example isn't much more work than DE.
If you really don't want to do a lot of leg work, there are services like Stripe Atlas that will do it all for you. I haven't used them but they seem to be targeting the startup/HN crowd.
Finally Wyoming and Nevada have some features of LLCs that you might find attractive, such as keeping the ownership structure out of public records. Personally, and unfairly to NV, I think of NV LLCs as slightly sketchy because for a couple of years all the ones I saw were weird businesses that promised "incredible investment opportunities!!!" in some revolutionary technology or other, thermodynamics be damned.
I am sorry, but under the current circumstances in the US, your second paragraph sounds like satire, and I actually laughed out loud.
Well, I did a small research and I couldn't find any cases of the US government discriminating foreign business owners by passport. There are several cases in the EU, but the US looks clear so far. Hence my interest in that location.
I'm in a similar situation — building a SaaS (API proxy for LLM cost optimization) and evaluating Estonia vs UK LTD. Leaning towards UK for Stripe compatibility but the 0% tax on retained profits in Estonia is very tempting. Would love to hear from anyone who's used both.
The 0% tax on retained profits is nice as long as your own residency country does not try to tax it. Some countries like the US don't consider this as a shelter and if you are the beneficial owner then still want to tax your company profits there.
Also the 0% retained profits system will come to an end in the next few years due to a worldwide push to have minimum corporate income tax.
Also the 0% retained profits system will come to an end in the next few years due to a worldwide push to have minimum corporate income tax.
I have a limited company and a nonprofit registered in Estonia and am about to register another company. I C
can't recommend it enough. It's how it should be everywhere and the polar opposite of how it is in Italy, where i am based.
You can create a German UG online if you have an eID. That's currently the best way for small commercial projects in Germany.
[deleted]
curious how much of the appeal is still there vs a few years ago
feels like a lot of these “global founder” setups sound great in theory but get messy in practice
Even the simplest of jurisdictions will cost you $3000-5000 of yearly up keep for no revenue. Don’t be deluded with the incorporation cost, later on you’ll discover lots of required things that are not very obvious now like banking fees, mailbox, accountants, some form, VAT, etc..
So until you have $5.000 of yearly revenue (or guaranteed incoming revenue), do not incorporate. Just remind your users that your service is not free and they have to pay up at some point after the beta.
Once you hit that threshold, you can consider incorporating. No one can help you in that. There are three factors here: Where you live, What your passport is (where you are from) and where your income is coming from. Based on these three, you’ll be able to determine which jurisdiction is most suitable. It’s not the one with the least taxes because at this stage, 5% or 40% tax on profit is irrelevant.
So until you have $5.000 of yearly revenue (or guaranteed incoming revenue), do not incorporate. Just remind your users that your service is not free and they have to pay up at some point after the beta.
Once you hit that threshold, you can consider incorporating. No one can help you in that. There are three factors here: Where you live, What your passport is (where you are from) and where your income is coming from. Based on these three, you’ll be able to determine which jurisdiction is most suitable. It’s not the one with the least taxes because at this stage, 5% or 40% tax on profit is irrelevant.
What about EU Inc? Is there any timeline?
Long way ahead still:
> Given its key importance for the EU's competitiveness, the Commission is calling on the European Parliament and the Council to reach an agreement on the EU Inc. proposal by the end of 2026.
> Given its key importance for the EU's competitiveness, the Commission is calling on the European Parliament and the Council to reach an agreement on the EU Inc. proposal by the end of 2026.
In Brusselsese that means we should be able to start business sometime around the turn of the century, right?
Vague. Early 2027 perhaps with a lot of luck, for a regime that will at best solve a very limited subset of issues.
I'm not holding my breath.
For some perspective, look at how something with a much smaller scope is being "revolutionised". I'm speaking of intra-EU dividend taxation, as regulated in EU directive 2025/50 ("FASTER"). A slightly less complicated dividend double taxation regime between EU member states. Applies to dividends on shares in public companies only. If the shares in question have not been traded within 5 days from the ex-dividend date. If the gross dividend is below 100k€. If the member state is not very small. From 2030. Using EU standardised forms. In some cases, resulting in direct reduction of the double taxation at source. In other cases, refund of excess double dividend tax within 60 days.
The clean solution would be to tax dividends in the tax residency member state of the receiving individual only. That would require a rather large leap of trust from very financialised EU member states like .ie, .lu or .nl. Perhaps possible with a long transition period and compensations. Only there's also bad faith state actors like .hu randomly torpedoing EU legislation to extract concessions. This discourages other member states from even trying to implement the clean solution.
I'm not holding my breath.
For some perspective, look at how something with a much smaller scope is being "revolutionised". I'm speaking of intra-EU dividend taxation, as regulated in EU directive 2025/50 ("FASTER"). A slightly less complicated dividend double taxation regime between EU member states. Applies to dividends on shares in public companies only. If the shares in question have not been traded within 5 days from the ex-dividend date. If the gross dividend is below 100k€. If the member state is not very small. From 2030. Using EU standardised forms. In some cases, resulting in direct reduction of the double taxation at source. In other cases, refund of excess double dividend tax within 60 days.
The clean solution would be to tax dividends in the tax residency member state of the receiving individual only. That would require a rather large leap of trust from very financialised EU member states like .ie, .lu or .nl. Perhaps possible with a long transition period and compensations. Only there's also bad faith state actors like .hu randomly torpedoing EU legislation to extract concessions. This discourages other member states from even trying to implement the clean solution.
It is one of the best jurisdictions for any business involving crime, money laundering, or scams.
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Why aren’t European people starting businesses in the US as pass through entities?
It doesn’t make sense to me why Europeans don’t use registered agents or foreign corporation state registrations to do business as US entities in order to get up and running quickly.
Europeans complain about the difficulty starting a business can just start a business as a US entity, you’re just using the US system as the financial layer.
At the point where you’re making enough money for edge cases or moving to a more favorable jurisdiction then you can afford to because you’re in business now
It doesn’t make sense to me why Europeans don’t use registered agents or foreign corporation state registrations to do business as US entities in order to get up and running quickly.
Europeans complain about the difficulty starting a business can just start a business as a US entity, you’re just using the US system as the financial layer.
At the point where you’re making enough money for edge cases or moving to a more favorable jurisdiction then you can afford to because you’re in business now
Adding a layer does not simplify. It adds complexity.
I'm currently considering opening an Estonian e-business for a small SaaS project. As somebody from Germany, establishing a company is a bit tedious and bureaucratic. Now I've come across the Estonian e-residency program and the option to run a business there. I don't care so much about the tax implications, but more about the bureaucracy aspect. It all sounds quite good. But marketing is marketing and real life often is something else. So, long story short: I would be happy if somebody could share their real-life experiences. Was it/is it worth it? Are there any pitfalls?
Thanks!