The direct economic effect of the e-residency programme for the state in the first half of 2024 was 31 million euros. According to a recent study, in addition to the taxes they pay to the treasury, e-residents leave more than 11 million euros in Estonia every year by using the business services of Estonian companies. In terms of the taxes paid by e-residents’ companies in the first half of the year, 76%, or 22 million euros, were labour taxes and 24%, or 7 million euros, were special income taxes (mainly on dividends). In addition to taxes, the economic effect of the programme includes an additional 2 million euros in state fees paid by e-residents. In the first six months of this year, 6,037 foreign citizens received e-resident digital IDs (there were 6,482 applications in total, the percentage of positive decisions was 93%), and e-residents established 2,450 new companies in the first half of the year. The most active participants in the programme and business founders were citizens of Spain, Ukraine and Germany, who from January to June of this year submitted 917, 448 and 378 applications for e-resident digital IDs to the Police and Border Guard Board, respectively, and founded 454, 173 and 170 Estonian companies. According to Liina Vahtras, the head of the e-residency programme, despite the difficult times, the programme is operating steadily, although the rate of increase in the economic effect caused by the programme is slowing down. “Interest in e-residency and business creation in Estonia remains high: in the first half of the year, 7% more e-residency applications were received compared to the same period last year, and 7% more new Estonian companies were founded by e-residents. This is more than we could have hoped for and expected in the current economic downturn,” Vahtras said. She added that the main goal of e-residency is to grow the Estonian economy and benefit the Estonian state. “We can achieve this in our daily operations in two ways: firstly, by attracting enterprising e-residents to Estonia, and secondly, by contributing to the development of the service economy ecosystem in Estonia through them, which will also create jobs and generate income for local companies,” Vahtras noted. According to a recent study, the turnover of Estonian companies operating on the official e-Residency Marketplace service provider platform in 2023 was at least 11.43 million euros just from servicing e-residents. “For an increasing number of service providers in our market, servicing e-residents accounts for more than half of their entire business, often reaching 80-100%. Service providers grow and develop together with e-resident companies, providing a valuable and growing customer base and expanding their global playing field,” Vahtras said. According to Vahtras, local companies are usually in the early stages or in the rapid growth phase, so they most often purchase services for establishing a business, creating a virtual office, and maintaining accounting records, as well as legal and tax advice. Taavi Kotka, Chairman of the e-Residency Advisory Board and one of the founders of the programme, believes that the service economy sector, which is gaining momentum thanks to e-residency, plays a key role in increasing the state’s revenue base and supporting e-government exports. “No country has yet reached Estonia’s level in providing digital business services, and even if it has, Estonia also has many years of experience and knowledge in servicing international entrepreneurs. If competition between countries in digital services and entrepreneurship is becoming increasingly fierce, it is the quality and reliability of the Estonian service economy sector that will determine whether foreign companies will come to Estonia to do business,” Kotka said. He added that Estonia’s competitive advantage will only be maintained if e-residency boldly takes the next leap in technological development. “We must begin to trust and use new technological possibilities, such as collecting fingerprints and facial images, as well as real-time identification of documents and identities using mobile applications, so that e-residency becomes even more secure, useful for the state and user-friendly. At the same time, it is necessary to completely eliminate the need for a physical e-resident’s digital identity card as soon as possible,” Kotka emphasized, adding that pilot projects are actively developing and are planned to become available to e-residents in the next couple of years. In 2023, the direct economic benefit of e-residency for the state (labor and dividend taxes, as well as state fees) amounted to 67.4 million euros. The total cost of the e-residency programme, including the contribution of government partners, was 7 million euros in 2023, of which, in addition to the targeted funding of the e-residency programme EIS, the Police and Border Guard Board invested 627 thousand euros, the Information Technology and Development Centre of the Ministry of the Interior (SMIT) 197 thousand euros and the Tax and Customs Board 93 thousand euros. The e-residency programme was launched on 1 December 2014 with the aim of providing foreign citizens with secure access to the electronic services of the Estonian state. Since then, more than 117,000 people (excluding revoked statuses) from 185 countries have become e-residents. There are currently 59,500 e-resident digital IDs in circulation, valid for 5 years. E-residents have founded or co-founded more than 32,200 Estonian companies, or about every fifth new Estonian company per year, and 38% of startups in Estonia are also connected to e-residents. The direct economic impact of the e-residency program on the Estonian state since its inception has amounted to 244 million euros. The economic impact of the programme is determined on the basis of a nationally approved model that takes into account the labour taxes paid by Estonian e-resident companies and the income tax in special cases (mainly on dividends). E-resident enterprises are those Estonian enterprises in which the role of the e-resident in the enterprise is established upon establishment or within 90 days thereafter, and the e-resident status of a foreign national joining the enterprise must be established before the establishment of the enterprise. E-residents are regularly and thoroughly checked at the national level before and after the registration of the enterprise. Within the framework of their authority, the Police and Border Guard Board, the Estonian Internal Security Service (KAPO), the Tax and Customs Board and the Financial Intelligence Unit exercise national supervision over the use of digital ID cards by e-residents. E-residency does not grant citizenship, tax residency, a residence permit or permission to enter Estonia or the European Union. The e-resident’s digital ID is not a physical identity document or travel document and does not have a photo. Read RusDelfi wherever you like. Follow us on Facebook, Telegram, Instagram and even TikTok.
In six months, e-residents brought the state 31 million euros in direct income
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