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HomeEuropeEstonia's e-Residency Program Reports €40 Million in State Revenue

Estonia’s e-Residency Program Reports €40 Million in State Revenue

During the first half of 2023, companies owned by Estonian e-residents generated €37.7 million in tax revenue, a 57 percent increase compared to the same period in 2022.

The majority of tax receipts, 55 percent or €20.6 million, came from labor taxes paid by e-resident companies registered in Estonia. The remaining 45 percent, €17.1 million, was collected from special case income tax, mainly dividends.

In addition to taxes, e-residents also paid €1.4 million in state fees, raising the program’s economic impact to €39.1 million for the first half of 2023.

Minister of Economic Affairs and Information Technology Tiit Riisalo said that the e-Residency program continues on a strong course. “For an increasing number of foreign entrepreneurs, e-Residency is a convenient way to conduct business in the European Union, providing a digital solution for safe and transparent operation, with low administrative cost. Although the maintenance and development of national IT systems is costly, in the case of e-Residency our return on investment is considerably higher. For every euro that Estonia spends on e-Residency, the program generates €7.6 in return,” Riisalo said, adding that, for Estonia, e-Residency is not only a revenue machine marketed to foreigners, but a public e-service that also benefits a large number of local Estonian companies.

Liina Vahtras, who assumed duties as the new managing director of the e-Residency program in the beginning of June, confirmed that these results – achieving nearly 65 percent of the €60 million target set for 2023 – have exceeded the most optimistic estimates. “We are working hard to accelerate the issuance of digital ID cards so that our e-residents would face no delays when setting up their businesses in Estonia,” Vahtras said.

In the first half of 2023, the majority of tax revenue, €12.6 million, was generated by e-residents engaged in professional, scientific and technical activities, followed by information and communication companies with €10.5 million and administrative and support service activities with €3.7 million.

As at the end of June, e-resident companies employed 5,027 Estonian residents, up by 284 compared to 2022. 

Despite a slight decline in major markets, Estonian e-residents established 2,302 new companies in the first half of 2023, a 6 percent increase compared to the previous year. The largest number of new companies have been set up by the citizens of Spain, Ukraine and Germany, with Turkey demonstrating a fast growth spurt, followed by France and Italy.

As at the end of June, Estonia has issued e-resident digital IDs to 5,428 foreign nationals, which is comparable to the annual average in recent years, i.e., approx. 1,000 new e-residents per month. The largest numbers of new applications have come from Spain, Ukraine and Germany, followed by Turkey and France, both showing a strong upward trend.

In 2022, the e-Residency program generated altogether €51 million in direct economic revenue for Estonia, whereas the program’s total costs (incl. contributions from partner agencies) amounted to €6.68 million.

To date, Estonian e-resident status has been granted to 105,500 people from 176 countries (excluding repeat applications and invalidated identity cards). Over the years, these e-residents have established more than 27,000 companies in Estonia. Currently, there are 61,350 active e-resident digital ID cards in use. As of March 2022, citizens of Russia and Belarus are not eligible to apply to the Estonian e-Residency program.

Estonia launched the world’s first e-Residency program at the end of 2014 with the aim of providing foreign nationals safe access to its public e-services, while also promoting cross-border entrepreneurship and generating additional revenue for the national budget.

As such, Estonia is the only country that offers a 100% digital entrepreneurship solution for foreign nationals, providing them with a state-of-the-art toolbox for setting up and running a location-independent international business.

Over the years, the program has generated around €183 million in tax revenue and state fees for Estonia.

In 2022, the Estonian government endorsed a new growth strategy for e-Residency, which envisions the program’s annual revenue to reach €100 million by 2025.

Source: ERR News

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