By Moustafa Daly
Before 2020, only a lucky few experienced a full-fledged “digital nomad” lifestyle with the freedom to work from anywhere. However, the COVID-19 pandemic and shifting work preferences sent the numbers of digital nomads soaring, estimated to reach above 35 million globally in 2023 as opposed to less than half of that more than three years ago.
This shift in the work paradigm has been met with a shift in policymaking, with many countries across the world launching digital nomad visas to attract professionals with disposable incomes and remote work commitments to set up their home bases there.
Estonia, which launched its digital nomad visa in August 2020, had established a popular e-residency program all the way back in 2014 – arguably the world’s first. While the digital nomad visa implies foreigners being interested in living there, the e-residency is reserved for those who want to run their businesses remotely but want them registered in Estonia.
This e-residency program has been successful, attracting over 100,000 e-residents from over 170 countries who collectively run businesses that make over €12 billion in revenue, as per government figures.
The flight from German bureaucracy using Estonia’s e-residency
Despite being an EU resident since birth, Daniel Lösch, a German entrepreneur and digital nomad, sought other EU countries to launch his sustainability startup, Atlas Zero.
Evading the notorious German bureaucracy topped the list of his priorities before fully launching his business.
“For the past two years, basically after COVID-19, I already started to travel around like a digital nomad. I went to like, South America, Southeast Asia, and during that time, I just realized that having a company in Germany is just quite difficult,” says Lösch. “I had difficulties with the [value added tax] VAT, and they don't really respond to emails, and then I’d have to call them, but that was also complicated because of the time difference.”
“And even when I talk to them, they can't help me, and I have to call again or another day and just stuff like that,” he adds.
In 2022, Lösch began looking into other residencies that would make his life easier and business operations smoother. He took his time researching and weighing his options until deciding to apply for Estonia’s e-residency in June 2023.
Within less than three months, Lösch received his Estonian e-residency card.
Perks of Estonia’s e-residency visa compared with other programs
Among the key factors attracting remote entrepreneurs to this visa is the seamless and straightforward application process. For Lösch, he had to fill out some online documents and then head to the nearest Estonian embassy to pick up the residency card – without having to step foot in Estonia.
“It's just an e-residency. So, I actually have not been in Estonia so far, and I’m not required to go. I want to go because I’m interested to see the country,” explains Lösch.
Once he obtained his residency, Lösch finally utilized the benefits of the program to advance his business, the most advantageous being its favorable tax regimen.
“The most important thing for me tax-wise is that the revenue is not taxed but the profit,” explains Lösch. “So, if I take money out of the company, that gets taxed. But as long as I make revenue with the company and I reinvest it into the business, there's no tax. So, for me at the moment where I'm trying to build the company, and I'm trying to grow everything, it’s just much, much easier.”
This tax benefits represent a much-welcome departure from Germany’s complex and unclear tax regimen.
“In Germany, there are like 1,000 rules, and they're super complicated, and I can't really deal with it,” he says. “I had talked to friends of mine that already have the e-residency, and they told me they use five minutes per month, and I was just so jealous of that. And I wanted that peace of mind so I can focus on my business and help it grow.”
Getting an Estonian e-residency, however, doesn’t automatically make its holder a tax resident of Estonia – as in paying taxes on personal income and wealth. Once Lösch pursues a tax resident status in Estonia, he can see his income tax go from a figure ranging between 14% and 42% in Germany to a flat rate of 20% in Estonia – he’s yet to fully use this advantage.
The future for Lösch and Atlas Zero with Estonia’s e-residency
“Now that I’m free to travel and it’s easier to do taxes and such, I’m happy to develop my business so it can reach its full potential in the European market. I plan to help companies all over Europe that have to do certain reporting on sustainability as this is usually a huge pain point for them that I’m trying to help with,” he explains. “I also look at sustainability regulations across all EU countries and help my clients understand and navigate them.”
With the bureaucratic hurdles and paperwork dilemma now a thing of the past, Lösch now feels freer to expand his business.
“I don't have to call my mother to like open a letter that was sent by the tax agency and then read it to me or something. So yeah, it definitely gives me more freedom,” he says.
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