Estonia's E-Residency Program Is Growing Faster Than Predicted
motherboard.vice.com
motherboard.vice.com
Singapore doesn't have a cute "E-residency" program, but a foreigner can just pay a local agent and have a corporation opened. Corporate taxes are a clean 17% (lower for small businesses and startups), no dividend taxes, etc.
http://www.guidemesingapore.com/incorporation/company/singap...
http://www.guidemesingapore.com/taxation/corporate-tax/singa...
You also get a fairly stable and well established set of corporate law, which unfortunately Estonia doesn't offer (yet).
The real tricky bit for Americans is how Singapore's tax system (just corporate income tax!) would interact with the US's crazy one (e.g. dividends, capital gains, random other things).
Depending on what you do this may benefit you and makes deferring taxation indefinitely trivial.
This is not true. While many countries do not do this, dividend payments are not tax deductible in the US. In fact, they are double-taxed (at both the corporate and individual level) which is one of the reasons/arguments for individual taxes on dividends being taxed lower than income tax rates.
In the case of corporations and dividends to shareholders you are correct. I don't know of any other such examples.
If one form of income were not taxed then things would end up getting skewed in that direction.
This is wrong. The problem is that different paths of money get taxed in different ways. If you buy stock, then sell it back during a stock buyback, you get taxed at one rate. If you receive dividends, you get a different rate. If instead of buying stock you loaned money, you'd be taxed at a third rate.
Plus, to minimize taxes, people now need to minimize the # of times money moves rather than making the most productive investment.
An additional cost of these various taxes result in the bizarre situation that you get more consumption if you consume today rather than in the future: http://www.themoneyillusion.com/?p=28842
Singapore (and Estonia) are doing it right, and the US is doing it wrong. The most economically efficient tax (besides properly calibrated pigouvian taxes) is a single tax on consumption by humans and the next best is a single tax on income by humans.
The general principle I stated is the one employed in the U.S. Generally, when one receives money there are tax implications. There are some exceptions to this principle but this is the general idea. The different ways of receiving money have different tax rates and this causes a skewing of how "income" is begotten in the U.S. by the very wealthy. They prefer getting money via capital gains since the tax is less that route.
I don't think one can reasonably argue that not taxing one form of income would lead to people preferring to get income via that tax free route. The objection I had to your original post is that the U.S. tax principle is bad. It is reasonable to tax all income streams. I don't know the optimal for each stream but given that taxes in the U.S. are low relative to the past 70 years suggests the rates aren't burdensome.
The issue is not taxing personal income, the issue is taxing corporations. A nearly ideal situation would be to eliminate all corporate taxes and tax individuals at a fixed rate when corporate wealth is transferred to shareholders. The only better situation would be eliminating all income taxes and replacing them with consumption taxes.
Unfortunately, this is a political non-starter - it would eliminate the ability of politicians to pretend they aren't indirectly taxing people when corporate taxes are raised.
First, it's expensive - you should count a good S$5k SGD/year if you go through an established player (e.g. Hawksford, who you are quoting), maybe a bit less otherwise. This ad infinitum, as you need a local director to keep the company open. And unlike in Hong Kong not so long ago, it has to be a real director - someone who theoretically can open bank accounts and hire people - so you're taking that risk too (the director will, conversely, be taking the risk that you might be a scammer or other criminal whose acts he'll have to answer for in court).
Then you have to put in S$50k in capital in order to be able to apply for a visa (EP) for yourself, should you want permission to work in Singapore (if not, you'll get taxed at home when repatriating profits); this visa will require, today, at least S$4-5k/month in "salary" (which will be taxed).
This also assumes that the Ministry of Manpower doesn't suddenly catch upon this very convenient way of getting yourself what is effectively an investor visa at a fraction of the investor visa cost (which they did two years ago with the EntrePass, which is today utterly useless for most foreign founders due to its requirement to have funding from a short list of approved VCs). Guessing what MoM wants and is going to do seems to be a bit of Kremlinology which HR directors love talking about as their special value add, but it is a bit opaque and the rules change with time, elections and special circumstances (like the famed riots last year, or the Ferrari and taxi incident).
The "plan" should you want to take advantage of Singapore's otherwise fantastic conditions for running a business is to get PR, which takes up to 3 years employed locally (depending on salary - someone on a high salary and from a "desirable" country might get it in 6 months). Singapore is fantastic... for local founders. Or if you're willing to pay.
The days where you could be in business for USD 1,500 and a flight to Hong Kong appear to be, unfortunately, over. I'd love to be proven wrong...
In a previous thread, someone said they managed to open an account so maybe it's on a case by case basis.
[1]: http://us9.campaign-archive1.com/?u=d439c8680308c578a74dbd36...
I tried opening a bank account in two banks. One rejected me because (despite having the company) I did not have sufficient ties to Estonia. The other (Swedbank) was very friendly and opened the account the same day. Again, LeapIn smoothened the process for me. I picked up my banking card three days later and everything worked perfectly.
Obtaining a VAT number is more difficult, and I wouldn't have managed without LeapIn's help. You need to convince the tax authorities that there is a legitimate reason why you need it. You need to present evidence (I had a previous company in another EU country) and there are several rounds of dialogue (knowing Estonian, and the local rules is very handy).
Overall, I was amazed at how efficient the process is, and how much effort Estonia is putting into making it even better. This really looks like a major strategic initiative for the country, where they are putting a lot of thought and investment.
Tallinn really deserves a separate post. It is a very beautiful city, with lots of life and things to do, really good atmosphere, good food, and reasonable prices. Very well worth my one-week trip!
http://motherboard.vice.com/read/lets-all-become-e-residents...
so in addition to leading the way in digital citizenship, they also have impressive data coverage? Count me in!
Joke aside, I'm very interested in seeing how bigger countries will implement something similar
Other than that - very good idea and probably the execution will be even better in the near future.
In my Western European country, we make less than $20k/y on average, so that is kind of high (~ 2 months' rent) for developers on the lower end of the scale.
I'm not arguing against you, just pointing out that salaries for devs are very variable even in the Western countries.
He quoted you a price from Toronto. You can probably find Ryan air for under 200€ roundtrip - bigger problem will be that you'll probably spend 2 days on it.
Also 20k $/year as a developer ?! You earn more in Eastern Europe unless you're a PHP "developer" or something like that.
https://nomadforum.io/t/i-m-kaspar-director-of-estonia-s-e-r...
Let's start with having to call the bank weeks or months in advance for an appointment, like everything else in the UK. Even though your appointment is for a specific hour, once you arrive on time, be prepared to wait hours before someone sees you. You will then need two different proofs of address, alongside endless other documents. For a business account, you need all partners to be present at said appointment and you will be asked endless questions about the nature of your business and your expected cashflow. If for some reason your conversational English happens to be not so good, be prepared to be flat-out refused a bank account, without much explanation. All of this is usually justified by Know-Your-Customer and anti money lanundering procedures, which is a bit ironic, considering that HSBC are the ones doing all the money laundering to begin with.
It really depends on the bank and branch you're walking into. My advice: Avoid doing what I did and don't apply for your first current account online. It might seem more efficient and time-saving but it's actually not - because of your non-existent credit history in the UK - they will have to ask you for endless documents.
Once you're in the UK, walk into a high-street bank that is actively seeking customers. Lloyds Bank or Barclays comes to mind. Ask for a basic bank account, which they will open for you without proof of address. Make an appointment with the same bank for a startup current account - sometimes they will send you to a different branch - if they don't do business banking themselves.
They will ask you about your business and estimated turnover. Make sure you bring your incorporation documents.
It's worth noting that I'm the only director of my limited company and the companies registered office was my home address - so no further proofs of address were required.
Waiting for your cards to arrive in the mail is what takes the most time, but I was able to use my online banking account even before I had my card.
Taxation in estonia is pretty nice since basically the only tax you pay is when you pull money out of the company, not when you sell something, as long as the money are inside the company you don't own anything.
(Of course is a little bit more complex that this, but here is the idea, you need to pay tax if you have employee for example)
Despite there being double-taxation treaties with several countries, Estonia taxes the company paying dividends, and not the individual receiving them, so you may not be in a double-taxation situation. But I am not a lawyer or an accountant; it is better to consult with one.
How much is the cost of being an Estonian e-citizen? When i was there i understood there was some cost, roughly < 100 euros. Is every step of the procedure online? or some paperwork has to be done in Estonia (this is was my understanding of last time)
I feel they could have been a little more transparent and clear about what stage my application was at, but overall it was fairly easy.
You don't actually have to go to Estonia to collect the card or do any of the processing in person there anymore. It can be done all online and everything delivered and finalized at your local Estonian embassy or consulate. When the program first started, to apply you had to make a physical appearance in Estonia. You still do to open up a bank account -- for now.
The software does work on Ubuntu. There's poor or no support for other distros IIRC.
I've yet to incorporate or actually use it for any practical purpose, but I expect to in the coming month or so. Estonia is doing some really cool things and it seems to be a decent jurisdiction to run a location-independent business from. I've still got a lot of experience to gain though.
The online application (€50) was very easy to fill out, and I received status updates via email. My e-Residency was granted 51 days after submission, and the card was ready to be picked up 8 days later.
I picked up my card at the Estonian consulate in NYC over the summer. You just have to bring ID, and they will fingerprint you while you're there.
I think it was the most pleasant interaction I've ever had with a government.