Estonia, the Digital Republic
newyorker.com
newyorker.com
News as of November were that they were (temporarily) locked-down [1] and are to be reissued until next March [2] in reaction to the RSA related security flaws [3] in the libraries bundled with the Infineon chip. Is this even an issue, or is everyone using a phone app, instead of the cards, anyway?
[1] https://www.theregister.co.uk/2017/11/03/estonian_e_id_lockd...
[2] http://www.bbc.com/news/technology-41858583
[3] https://www.schneier.com/blog/archives/2017/09/security_flaw...
https://github.com/open-eid/qesteidutil/commit/20ead85d31b0b...
There is a huge campaign going on with service points open even in shopping malls for people that do not manage the process at home. Initially there were some scaling problems, though..
Edit: to tell the truth, the information available in Estonia regarding the exact nature of the fix is still scarce. There has been some offhand remarks from RIA that the updater basically patches the microcode on the card to generate an EC keypair, but not a lot of details.. The basic premise that the new key is still generated on the card, still holds, apparently.
I don’t use them on a daily basis, because I use an app for authentication, much faster.
They then gave a limited time frame for every one to migrate their cards over. Either with the software update or going to the police department and having them do it for you.
After the deadline they declared all older cards digitally invalid. Meaning that you can still use it as a physical ID but not for online auth or signing processes.
I personally prefer Smart-ID because of the low friction in getting started, compared to Mobile-ID where you have to get a SIM-card that supports it.
The security assumptions for Smart-ID are far weaker than MobileID or ID-cards and actually no government institution will accept such signatures. You can sometimes use it for identity, for example the Tax Board allows you to authenticate via your bank, which in turn may support Smart-ID: https://www.emta.ee/eng
Since offering Mobile-ID actually costs a lot of money to banks (since there is no direct connection to the card via browser and a USB cable, you have to pay to use some API-s across SK.ee & telcos), it is the main motivation for developing it.
Problematic was communication with card maker Gemalto, who didn't inform Estonia about security flaws properly. Gemalto was informed by researchers in March. These researchers informed Estonian government in August. Few days after that prime minister announced security problems.
Things would have been a lot of easier if Gemalto didn't hide the problem from the government.
Governments (rightly) want contractors like this as experts-on-tap in the technology under consideration. But what you really want is not exactly a provider of the technology, but rather an advisor or partner in the process of implementing your process. I don't think we know how to structure a non-nepotistic relationship of that kind.
As much as it's easy to hate on the Big4 consulting companies, they exist for this reason among others (some of which have more to do with how to grease the skids with pork).
More seriously - owning shares in us companies create scary tax implications that require some advice when having us clients. US banking system is stuck is in the 1800s and dealing with it is a very serious pain. US legal system, unlike European is very unfriendly for individuals - its just infeasible to do stuff yourself on a shoestring budget, without hiring professionals.
Millions of new businesses are started every year in the US on a shoestring and without hiring professionals.
Despite not even being a tax form some of these (e.g. FBAR) have penalties of 50% of the unreported amount. It's not something you want to leave to chance.
I don't think that's meaningful. There are 320 million people in the U.S., and only a tiny proportion of people anywhere would consider opening their business in another country.
That doesn't mean there isn't a high barrier to accessing the U.S. legal system. For example, as we know, well-funded parties often defeat poorer parties by simply threatening legal action, because the poorer party cannot afford to use the legal system.
As someone who has to work integrating to banks, yeah this is sad but true.
Also 2checkout can be an option too.
I wrote to them and I asked them to explain to me why they have rejected me. I told them I was an ex-customer and I could prove it. So they came back and they asked for an insane amount of information and documentation. Something I learned is the 'no-paper' model of Estonia is something Braintree doesn't like at all.
I had a problem with a very specific request, and Leapin helped me to get it in less than 24 hours.
So yes, go and try again!
If you don’t need a bank account and you can live with PayPal you don’t need to go there. I needed a bank account and credit card so I traveled to Tallinn and opened a bank account at LHV. You have to sign the documents at the bank office.
I think LHV Bank is working on a remote process with an interview using Skype, but it was not available several months ago.
Still, I have faced several issues setting up my small SaaS service: Stripe is not available and my Braintree application was rejected because they did not understand why I wanted to create a company in Estonia! It took me two weeks to explain that I was a nice guy and then everything went fine. I also had issues creating a merchant account in Coinbase, so I had to use Bitpay.
Also the deposit insurance in my country is quite low, so saving money in Estonia is a good option for me.
I'm using the LHV Bank, they give you a multi-currency account, a great mobile application and also access to different worldwide markets (for investments, etc.).
Article by Estonia's current president, Kersti Kaljulaid.
"As the President of Estonia, I represent the only truly digital society which actually has a state. And this position has made me question whether the state as we know it today is fit for the 21st century."
- you can't even send an email to tax authorities and have to print/send paper letters
- mobile internet is very slow and super expensive.
- until recently it was not even possible to share your wlan
Is there a lack of competition in the mobile service provider market? Bad regulation?
> Is there a lack of competition in the mobile service provider market? Bad regulation?
Probably too few competition. I live in Germany and have not yet looked into this much, but I think Deutsche Telekom could be still a problem creating the majority of the infrastructure and offering usage for others probably only via higher fees. Similarly why there is no real competitor to Deutsche Bahn in the train sector.
https://www.telekom.de/unterwegs/tarife-und-optionen/smartph...
In Thailand last january I paid 9€ for a 4G Sim that lasted me 1 month with something like 21GB allowance.
Plus LTE's speed is limited here. Thanks to the EU rules on roaming I'm now using my Italian Vodafone seem for data :(
India. I live in Mumbai and use Airtel; apparently the plan I was using got discontinued, so I'm going to bump myself up to the 3 GiB/day for 30 days plan at ₹550 (~€7.5). This is considered expensive here, with cheaper options like Jio readily available.
Many tax authorities will communicate with you via email if you sign a form that you understand that email is not encrypted (for regular questions, proper applications need to be done via Elster).
Why? There's proportionally more manpower, and even more than money than that.
In case of Germany the problem might be that they do not need to change much as everything is okayish. In Estonia they knew they had kind of nothing after the 90's and there was a real need to reinvent themselves.
Actually, consulates are not considered sovereign ground [0]
[0] - https://www.quora.com/Is-an-embassy-sovereign-territory
To those who've done it, what are the pros/cons?
For the record, I'm based out of India and have been advised to setup in Singapore
It's quite smart for Estonia to do this because they have quite a lot of brain-drain. Lots of up-and-coming educated Estonians end up leaving the country to persue jobs in Europe due to the lack of companies operating locally.
Trasferwise is capitalising on this, but the government sees it as a reason to heavily invest in making companies want to be in Estonia.
Also, for an international business a company based in Estonia looks more reliable and “techie” than other countries. And this is important if You sell digital goods or services.
I think Singapore can be a good place too, but it’s much more complicated for me.
By "benefits" do you mean profits?
Not sure what you mean. Singapore seems quite international, reliable and techie, based on what I've read, as well as heard from friends and clients who work there. (There are tons of enterprises that have a base or regional office there, and many startups there too).
Interested to know if I got you wrong, or am wrong.
The Belgian tax authorities must allow you to invoice from the Estonian company (that's part of EU freedoms) but it probably won't save you much taxes.
I’ve not had any of the issues you’ve mentioned (maybe about 3 spam emails).
Setting up the company is then easy. To set up a full bank account you need to go to Estonia. You can setup a transferwise account which gives you a banking facility however.
There are other countries where you can setup companies quicker, or with better tax implications. But I don’t think there’s a good option in the EU.
If I were you, I’d get the e-residency card now and have it available if you want to quickly start a company later.
I recently completed an advanced level of "Kafka quest": a 40-day fight with the city administration of Leuven, Belgium. The goal? Change the marital status of my Latvian(EU!) girlfriend in the Belgian(EU!) civil registry. From "undetermined" to "single".
-"No, we can't accept printouts from an electronic service. It doesn't look like our examples, nothing at all like what we have."
-"But it's the only marital status the Latvian civil registry gives out since a few years. Have a look at this explanation on the relevant Latvian government website. In English. With a Dutch translation I made to help you."
-"I'll have to ask my boss."
-(two weeks, several emails and phone calls later) "OK, we can accept this document. You don't even have to get a court stamp to legalise it. But it needs to be translated. To Dutch. All eleven pages, even if we need only that single word "single". No, google translate for the relevant bits won't do. No, you can't translate it yourself. It has to be done by a certified translator. Here's a list."
- Leuven official sends me a list of certified translators. No certified translator for Latvian on it. I find one online, in a city 100km away.
- Certified translator translates the 11 page document for us. Gives us a discount because it doesn't need a certified translation.
- Make an appointment a week in advance (the fastest possible) with the city government, then back to the Leuven city hall.
-"Ah, when we said it the civil registry excerpt was free of legalisation, we meant the original only. The certified translated copy needs to legalised. By the court of the city the translator is attached to."
- Back to the translator in the city 100km away, to request legalisation by the local court of her translation of a source document that is free of legalisation.
- Wait another two weeks for the stamped document to arrive by snail mail.
- Make another appointment with the city services.
But fear not, for there is hope! In a few years, so I learned, standardised paper forms will be developed to exchange this kind of information within the EU, hopefully eliminating the need for certified, legalised translations.[1]
[0] ...except for the fundamental conceptual insecurity of voting from home of course.
[1] http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELE... for a bit more context.
It's either done really secretly or not at all.
As an example, the latest hooplah around enterprise taxation is related to using company cars during private time. If an employer does not allow to use company cars for private purposes, then they will be marked as such in a public registry. If you have a feeling that your neighbor is using his company car outside of work, you can check it and report it to the TCB: http://www.err.ee/643218/erasoiduks-tooauto-kasutaja-saab-na... But if the company car is not registered as such, then you will have to pay fringe benefits tax 1,96 EUR per engine kW per month for newer cars and 1,47 EUR per engine kW per month for cars older than 5 years.
As an exercise to the reader, think about how flat taxation per kW affects companies with electric cars.
In practice nobody really monitors these things and many do abuse the system to cater for themselves etc. However if you find yourself an enemy who will report you (even just on suspicion), then you better have a convincing case for the tax authority and/or judge as your accounting gets audited.
There are a bunch of special benefit rules that can be used for lawful cost savings though. There are lawful ways to split car costs with company money, there are lawful ways to get a tax-free daily allowance if you're traveling for business, limited to some X days per month.
In general I think the company tax rates are low enough to do everything lawfully. Taking out profits as an owner incurs a 20% income tax to the company and zero taxes to the individual. In addition, if you've taken out profits before, then the company income tax is 14%, up to the amount that equals the average of the last 3 years. So if you take out similar profits on a regular basis, the tax rate is only 14% on everything.
As I understood it, this is only so for distributing profits to legal entities. If you're distributing to a private person, the private person will have to pay a new 7% income tax which sums up to a total of about 20%. This of course only matters if the private person is tax resident in Estonia.
I find the PwC tax alerts very informative to be kept up to date on the tax laws in Estonia: https://www.pwc.com/ee/en/press-room/tax-alerts/estonian-tax...
I hadn't seen any mention of the new 7% individual rate in any newspaper articles or even accounting firm articles. I now inspected the actual income tax law [1], and sure enough the 7% clause is there.
One one hand this means a slight net tax increase to 20.02% [2], on the other hand if the total individual income is less than 25200€/year then a part of that 7% will be returned.
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[1] Unfortunately not yet translated to English https://www.riigiteataja.ee/akt/107072017022
[2] 100 * 0.86 * 0.93 = 79.98