Ask HN: What surprised you about Estonia e-Residency and running an Estonian OÜ? | Hacker News Reader

Ask HN: What surprised you about Estonia e-Residency and running an Estonian OÜ?

82 pointsjvilalta75 comments

From the official information online, joining the e-Residency program and setting up an Estonian company seems relatively straightforward.

I'm considering using an Estonian OÜ for a SaaS business and would love to hear from people who have actually gone through the process.

What surprised you after becoming an e-resident and establishing your company? Were there recurring costs, compliance requirements, banking/payment issues, tax complications, or other operational challenges you didn't anticipate?

How easy has it been to run the company remotely? Have you ever needed to travel to Estonia to resolve an issue?

Looking back, would you do it again? What do you wish you had known before getting started?

I'd appreciate any lessons learned, gotchas, or advice from current or former e-residents.

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Useless + overhyped .

Company will end up as tax resident from the country where it is managed & controlled .

If there is an DTA the tie breaker rule applies and the country from where it is managed & controlled gets the right to tax .

Also you get to enjoy bureaucracy+ dual accounting in both countries .

If there is no DTA it can lead to double taxation .

And if you don't have a fixed place of management/business+ tax residency (basically nomading) a US LLC disregarded for tax purposes is a much better fit .

Username checks out.

There is no cake will drop from sky, and if there is, well it came with gravity

This 100%. Hire a (good) accountant.

I was surprised how amazing it is ?

  What do you wish you had known before getting started?

Your yearly financial data is public, everyone will know your income / profit. And you will get spammed, your email will be public too.

  How easy has it been to run the company remotely?

Great

  Have you ever needed to travel to Estonia to resolve an issue?

Only visited once to open bank account LHV but I closed it since then and can use remote banking

  Looking back, would you do it again?

Yes

Same experience for me, it's been great!

I never needed to visit since I could use Wise for banking.

The only thing is that surprised me was the tax rate, when I created my Company the advertised rate was 20/80 but in reality it was ~25/75 and it increased since.

Wise is not a bank.

Wise isn't a bank but you can use Wise for banking operations (i.e you get bank accounts)

Yes, it was stable for a long time but has been changing mainly due to factors associated with the war in Ukraine (spikes in inflation, especially related to energy prices as well as a need for increased defense spending)

Please beware:

From: https://learn.e-resident.gov.ee/hc/en-gb/articles/3600007215...

> Corporate tax residency

> However, some countries have different rules for deciding if a company is tax resident. It is common that, in addition to the place of incorporation, the place of effective management can trigger tax residence. If you run your company from a country with regulations like this, then the company may end up having dual tax residence. This happens when two states believe that the company is tax resident in their jurisdiction and will want to tax the company’s profits.

This 'It is common that [...] the place of effective management can trigger tax residence' is indeed common.

Also estonian law doesn't recognize trusts, so if you want to save your assets for your children that's a problem.

You mostly use foundations for that purpose in civil law countries (which are also not part of the hague trust convention )

I assume we are taking about a foreign trust and not an Estonian one. In what regard? When it comes to money laundering? Profit distributions?

No, I was under the impression that foundations must be established with a non profit goal in mind. I thought you cannot just give beneficiaries cash. I see I was mistaken and that private foundations allow you to treat the structure the same as a trust fund.

Hence the executives/boardmembers-all-fly-to-some-island (Jersey is the one in my mind), have board meeting in the airport, sign the papers, and all fly home?

Company stays "in" Jersey, none of the humans need to live there?

That is unfortunately not how it works. Most commonly the place from which decisions are made on a day to day basis is used. This results in the country in which 50% or more of your directors reside for 183 days a year.

So if 50% or more of your directors spend 183 days per year in the UK then your Estonian based business becomes UK tax resident in the eyes of the UK.

Do not underestimate the complexity of these rules.

That does not work necessarily work in the UK anymore.

If the company is managed 'day by day' by a local director (for example by a company like Intertrust or Trustmoore) then the non-local board and/or shareholders can indeed flyin to have 'a meeting with extensive discussions where all decisions where made and some papers were signed'. I had a company in Singapore for some years doing this.

It is still amazing to me that so many people don't get this fact.

It doesn't matter where your company is incorporated, you'll be liable to pay the taxes where you live. And if you think the revenue service of your country is going to forget, you are guaranteed to have a very nasty surprise waiting for you when you least expect it.

The only way to more or less skirt this rule is to keep moving so you're technically never fiscally resident in any country (not even sure if it works), or move your personal fiscal residence to a tax haven like Monaco.

Where are you located? Where will you administer the company from? That impacts your tax situation quite a lot.

See https://www.e-resident.gov.ee/understanding-cross-border-tax..., look for “Permanent Establishment”

I am in the US currently, would be managing initially from the US. I understand there will be US tax complications, but I can/would deal with those.

The worst thing you could do as an us citizen (I assume ) and resident is to incorporate outside of the US.

I can think of worse things myself.

This is a terrible idea. please hire a professional with direct experience on these matters and not blog posts from influencers

Any suggestions or alternative ways to setup a EU company remotely in your extensive experience and wisdom?

I saw this a lot when I ran BD for the program (I'm also an American) and its good you know there will be US tax complications but I would say that unless you expect to 1) have many EU customers and 2) working remotely globally and redomicile elsewhere so you are not considered US tax resident that it probably doesn't make more sense than using something like Stripe Atlas to just set up an LLC or C-Corp

The point is serving EU customers as a EU company yes.

Unless you have some specific reason for being in the EU, I suggest you also look into Singapore.

Its been a few years but I ran BD for the program in '19-'20 -- I would say that people underestimate the difficulty in shutting down the company if that needs to happen, sometimes getting access to a proper bank account can be annoying, and don't always understand the tax implications (ex. if I was resident in Germany, all my customers were in Germany, but I tried to run everything through this Estonian biz and pay taxes only there, that could very well cause you lots of issues/complications).

Also, shameless plug for people broadly interested in the country of Estonia and how it became a leader in e-gov/tech only a generation after independence from the Soviet Union, I wrote a book about it after being curious myself! https://www.rebootinganation.com/

UK, USA and Singapore are the popular choices for this. UK is simple and cheaper, Singapore is a bit more expensive. I don’t see a reason to go USA route unless you are seeking investment from there.

I’m using UK myself. It takes a few forms and half a day to get a working Wise/Stripe account.

Finally somebody who knows their stuff. I never understood why people preferred Estonian incorporation given that it's almost certainly more expensive and less convenient than the other options.

I think the main reason is to have a business incorporated within the EU if that's relevant for the person. Delaware is great, and UK filled this role until Brexit but after that if you needed an EU incorporated company it was a massive pain basically everywhere except Estonia which was relatively cheap and everyone in the industry speaks English

Your username is cool

Ha, thank you!

This is indeed the main reason for the question, and for the reasons you mention.

Its for sure over hyped but its not useless. Its nice that you can reinvest the profits within the company and only pay taxes on distribution (if this works of course depends on where the owner is. But at least in Sweden it works).

None of those countries are in the EU, which is important for my use case.

It has been a great experience. Setting up the company was online, and it took 3 days, including the time spent to change the name because the initial name was rejected. You can use Wise for banking, but LHV is also visible but there is an account limit if you don’t live there. Accounting is easy, but you will need an accountant for tax reporting if you have a VAT ID. My accountant charges me 60 euros per month and does an amazing job.

Any tips for a 2 person European company. One founder based in Amsterdam, the other in London. We are close to setting things up, some input from other founders would be great

Probably a UK limited liability partnership would be an option .

But you have to investigate how the Dutch will treat it .

You could apply for a advance tax ruling with the Dutch tax authorities before doing anything

Why LLP over Ltd?

Because it's transparent so you pay income tax ( which is lower than corp+dividend taxes especially at lower incomes ) .

Later on when you scale, you can convert the LLP into an LTD.

Also you might avoid exit taxes as it is an partnership , if you move between countries.

Also there is basically no information in the post besides 2 founders in different countries.

Incorporate in one of the two countries. If you're serving EU, with GDPR it might be easier to do Netherlands instead of the UK.

Question: are OÜs particularly beneficial even for non-Estonians (EU), and in what way?

I can't speak about all EU countries, but the one country I looked into (Spain), I couldn't find a way to do everything remotely. It required being physically present for some things, so that's why I am asking about whether Estonia actually delivers IRL on the e part of e-residence.

https://news.ycombinator.com/item?id=47500239

For SaaS business, HK is definitely the best, 0 taxes, very low maintenance requirement, Stripe accepted, solid banking system.

I switched to 1Password after the last one.

The LastPass thread is over there -----> https://news.ycombinator.com/item?id=48671468

(you'd probably be downvoted anyway because of the insubstantial anecdote)

That's strange. My comment replied to a post I did not open or read. Must have been a bug or I was sleep-posting.

I think banking is still the biggest issue if you’re not an Estonian resident.

Honestly, I’d avoid the EU in general. There are only about four or five good places to set up a company and stay connected to the financial system: the US, especially Wyoming or Delaware, Dubai, Singapore, and Hong Kong.

Why not London/UK?

London post-Brexit is problematic outside of the legacy stuff in City of London, but why not Dublin?

It was great until they turned racists and stopped me from using the service because of my nationality (Russia), even though neither me or the business had anything to do with Russia.

are you a russian speaking estonian? or russian citizen?

Russian citizen living abroad

For better or worse, our world has the concept of "citizenship". It is not ideal, but it is what we have settled on. You reap the benefits of your passport (citizenship), but you also bear responsibilities. It is possible to switch nationalities, and I would heartily encourage anyone whose conscience has trouble accepting what their country does to do so.

I sympathize with all Russian citizens living abroad. While citizenship is something you can get out of, it is a long process and circumstances may not easily allow it. I don't think it's fair to discriminate against Russian citizens without hearing their story, even the ones still living in Russia, for actions taken by their rogue government. Do US Americans really want to be held individually accountable for everything Trump does or will do?

I understand how comments like yours and other sibling comments will generate feelings of being treated unfairly: We do not choose our birth country. We do not know the individual's actions, we do not know their political stance, and it is not racist but still discriminatory to use their nationality against them. They're already punished enough by being associated with their government. That's at least how I see it.

Then again, it is probably due to EU wide legislation, so not something Estonia can do much about even if they wanted to. I hope they find emotional support to detach their individuality from how Russians (and Ukrainians!) are treated in general in the current dynamics. It's not their fault as individual, and I'm sorry that they became victims.

There is a second point of view: imagine a Ukrainian living in a Western European country. They moved there because Russian missiles and bombs were falling on their heads and killing their family. They regularly send money to their country to defend against the agressor.

Their neighbor holds a Russian passport. He works at an IT company and earns a nice salary. It's a good life. He complains about being discriminated against. He "doesn't support the aggression". This "not supporting" does not take any material form, he doesn't send money anywhere nor perform any other actions. In the past, he has done absolutely jack squat about the rise of Putin to power (back when doing something was still possible), because he "is apolitical". When the war ends and things blow over, the neighbor will use his Russian passport to go back to Russia, live a good life there using money earned while abroad, and participate in rebuilding the economy, until the next Putin appears on the horizon. He will do absolutely jack squat about the next Putin, because he "is apolitical".

As you can see, it's all upside for the Russian neighbor.

I don't know about others, but something irks me about this common scenario. Sure, there are many subtleties and many ways in which life is complicated. But I see this scenario play out regularly and I can't help thinking that there should be some accountability for the passport you hold.

Common scenario ?

The real question is what can a citizen do in a none democratic country... If you were Russian would you publically be protesting the war inside of Russia?

And all the people saying renounce citizenship, is your country gonna give him theirs ? Does Estonia offer free Estonian citizenship to Russians who abandon their's?

The real elephant in the room that I feel doesn't come up enough in these discussions is the fact that Israel is a democracy with freedom to protest etc and they are according to even holocaust survivors committing a genocide and according to mathematica and reports killing countless more civilians yet where is them being cut off from the banking system...

Or UAE in Sudan etc. Etc.

I dunno Russia is always the big boogieman seemingly...

If you were German in Nazi germany would you protest or just complain that French -!: British people discriminate against you for being a German citizen?

I'm talking about double weights and standards aka getting kicked out of the international banking system which wasn't possible in that time (and seemingly is still impossible if you are a friend/ vassal of the usa.

If I lived in nazi Germany I would have left asap to the usa like countless people (Einstein etc) did... Strange how they didn't try and stop people back then getting out...

And if you were are German citizens (not a Jew or another victim) in good standing with the German government. Would you expect that US govt would let you freely do business in the US to acquire things that can be used to kill Americans? It’s just crazy to assume that US would let all german citizens freely roam around USA and do business during ww2

This just incites hatred. Have you considered that the Russian neighbour might have fled Russia?

Then you really can't say you has nothing to do with Russia. Citizenship is a very big thing in banking, and legal services. And it's certainly not about race. You could be ethnically Japanese for that matter, it's Russian passport which is the dealbreaker here.

Exactly. You could renounce it and potentially become stateless, which is a whole different problem.

I get it, guilty by association, it isn't fair. The banks need to keep their books clean, anything that could be flagged they will avoid like the plague.

If you are Russian, you have something to do with Russia

russian is not a race.

Michael Scott: I am a victim of a hate crime. Stanley knows what I'm talking about.

Stanley: That's not what a hate crime is.

Michael Scott: Well, I hated it, a lot, okay.

Oh I wonder why they don’t wanna do business with Russians. Could it be because Russians are threatening to invade, bomb and occupy Estonia?

It’s your choice to decide to keep your Russian citizenship. Then you have to pay the price of being a Russian citizen.

> It’s your choice to decide to keep your Russian citizenship. Then you have to pay the price of being a Russian citizen.

It's not as black and white as "just renounce or pay the price". Renouncing your Russian citizenship is not an easy process, and they might even deny your request... It's not like cancelling a Netflix subscription.

And merely being Russian doesn't make someone a bad person or a supporter of Putin's regime.

Seems pretty straightforward to renounce your citizenship. https://www.reddit.com/r/tjournal_refugees/s/jnQRpzMXCS

Do you want to keep it or renounce it? Sounds mostly that you either wanna remain Russian or you are the most lazy person on earth.

Have you ever paid taxes in Russia or any way contributed to Russian society? If so you are directly financing the genocide committed by Russia. Are you at least admitting Russia is engaged in a genocide and that Russia must be defeated and treated just like the third riche?

I'm not Russian. I'm Swedish, born and raised in Dalarna.

I'm not pro the Russian regime, there's really no need for the aggressive tone and insults. All I said is that it really isn't black and white when it comes to renouncing it, and even the Reddit post you linked shows that it isn't an easy process, the comments too describe difficulty in doing it and asking for help, some examples:

- https://www.reddit.com/r/tjournal_refugees/comments/1lrdngq/...

Some governments have even stopped enforcing renunciation requirements because people have found it difficult to renounce. One such example is the Netherlands[0]: "There are currently indications within the implementation that naturalized Russians are experiencing problems regarding this renunciation [...] for the time being, it is not enforced for Russians naturalized as Dutch citizens whether Russian nationality is actually being (or has been) renounced."

As I understand, Russia doesn't do citizenship-based taxation like the US does, so I don't have as big of a problem with someone retaining their Russian citizenship when they're living abroad if they find the process difficult/impossible/unrealistic. If they did citizenship-based taxation, then I would have more of a problem with it, as, at that point, it is funding the regime.

I understand why many governments have measures against Russian and Belarusian citizens, but I also sympathize with the people affected.

> Are you at least admitting Russia is engaged in a genocide and that Russia must be defeated and treated just like the third riche?

I'm undecided if I'd call it genocide by definition, but there are definitely things that lean towards it, such as abducting children and trying to "russify" them. I definitely believe they should have never started the war - I don't support it at all - and that they have committed tons of war crimes and awful things such as torture, rape, attacking civilians (also in terms of infrastructure), political assassinations, and lots more. It should end with Ukraine having complete control of its own country and being left to live in peace.

But it doesn't mean I automatically believe all Russians are bad people who support the regime, especially if they live abroad and are trying to build a life.

I welcome both Ukrainians and regime-opposing Russians to come and start a life here.

[0]: https://puc.overheid.nl/ind/doc/PUC_1312395_1/1/

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