Did you know that besides using your Estonian digital ID, there is also another solution for signing documents? The good news is that it is also available to e-residents as an app called Smart-ID. Some of the reasons to prefer Smart-ID are its speed, conveniency – and it works even if your digital ID card has been lost or has expired.

Smart-ID is a mobile app that enables you to authenticate your identity online and digitally sign documents using a set of PIN codes. It works just like an Estonian digital-ID card, except you never need to worry about plugging your card into a computer because you can complete the same actions also through your smart phone or tablet instead. Smart-Id work regardless of whether the e-service you are using is on your computer or the same smart device that you are using with Smart-ID.

Smart-ID instantly recognises who you are – you have to use your Estonian digital ID card (for example the e-Residency card) in order to set it up before you can use it. After that though, you don’t need to carry your card and card reader anymore. You can leave it at home and continue to enjoy the benefits of digital ID through Smart-ID on your phone or tablet instead.

The story of Smart-ID

As part of Estonia´s digital revolution, Estonia decided it would start issuing all its ID cards already in 2002 as digital ID cards by integrating a secure chip. When plugged into a computer, they would provide cards holders with online authentication and digital signing through a unique set of PIN codes to be entered on screen. This system was developed by the state with various partners, principally a private company called SK ID Solutions (which later also developed Smart-ID. Their name can be seen in the service prompts when digitally signing documents on your computer)

In 2017, SK ID Solutions unveiled an even more advanced digital ID tool that retained the convenience of using a mobile phone but detached it from the hassle of tying it into a mobile phone contract. It’s an app-based solution called Smart-ID that works on Apple and Android mobile phones and tablets. You still need to use your digital ID card to authenticate yourself when setting it up, as well as to re-authenticate yourself after three years of use when your Smart-ID expires, but between then you never have to touch your card to use most e-services in Estonia. That eliminates one of the most significant issues encountered with e-Residency at present, which is that you lose access to e-services if you lose your card, until you can get a new one issued at an Embassy.

Extending your digital access to Estonian e-services

Renewing your e-Residency digital identity is the same process as applying. This means that there is a need to pick up your new digital ID card from an embassy or alternative pickup point and prove your identity in person. As long as the lockdown and travel restrictions stay in force, the renewal process will be very difficult or even impossible for some e-residents who do not live in a location with a pickup point, or who are otherwise affected.

E-Residency has come up with a solution to make sure that e-residents are aware of an alternative way to extend digital access to some Estonian e-services past the expiry date of your digital identity card — the abovementioned Smart-ID. It’s a convenient and secure long-term solution to help e-residents extend access to and more easily log into many Estonian e-services.

Step-by-step guidelines:

Smart-ID app can be downloaded iOS devices through the Apple app store and Android devices through the Google Play store. It is free of charge and does not take up much space or much data on your phone. Once you’ve downloaded the app, open it up and click ‘Register’ then follow the on-screen instructions to authenticate yourself and sign up for Smart-ID as an e-resident. You can repeat this process and set up Smart-ID on as many devices as you like, such as your mobile phone and a tablet.

Next step is to authenticate yourself once using your digital ID card before you can access e-services such as banking. Afterwards, your digital ID card needs to have active certificates when you set up Smart-ID (i.e. it cannot already have expired) so if you are concerned about the time it might take to renew your digital ID card and you need uninterrupted access to banking and other digital services in the meantime, then you are strongly advised to activate Smart-ID straight away. NB! Your Smart-ID will be valid for three years after you create it or re-validate it so make sure you do this just before your current digital ID card expires if you want to save yourself some time before your next trip to an Estonian digital ID pick up location.

Here are a few digital services e-residents can undertake using Smart-ID:

Please let us know if you have any further questions! You can also read more on the e-Residency blog: https://medium.com/e-residency-blog/e-residency-card-expiring-soon-smart-id-to-the-rescue-1bc6bdd0e7e0

Many entrepreneurs who own a company in Estonia, but do business elsewhere have to translate their websites or at least a summary of their webpage into Estonian. This also includes e-residents who have founded Estonian OÜs. Silva Hunt will explain in detail why and how this can be done and added to your webpage easily. The basis of these requirements is the Estonian Language Act that can be found in English here – https://www.riigiteataja.ee/en/eli/512012016001/

Under Chapter 4, § 16. Language of information is stated that:

(1) Signs, signposts, business type names and outdoor advertisements, including outdoor advertising, installed to a public place with the purpose of political campaigning, and the notices of a legal person shall be in Estonian.

(2) The translation of the text into a foreign language may be added to public signs, signposts, business type name and outdoor advertisements; thereby the text in Estonian shall be in the forefront and shall not be less observable than the text in a foreign language.

(3) Upon using a brand as a sign of the place of business of a person or in outdoor advertising the part of a brand in a foreign language that includes essential information about the place of business and goods or service offered shall be presented also in Estonian, without damaging the distinctiveness of the brand and without applying subsection (2) of this section. The specified information may also be presented at the entrance to the place of business.

(4) If the agencies, companies, non-profit associations and foundations and sole proprietors which are registered in Estonia have a web page in a foreign language which is directed to the public, it shall include at least a summary in Estonian about its field of activity or the goods and services offered.

(5) At public events the organiser shall ensure the translation into Estonian of the essential information in a foreign language.

E-residents of Estonia should especially be aware of number 4. To avoid any issues or fines from the Language Inspection, simply add summary information in Estonian about its field of activity or goods or services offered. This is also the case if the company does not offer the service in Estonia and operates only in foreign markets.

Besides using Google Translate, there is one other, Estonian-developed option that we can definitely recommend – using Aligner.io. Aligner is a language translation platform created by Estonians that was created to speed up the process of managing and translating multilingual web content and also helps e-residents meet the requirements of the language laws. The uniqueness of Aligner technology is content management, which can be changed and updated in more than 100 languages in just seconds, using the best machine translation engines and delivering instantly. And the good news is that it is and will remain free of charge.

What is the easiest way to create an Estonian summary for your website?

The easiest way is simply to add a new page to your website, for example under the name “Summary of offered services foods” or “Summary in Estonian”. This can be done similar to any website where there is also a policy on the use of cookies or privacy.

You can use the English-language summary of your company´s activities and services and open the page https://app.aligner.io/ Paste the summary text into Aligner or import it directly from Google Docs, then choose an Estonian machine translation that will appear immediately and for free. Another option would be to pay for a human translation that will be completed in a few hours. Afterwards simply copy and paste the completed translation onto your website in Estonian.
NB! If you do not plan to offer services in Estonian at all, we recommend that you do not translate the entire page, but add only a short description and mention that the products and services s in English. Otherwise, it might create false expectations among users that the service will continue in Estonian.

If you have any questions about the language requirements, our team is more than happy to help!

Personal tax residency

First of all, regardless of your e-Residency status, you must always pay personal tax in the country in which you are a tax resident. It is very important to understand the difference between e-Residenct and residency – the first one is a  digital status, the second one a physical residency with residential benefits and obligations. E-Residency does not necessarily mean you are an Estonian tax resident as an individual.

An individual is a tax resident in Estonia if

  • his or her place of residence is in Estonia or
  • he or she stays in Estonia for at least 183 days over the course of a period of 12 consecutive calendar months.

Generally, residents are taxed on their worldwide income in their state of residence. This means that the country where you submit your annual personal income tax returns requires you to tax income you have earned from everywhere else in the world. Generally, there are also both domestic as well as international measures in place to avoid double taxation if this income has already been subject to tax in the country where you received it from. 

For that reason, you should have proof of taxes paid or taxes that have been withheld in Estonia always available to be presented to your local tax authorities. Local tax treatment could be different for each type of income (dividend, salary, directors’ fee) and it could also be affected by what has been agreed in the tax treaty your country has concluded with Estonia.

If you are location-independent, you should understand the tax system of your home country and any country in which you work for an extended period of time. Everyone’s personal tax situation is unique, so we strongly recommend you seek professional tax advice – from your home country or from your service provider´s tax specialist. In case tax advisors in your home country are not yet familiar with the term of e-Residency, please provide them with this explanation from the Estonian Tax and Customs Board.

Corporate tax residency 

Estonia has a simple rule which says that a company is a tax resident in Estonia if it is incorporated under Estonian laws. If you have registered your Estonian OÜ, then this means your company is an Estonian tax resident and subject to tax in Estonia.

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 triggers (tax residence) (parem on öelda, et tekib püsiv tegevuskoht – Permanent establishment). If you run your company from a country with such rules, then the company might end up having (justkui) 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. Nad usuvad, et neile õigus ärikasumit maksustada enda riigis.

In case business activities of this company are carried out elsewhere or the company is managed from outside of Estonia, the income received in a foreign state will be taxed (parem oleks: võib olla püsiva tegevuskoha korral maksustatud) in this foreign state and Estonia will ensure avoidance of double taxation. Estonian Tax and Customs Board has a list of all Conventions for the avoidance of double taxation

Estonian tax system

In Estonia, income tax is not assessed on the profit earned every year. Income tax is assessed on a monthly basis and only when profits have been distributed (when you pay out dividends for example). The corporate tax rate is generally a flat 20%, calculated as 20/80 from taxable net payment. Since 2019, if regular dividends are paid out, a reduced rate of 14/86 may apply.

Estonia’s taxation system does have favorable features for investors — including a unique corporate income tax system that has worked well for almost 20 years — but a company can only benefit from it on its profit attributable to Estonia.

Besides corporate income tax, e-residents with businesses in Estonia will also need to consider the following Estonian taxes:

  • 20% income tax from the director’s or member of the board management fee;
  • 33% social tax from the director’s fee.

Find an overview of tax rates at the Estonian Tax and Customs Board website. 

VAT registration

If your annual taxable turnover is below €40,000, VAT registration in Estonia is not obligatory. Learn more about VAT registration.

Nota Bene

  • NB! Please note that the information presented above is a generalization of a complex set of rules depending entirely on laws applicable in your state of residence and the treaty it has concluded with Estonia and is therefore only for illustrative purposes.
  • Never rely on general advise, however, when it comes to taxation. International taxation rules may be complex and are dependent on the specifics of your business activities and location.
  • Although international taxation is complex, having e-Residency can make the tax paying process more transparent and easy through e-services available in Estonia. For example, if you do owe corporate taxes in Estonia, you can declare all taxes entirely online.
  • Silva Hunt has its own tax and legal consultant on the team who can help you figure out your tax situation – please contact us and book a consultation.

Further reading

Tax residency basis on the EMTA website

Further information about corporate taxation on the EMTA website.

Further information by the Head of the Tax Department at the Estonian Tax and Customs Board (ETCB) on How do e-residents pay taxes?Why tax avoiders are disappointed in Estonian e-Residency