The e-Residency program is specially designed for digital nomads. Why? First, because of Estonia’s commitment to build a digital nation that allows its virtual citizens to achieve location independence, running their business completely online, and secondly, to prevent this vision from colliding with other systems – especially in Europe – that are still linked to concepts such as geographic location.
Many countries, such as most European nations, USA, UK, Australia and Canada, have CFC rules (Controlled Foreign Corporation) to prevent their citizens from running companies from low-tax countries. Unfortunately, these rules don’t differentiate between countries, they apply to all foreign countries, including reputable countries like Estonia.
What happens if you live in a country with CFC rules and run a company in Estonia? If the majority of board members live in one country (such as if you are the only member of your company), and are tax residents in that country, the Tax office of that country considers that the activity of the company happens 100% in that country, so it will consider that your company has a “permanent establishment” there, and therefore your company will be considered a company of that other country for fiscal purposes. Meaning: it will have to pay taxes there and you will lose the benefit of taxation on distributed profit only.