The Estonian parliament adopted on 3 June amendments to the Aliens Act, allowing for the creation of a digital nomad visa.
The visa would give the right to digital entrepreneurs and workers, who temporarily want to live in Estonia, to reside there for one year (log-term visa), being at the same time entitled to a Schengen visa which allows them to visit member countries for up to 90 days.
For now, most of nomads enter Estonia on a tourist visa and officially are not allowed to work and live in the country. For a longer (legal) stay, they would need to find an employment there.There are already countries which have introduced similar residency permits that remote workers use for the purpose of working and travelling. But Estonia seems to be the first one officially addressing and promoting the visa rights to the community of digital nomads.
After the famous e-residency program, introduction of such visa was just a matter of time.
We always remind that Estonian E-Residency program is a great tool for the remote administration of the company, however it does not bring any tax residency or citizenship rights in Estonia or the EU. Now many nomads with established Estonian companies can actually try the lifestyle of the country for longer.
On another note, we should also dispel the myth that e-residency is a way to avoid tax responsibilities in the applicant’s home country. Of course, Estonia has the unique corporate income tax system, encouraging the growth of start-ups. It certainly attracts young entrepreneurs with taxation at a flat rate when profits are distributed so there is no tax on profits that are reinvested into the company.
By default, companies established in Estonia through e-Residency become tax resident in Estonia. However, not all e-residents contribute taxes to Estonia. Actually, some of e-residents make a larger tax contribution to their home countries if the source of taxable income is there. For example, if company’s activities create a permanent establishment (a fixed place of business in a foreign jurisdiction) in another country, there might be grounds to taxation there.
Same clarification is required when it comes to personal residency. Your personal tax on your wage is subject to the rules in the country of your personal tax residency.This is why, in case of doubts about clear understanding of tax obligations, it is always advisable to consult the specific situation with a professional tax adviser to avoid any risks and surprises.
We are still waiting for more details about the new Visa, if and for how long, the 1-year permit could be extended. We will be following the subject and inform about any updates. Undoubtedly (contrary to the German model), the Visa won’t require foreigners to pay taxes in Estonia. Most probably, the applicant will just need to declare that he is a taxpayer in another country.
Surely it is a great move of the government, since with no real cost on the side of the country, expats coming to Estonia are a great good boost for economy. Digital nomads’ visas might quickly become a global trend.