E-residents of Estonia contributed twice the expected revenue to the state in the first half of the year

The direct economic impact of the Estonian e-Residency programme to the state was €68 million in the first six months of 2025, nearly double the target amount. Additionally, according to a recent study, e-resident entrepreneurs spend more than €15 million annually on business services offered by domestic providers.

 

According to Liina Vahtras, Managing Director of the e-Residency programme, the first half of the year was more successful than expected. "2025 has been a record year for us in terms of economic impact, new applications, and companies created. Over the past six months, e-residents have generated more revenue for the state treasury than they did in the whole of last year, when the economic impact of the programme was €66.8 million. These positive results have led us to anticipate continued growth in tax revenues for the state in the second half of this year, increasing the expected annual revenue from e-Residency to the state treasury by a third", she said.

 

According to Erkki Keldo, Minister of Economy and Industry, the simplicity and flexibility of Estonia's tax and business environment is a competitive advantage that has helped to increase e-residents' interest in the country. "In addition to high-quality digital services that can help entrepreneurs start and develop their businesses without excessive time consumption and bureaucracy, Estonia has the best tax system among OECD countries, a position it has held for 11 years. The abolition of corporate income tax from the start of the new year will help the country maintain this position. The e-Residency programme's economic results demonstrate that we have been on the right track in our desire to bring more capital and ambitious companies to Estonia", the minister added.

 

During the first six months of 2025, tax revenue accounted for 97% of the total economic impact of e-Residency, or €65.9 million. Nearly 40% of this, or €26.2 million, came from labour taxes, and 60%, or €39.7 million, from special income tax (mainly from dividends). In addition to taxes, the economic impact of the programme included an additional €2.1 million, which was collected from state fees paid by e-residents for applying for e-Residency and establishing companies.

 

"The significant economic impact in January and February, which totaled approximately €29 million, can be explained by the income tax rate increase at the beginning of 2025, which led to an unusually high number of dividends being declared in December. Although the tax rate increase had a noticeable impact on economic results, tax revenue remained higher than usual in the following months. This shows that e-resident companies are viable and growing, and that they have a buffer to cope with unexpected events", Vahtras commented.

 

A total of 7,994 e-resident digital ID applications were received from January to the end of June, and 2,634 new companies were created by e-residents in the first half of the year, which was 23% and 8% more than during the same period last year, respectively.

According to Vahtras, the main goal of e-Residency is to grow Estonia's economy and benefit the Estonian state. "The programme's day-to-day work focuses on targeted sales efforts in countries with the greatest market potential, bringing not only e-residents starting businesses to Estonia, but also existing companies. In half a year, we have seen significant growth in all the markets we have focused on: France and Italy currently show the greatest potential, with a 50-80% increase in applications compared to previous years. There continues to be strong growth in interest in e-Residency in Germany and the UK, as well as in Latin America, where we launched issuance missions in the spring in cooperation with the Estonian Police and Border Guard Board", Vahtras noted.

 

The development of cardless e-Residency, i.e. the replacement of the physical e-resident's digital ID with a fully digital alternative, is also actively underway, with the development of a mobile remote identification solution planned for 2027. This will add another layer of technological security to the application process and shorten the customer journey for e-residents, making it even more convenient and faster to set up a company in Estonia.

 

E-Residency fosters Estonia's service sector

 

The growth in the number of Estonian companies created by e-residents is creating an ever-expanding customer base for companies operating in Estonia's service sector. According to a recent study, in 2024, the turnover of Estonian companies operating on the programme's official service provider platform, e-Residency Marketplace, which is the programme's official service provider platform, generated €15.51 million in revenue from serving e-residents alone. This was nearly 36% more than in the prior year (€11.43 million in 2023). Serving e-residents accounts for more than half of the total business activity of an increasing number of companies operating on the platform, often reaching 80-100%.

"The e-Residency programme supports a vibrant and growing ecosystem of service providers in Estonia, which helps the business environment innovate, and the tax revenue it generates plays an important role in filling Estonia's state coffers", said Piret Kerem, COO of Xolo, the market leader of the e-Residency Marketplace platform. "We have e-resident customers from 152 countries around the world. In terms of numbers, we are most successful in Spain, Italy, and Germany, but the fastest growth is in Belgium, the Netherlands, and France", Kerem noted.

 

"E-residents appreciate the opportunity to run their businesses flexibly using Estonian e-services, which are faster and clearer than in many other countries. Estonia's advantage is not only the ease of setting up a company, but also the entire functioning business environment around it. Many European countries still approach entrepreneurship in outdated ways, making it unnecessarily difficult to start and run a business, especially for individual entrepreneurs. Estonia has a real opportunity to export its business environment through e-Residency, proactively working to expand the e-Residency programme and maintain the stability of our business environment", she said.

 

"The reasons for turning to Estonian e-Residency can vary, such as using it to expand a successful US business to Europe or to take advantage of the opportunity to manage one's business independently of its location using an Estonian digital signature. Based on our experience, e-residents with different needs are united by innovative thinking, openness to modern solutions, and good business sense. The businesses of e-residents are for the most part truly international: 85% of value creation takes place with customers who are not located in the same country as the business owner. The fastest growing companies tend to be those owned by younger e-residents aged 18-29, which shows the rise of a new entrepreneurial generation", she added.

 

According to Kerem, e-residents consume the most services related to company establishment, contact persons and virtual addresses, and accounting. In addition, there is a need for legal assistance in matters of taxation and contract drafting. Investment is also of great interest, as deferred corporate income tax makes investing profits very attractive. "E-residents continue to be most willing to pay for a personal approach and clear advice. At the same time, clients' expectations for smart, automated solutions that save time are growing stronger. Xolo has created a platform for serving e-residents and other clients that automates invoicing and report generation. We are also increasingly using AI on our platform; for example, nearly 90% of expense document categorization is done automatically", said Kerem.

 

The e-Residency programme was created on 1 December 2014 with the objective of offering foreign nationals secure access to Estonia's e-services. Over time, more than 128,000 people from 185 countries have become e-residents (excluding those whose status has been revoked). There are currently around 62,000 e-resident digital ID cards with a five-year validity period in circulation. To date, e-residents have founded and cofounded more than 36,000 Estonian firms. One-fifth of all new companies founded in Estonia each year are established by e-residents.

 

The direct economic impact of the e-Residency programme on the Estonian state since the programme was established has been €342 million. In 2024, the direct economic revenue of the e-Residency programme for the state (in terms of labour and dividend taxes and state fees) was €66.8 million. The total costs related to the e-Residency programme, including contributions from government agencies, amounted to approximately €7 million in 2024.

The economic impact of the programme is measured using a nationally approved model that takes into account the labour taxes paid by Estonian companies owned by e-residents and income tax on special cases (mainly dividends). An e-resident company is defined as an Estonian company in which the e-resident's role in the company arose at the time of its establishment or within 90 days of its establishment, and the e-resident status of the foreign citizen joining the company must have been established before the company was created.

 

E-Residency's homepage and statistics:  https://www.e-resident.gov.ee/en/