Edward Lucas, a senior editor at The Economist magazine, may live in England, but as of Monday he is also a “resident” of Estonia. Lucas was the recipient of the first certificate of virtual residency issued by the Estonian government as part of a plan that it hopes will attract foreigners to invest and even start businesses in the small Baltic country.
Lucas appears to be the first electronic resident of any country, anywhere.
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While a number of other countries, including Iceland, have discussed the concept on a limited basis, Estonia became the first to put it into practice. Lucas was issued a card with an embedded microchip that will allow him to conduct secure transactions with the Estonian government from abroad, and which also allowed him to digitally sign documents – a process that, in the European Union, is the legal equivalent of a physical signature.
WHY THIS MATTERS
Since Estonia does not require businesses to set up a brick and mortar “office” in its country in order to establish a business there, its e-residency program could siphon investment dollars from the U.S. and other high-tax countries.
Virtual residency should be defined, in part, by what it is not. By accepting the card, Lucas is not made a citizen of Estonia. He is not even guaranteed entry into the country. However, should he choose to open a business in Estonia, he would be able to access Estonia-based financial services for his company from anywhere in the world with an Internet connection.
The electronic residency program appears to be, in large part, an effort to market Estonia to a global audience. The former Soviet Socialist Republic, which declared its independence in 1991, has since adopted a democratic government, joined the EU and NATO, and built some of the best Internet infrastructure on the planet.
Sharing a border with Russia has made for some tense moments in recent months, given the Russian Federation’s aggressive stance toward its former constituent states, and part of the Estonian plan for self-preservation appears to be tying itself ever more tightly to the West, both culturally and economically.
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The e-residency idea took off after the Estonian Development Fund, in cooperation with Sten Tamkivi, the former head of Skype, sponsored a contest that would reward the best idea for bringing business to Estonia. The proposal that urged the introduction of “10 million e-Estonians by 2025” won, and received the backing of the government.
Estonian officials, in speaking to journalists about the e-residency program, have touted the country’s flat tax structure and the fact that profits reinvested in a business are not taxed.
While e-residency is theoretically open to anyone, there are a couple of hurdles. The first is a criminal background check. The second, which may prove more difficult for many, is that applicants currently have to go to Estonia to apply for and receive e-residency status. That is expected to change in 2015, however, as officials have promised to roll out an application process that can be handled by the country’s embassies and consulates abroad.
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