Why I would not set up an Estonian company while living in Germany
When you live in Germany and want to set up an Estonian company, in terms of taxation, you have to differentiate between personal tax residency 👨💻 and corporation tax residency 🏢.
Your personal tax residency 👨💻 is very probable where you have your registered address. In my case, I would have to pay taxes on my personal income in Germany 🇩🇪
Your corporation tax residency🏢 is very probable where your company’s value is generated 💸. This is usually the country of residence of the shareholder. In my case, as I live and work in Germany, this would be Germany 🇩🇪. Therefore my Estonian company would have to pay taxes in Germany.
The Estonian Income Tax Act would avoid double taxation but my Estonian company would have to declare taxable payments and submit annual report in Estonia 🇪🇪 and Germany 🇩🇪 - additional bureaucracy and higher costs ⚡️⚡️⚡️
If the corporation tax residency of my Estonian company was in Germany, I would probably have to set up a branch or subsidiary in Germany, which would result in additional uncomfortable bureaucracy and legal costs ⚡️⚡️⚡️
If I did not have my personal residency in Germany but lived truly location-independent, my corporation tax residency would be Estonia by default 🇪🇪❤️
So, E-Residency can lower the costs, hassle and barriers to entrepreneurship, but not if you live and work from a country within the European Union like Germany. And key information like ownership and the taxation is very hard to find on the Internet!
Sources
Mail from Estonian Tax and Custom Board