In the first half of 2022, Estonia collected a combined €24 million in tax revenue from e-residents, exceeding last year's record numbers by 85 percent.
"In addition to being Estonia's international calling card, the e-Residency program has also proven to be exceptionally profitable, generating annual revenue that is six times higher than the program's operating costs," Minister of Entrepreneurship and IT Kristjan Järvan (Isamaa) said according to a press release.
"Thanks to e-residents, there has also been a marked improvement in the competitiveness of the Estonian business market, with nearly every third startup in Estonia established by an e-resident," he added.
"This year, we'll be celebrating eight years since the launch of the e-Residency program," e-Residency managing director Lauri Haav said. "In this time, companies set up by e-residents have become more mature, employing more people, and taking out dividends. For Estonia, their success means increasing tax revenue."
Haav also noted that this growth is expected to continue as increasing numbers of e-residents are finding their way to entrepreneurship.
In the first half of 2022, labor taxes accounted for the vast majority of tax receipts from e-residents — 68 percent, or €16.32 million. The remaining 32 percent was collected on income tax related to dividends, amounting to a total of €7.68 million.
The largest share of tax revenue, €9.4 million, was received from companies operating in the field of information and communication, followed by professional, scientific and technical activities with €4.85 million, and administrative and support service activities with €3.19 million.
As of the end of June, a total of 3,262 Estonian residents were employed by companies run by e-residents, up by 1,194 on year. New job openings are created primarily by businesses whose operations include office management, coding and consulting sectors.
Ukraine war impacting e-Residency
Despite growing tax receipts, the impact of the war in Ukraine as well as general economic uncertainty are reflected quite clearly in the dwindling numbers of e-residency applications and new companies being established by e-residents, Haav said.
In the first six months of 2022, e-resident digital IDs were issued to 5,408 people, and e-residents established 2,198 new Estonian companies, down 12 and 4 percent, respectively, on year.
"This decline was expected, especially considering that Estonia has suspended granting e-resident status to Russian and Belarusian citizens," Haav explained.
He noted that Ukrainian citizens have remained active entrepreneurially, and that their share among the local e-resident community has continued to grow despite uncertain times, highlighting that 415 Ukrainian citizens were granted e-resident status in the past six months.
Interest in Spain, one of the program's three target countries, increased significantly during this period as well, topping both new e-resident and new companies established rankings with increases of 30 and 25 percent, respectively, on year.
Launched in December 2014, Estonia's e-Residency program aims to provide foreign citizens secure access to Estonia's public e-services. Since its inception, over 94,000 e-residents have established more than 22,000 new companies in Estonia.
To date, Estonia's cumulative economic gain in terms of tax revenue and state fees totals €114 million. The program's total direct contribution to the national budget is expected to increase by another quarter of a billion euros by the end of 2025 in connection with the successful implementation of the e-Residency's new growth strategy.
In 2021, the e-Residency program generated €35.2 million in direct economic revenue. Total costs of the program, meanwhile, amounted to €5.76 million.
Click here for more info regarding Estonia's e-Residency program.
Editor: Aili Vahtla