E-residents, address services behind most letterbox companies ({{commentsTotal}})

Map of Estonian companies by location. The single most popular address sports 2,113 businesses.
Map of Estonian companies by location. The single most popular address sports 2,113 businesses. Source: Tanel Jairus/Eesti Avaandmete Portaal

Based on research done by Open Knowledge Estonia using publicly accessible data of the commercial register, the Estonian media recently reported that there are several thousand companies registered to just a handful of addresses. While letterbox companies have long been a common phenomenon in tax havens around the world, they are a relatively recent issue in Estonia.

ERR's Estonian news outlined the situation earlier this month, writing that some 5,000 businesses are registered at just three Tallinn addresses.

At a closer look, all three locations also sport business service firms that offer a legal address as part of their packages. While one of the companies, LeapIn OÜ, mainly caters to the needs of e-residents, both Regus and 1Office, located in Tallinn's city centre, also offer this service to local companies.

Representative address for companies in remote or unpopular locations

The service became popular years ago and has thrived since the requirement of an initial capital payment upon the foundation of a company was abolished. It allows companies located either on the fringes of Estonia or in less desirable parts of town to get a representative address, such as the Tornimäe residential and office towers.

This means that the owner of a company previously located eg in Tallinn's Lasnamäe district can sign an agreement with a business service company over the use of their location. This may go further as well, including mail, phone and other services. The companies offering this typically also rent out office space and meeting rooms by the hour.

All their official contacts, for example on the company website, then refer to the popular and highly desirable location in the city centre.

Contact persons for e-residents, legal loophole

An Estonian e-resident does not by default need to name a contact person in Estonia. But if they decide to register a company here, they will need a domestic address as well.

To become a contact person, a local needs to pass checks by Estonia's anti money-laundering authority. As ERR's Estonian news wrote on Friday (link in Estonian), 178 companies and individuals have been granted this right.

E-residents who own Estonian businesses can also establish a base here without expressly selecting such a contact person, though this approach leads them into a legal grey area. As the owners of a company neither need to prove that they live here nor need to be physically present at any stage of setting up their business, there are cases in which ties are limited to a rented address as described earlier on in this article.

The Justice Ministry's Indrek Niklus explained to ERR that there are indeed companies who suggest to e-residents that they may lie and tell the authorities that they themselves are in fact in Estonia.

"Register yourself to our address, but we aren't your contact person. This isn't straight out illegal, but it isn't in the spirit of the law either, because it gives the state a false address of the e-resident, and we can't be sure what happens to the correspondence we send there," Niklus said.

The requirement that e-residents define a contact person for their business in Estonia is necessary, as otherwise the state would have to try and find them wherever in the world they may be located. Now, with contact persons clearly defined, any correspondence can be sent to the latter—and considered received once delivered.

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Editor: Dario Cavegn



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