important updates to e-⁠residency: what’s changing in 2025 and beyond

Read about upcoming regulatory changes in Estonia, including to application fees and taxes, which will impact e-⁠residents and their businesses

As we get closer to 2025, we here at e-⁠Residency want to ensure our community is fully informed about some upcoming changes to the legal landscape surrounding the program. From state fee increases for applications and renewals to tax rate adjustments and added restrictions for new applicants from certain countries, these changes will affect many of you. These updates, however, are not exclusive to e-⁠Residency. Estonian citizens, residents, and businesses will also be impacted as part of broader efforts to support Estonia’s economic resilience and adapt to global challenges. We understand these changes may bring concerns, but they are necessary for maintaining a secure and sustainable digital environment for entrepreneurs worldwide.

There is some good news too, as we advance towards the introduction of mobile e-⁠Residency by 2027. Such a major innovation will improve the accessibility and convenience of e-⁠Residency and ultimately make doing business in Estonia and the EU even easier and more secure. 

For full details on how these changes might impact you and your business, please read the complete blog post, which we will continue to update and re-share as new information comes to light.

1. Increase in state fee for applications and renewals

From January 1, 2025, the state fee for applying for or renewing the e-⁠Residency card will change and the new rate will start at €150. 

This means that if you’re currently thinking of applying for e-Residency or renewing your card, we recommend submitting your application before the end of this year!  For e-⁠Residency applications submitted until December 31, 2024, the current state fee rates continue to apply. Currently, the state fee for applying for an e-⁠Residency digital ID varies based on the chosen pickup location. If you pick up your card in Estonia, the fee is €100. If you choose to pick it up at an Estonian embassy, the fee is €120. 

What is a state fee?

When submitting applications or larger requests to Estonian state institutions or registries, you will usually need to pay an administrative fee - known as a state fee. Some common state fees for e-⁠residents include: when you submit your application for e-⁠Residency, register your company, or make changes to your company's articles of association. Overall, the rules and payment of state fees are regulated by the State Fees Act.

Why is the state fee increasing?

The change in the state fee for e-Residency is part of a broader review and reevaluation of state fees of identity documents across the Estonian State. For example, the state fee for an Estonian citizen to fast-track renewal of their ID card / passport will increase from €45 / €58 to €250.

The general system of state fees helps to ensure that the services and operations provided by the state are sustainable and that their costs are fairly distributed among the direct users of the service. In the case of e-⁠Residency applications, the current state fee rates have not changed since 2020, while the costs of the e-⁠Residency application procedure, background checks conducted by the state authorities, card production, and transportation have increased significantly. 

2. Tax changes

Increased tax rate on distributed profits

The corporate income tax on distributed profits increases to 22/78 starting from 1 January 2025. 

Furthermore, the reduced CIT rate of 14/86 will be abolished. This reduced rate currently applies to regularly paid dividends. As a result, the 7% withholding Personal Income Tax (PIT) will no longer apply (except for any dividends already taxed before 31 December 2024 at the CIT rate of 14/86). 

The higher CIT rate together with elimination of the preferential tax rate on regularly paid dividends may impact the overall dividend policy of companies.

Increased tax rate on personal income

The personal income tax rate increases from 20% to 22% starting from 1 January 2025. This is important for e-⁠resident companies with employees in Estonia, and also should be noted when declaring taxes on board member fees.

For the vast majority of e-⁠residents, you will continue paying personal taxes in your own country of tax residency at its local rates, so the change in Estonia's personal income tax rate will not impact you. 

Security tax package

The Estonian Government has introduced a three year ‘security tax’ package. The legislative proposal is currently being considered by the Parliament (as at the date of publication of this blog post). The objective of the package is to contribute to Europe’s security infrastructure as well as ensure Estonia’s economic and business ecosystem remains resilient and sustainable. 

The package involves a tax raising effort that will impact all Estonian tax paying citizens, residents, and companies. This includes Estonian companies founded by Estonian citizens, residents, non-residents, and e-⁠residents.

What we know at this stage is that the package contains three elements, which are planned to last until 31 December 2028: 

• Element 1: 2% tax on corporate profit – this element will commence on 1 January 2026
  1. The first tax payment will be due on September 10, 2026. The tax base is the previous fiscal year’s accounting profit before income tax. The tax is paid in advance quarterly and finalised after submitting the fiscal year’s report, allowing the tax burden to be spread out and paid in instalments.  
  2. If a company has no profit, no tax obligation arises. 
  3. The profit tax considers alternative measures based on a company's financial capacity, making it the least burdensome way to contribute to national defence during challenging times. 

2. Element 2: Increase in the VAT rate by 2% to 24% - this element will commence on 1 July 2025. VAT-registered e-⁠resident companies will need to start using this rate from that date.

3. Element 3: Increase in the personal income tax rate by 2% to 24% - this element will commence on 1 January 2026. E-⁠resident companies with employees in Estonia should note the increase in the personal income tax rate from 22% to 24% from 1 January 2026. The personal income tax rate will also increase for the salaries of board members of companies, from 22% to 24% from 1 January 2026. For the vast majority of e-⁠residents, you will continue paying personal taxes in your own country of tax residency at its local rates, so the change in Estonia's personal income tax rate will not impact you. 

We have set out above the details we know so far, and as soon as the legislative proposal has been published, we will get legal advice as to how the changes will affect e-residents and their companies, and thereafter notify our community. Make sure you are signed up to the e-⁠Residency newsletter to receive emails about this topic. 

3. New application restrictions for citizens of certain countries

E-⁠Residency aims to provide a secure and trustworthy platform for entrepreneurs from around the world to do business in Estonia safely, transparently, and seamlessly. We work with multiple stakeholders across the Estonian Government to deliver on this goal, including the Police and Border Guard Board (PPA), the Financial Intelligence Unit (RAB), the Tax and Customs Board (EMTA), the Estonian Internal Security Service (KAPO), Government Ministries and Agencies. 

On a regular basis, we identify and analyse potential risks to the e-⁠Residency community and Estonian business environment and work together to mitigate these risks and thus protect e-⁠residents, Estonian citizens and businesses from bad faith actors, technological vulnerabilities, and other potential reputational damage. One risk mitigation strategy we take seriously is KYC (‘Know your customer’) - or in this case - ‘Know our e-⁠residents’. As any e-⁠resident reading this article will know, all applicants are subject to background checks before you are accepted into the program. This helps to ensure that good faith, law-abiding people become e-⁠residents and build businesses in Estonia.

With the above in mind, the Estonian Government is currently considering a legislative proposal by the Ministry of Interior for limiting e-⁠Residency applications of citizens from countries where Estonia does not yet have any bilateral cooperation framework on justice, security and law enforcement. This creates a situation where the Estonian Police and Border Guard Board, when performing background checks on e-⁠Residency applicants from these countries, has limited ability to assess risks of onboarding them into our ecosystem. By restricting new applications from citizens of these countries, the Estonian Government aims to ensure that current and future e-⁠residents can maintain their trust in Estonia’s online e-services and business environment, whilst enjoying a wide range of benefits such as accessing the EU market, fast company registration, and running their businesses remotely with minimum administrative burden. 

The countries with application restrictions are identified on a case-by-case basis and will be included on a list kept by the Ministry of Interior. In the current draft of the new legislation, the list of countries is based on EU, Financial Action Task Force (FATF), and Estonian competent authorities' data.

The draft legislative proposal aims to make exceptions for citizens of countries with application restrictions. Exceptions are made to the citizens of listed countries (according to current legislative proposal) in case they:

1. have lived in the European Economic Area at least the last 3 years and have a valid residence permit in this country;
2. have permanent economic activity in Estonia;
3. are employees of an Estonian foreign mission or are Honorary Consuls; or
4. are submitting a renewal application for e-⁠Residency.

The proposed legislation does not impact existing e-⁠residents with a valid digital ID, who are citizens of the countries with application restrictions. Their already issued e-⁠resident digital ID will remain valid until the end of its validity period. Citizens of listed countries can submit a renewal application. During the processing of their renewal application their previous activities as e-⁠residents will be evaluated on a case-by-case basis. When processing a renewal application, the e-⁠resident's previous activities will be evaluated in light of whether the e-⁠resident has contributed to the purpose of the e-⁠Residency program, including contributions to the development of Estonia's economy, science, education or culture. Simply having a registered company will not suffice. The company must also have ongoing business activity in Estonia (e.g. the company has sales revenue, salaried employees, or is making investments in Estonia).

If the proposal is approved by the Parliament by the end of 2024, the limitations will come into force from January 2025 at the earliest.

*Since 24 February 2022, first-time e-Residency applications from Russian and Belarusian citizens have been closed. The legislative proposal discussed above is independent of current restrictions on e-Residency applications from Russian and Belarusian citizens. This restriction is established due to sanctions put in place as a result of Russian and Belarusian aggression in Ukraine and is in line with international sanctions against Russia and Belarus. Read more on our Knowledge Base.

4. Mobile e-⁠Residency

E-Residency is planning to implement mobile biometric data collection by 2027 in the application and renewal process. This initiative will capture e-residents’ facial images and fingerprints directly from mobile devices. The first step in this transition to mobile e-Residency has already commenced, with the Estonian Government’s call for tenders to collect biometrics of e-⁠residents on mobile devices.  

Additionally, the program is in its initial phase of exploring the development of a secure mobile-based solution that combines digital verification and signing, aiming to integrate seamlessly with the forthcoming EU Digital Wallet.

Both changes to e-⁠Residency will be major innovations for the program, reflecting our commitment to make business easier for entrepreneurs, and for delivering a secure, transparent, and remote business environment for e-⁠residents around the world.