There has been a lot of buzz among digital nomads and online workers about Estonia over the last few years. Their innovative e-Residency program allows anyone in the world to use its e-government systems and set up a remotely managed company.
Since I’ve been nomadic and have lived in different countries while working online, it made me interested in the program as well.
I recently went through the whole process of becoming an e-resident, starting an Estonian company, and even travelling to Tallinn to open a bank account. Based on this, I can share with you some tips and experiences.
I’ll talk about what e-residency is and isn’t (and how useful it is for digital nomads) in another post. Here, I’ll just be giving an overview of Xolo Leap (formerly known as LeapIN), one of the most popular Estonian service providers for e-residents.
This turn-key service is ideal for freelancers, remote workers, independent consultants, educators, etc. and other types of solopreneurs who sell their digital services internationally. If you run an online or location-independent business, then using Xolo Leap could be a great option for you.
Update: Xolo will soon also offer another option, called Xolo Go, but this doesn’t get you your own Estonian company. Go is meant for freelancers who are really just starting out and need an easy way to send invoices.
Setting up your company
The process of setting up your company is very straightforward and can be done entirely remotely.
Xolo has created an easy step-by-step onboarding process, which requires you to fill out some forms and digitally sign a few contracts. You sign the agreements using your e-Residency identity card, so you need to be registered as an Estonian e-Resident first.
The whole process took about 5 business days for me. It typically involved filling out some details or just clicking an accept button, then waiting for the next step while Xolo set things up in the background.
If you’ve ever experienced a lot of bureaucracy or physical paperwork before, then you’ll probably be delighted by how easy it is with Estonian e-Residency and Xolo Leap.
By the way, if you’re going to sign up with Xolo Leap, they were kind enough to share a coupon code which I’m happy to pass on to you. Just fill it into the referral code field on the very first page.
Adding bank accounts
Once your company is created, the next step is to associate one or more bank accounts.
Xolo Leap integrates seamlessly with PayPal and TransferWise, both of which can be set up online without ever visiting Estonia.
It can also integrate with a business bank account of LHV in Estonia, which is Xolo’s partner bank, though this requires an in-person visit to set up.
TransferWise integration is a real killer app of Xolo that I didn’t even anticipate when I signed up (as they only introduced it recently).
I use Euro at home but often receive payments in USD, GBP, AUD or CAD — and traditional banks and PayPal tend to charge truly eye-watering amounts for currency conversion. Using a TransferWise Borderless account can save you hundreds of Euros in conversion fees, and your TransferWise account will work with Xolo’s dashboard seamlessly.
With Transferwise (which is also an Estonian company) you can receive money to a European IBAN, a US account number, a British account number, and so on. If you need to convert any of this currency, it’s at a very low rate.
I wasn’t using TransferWise before as it didn’t work well with the accounting platform I used. But Xolo uses the TransferWise API to import transactions automatically, making a Borderless account super easy to use in combination with your Estonian company.
The Xolo dashboard can also read transactions from your PayPal account once you‘ve provided read-only access. While PayPal charges rather hefty fees, for some of my clients it’s still the only payment method available, so it’s nice to have this integration.
You’ll need to set up a PayPal Business Account on the Estonian PayPal site. That’s because each version of PayPal is local, so to connect your account to an Estonian company it needs to be an Estonian account. (There is basically no country drop-down box on PayPal.)
When you go to PayPal it will normally redirect you to your local version, but if you just enter www.paypal.com/ee/ in the address bar you can sign up from there.
You can set up PayPal or TransferWise remotely, but these accounts do have a disadvantage. They’re not real banks in the legal sense, meaning you don’t get a deposit guarantee. If you want to be covered by the 100,000 EUR deposit guarantee that’s standard within the EU, you’ll still need to use a traditional bank.
Unfortunately, you can’t just use any bank. Xolo Leap integrates only with Estonia’s LHV bank.
I got started using just PayPal and TransferWise, which works fine for pretty much any transactions. Eventually, I did want a safer place to keep my funds, so I opened an account with LHV bank.
This used to be possible remotely via video call, but current rules require you to physically visit LHV’s offices in Tallinn to open your account. This may change in the future, but right now it’s the only way to get this set up. It’s a bit inconvenient, though it does give you a nice excuse to visit Estonia and see the wonderful city of Tallinn.
As a Xolo Leap customer you can get pre-approved for an LHV account. I recently went to Tallinn to finalize the account opening where my visit to LHV Bank took about 30 minutes.
The Xolo dashboard will show you a list of all your accounts, separately listing different currency accounts.
For example, in my dashboard, I can see how much USD, EUR, GBP, and AUD I have on TransferWise. This multi-currency support is wonderful if you’re running an international online business.
My previous bookkeeping platform essentially converted everything to EUR, but with Xolo I can get a more accurate picture of my funds and keep different currencies around if needed. Invoicing can also be done in a range of commonly used currencies.
If you need to sell digital products directly to customers, you currently have the option of using either PayPal or Paddle. There is also support for the Apple App Store or Google Play.
I have not tried these out myself as I don’t have a direct sales channel that would need this, but if you’re a SaaS provider, app developer, or indie software dev, you’ll probably be interested in these options.
The selection of payment gateways seems limited at first glance, though Xolo’s FAQ states these gateways were chosen specifically as they work best with their platform and don’t have a negative attitude towards location-independent businesses.
The Xolo dashboard
Xolo gives you a self-service dashboard from where you can manage your income and expenses. The dashboard is nicely streamlined and very easy to use.
You can upload expense documents through the dashboard, after which they will be processed and digitized by Xolo. Documents are usually digitized within a few days.
Invoicing can be done easily from the dashboard. It’s nothing too complicated: you can keep a list of regular clients, choose from several colours for the template and upload a logo, and e-mail the invoice to your client as well as archiving it in the dashboard. The Xolo staff will do the matching of invoices to payments and filing them away.
You can record business trip under a separate tab. When a trip is approved, you can click on it and upload your expense documents. Note that if you’re a full-time digital nomad, you can’t just claim your perpetual travels as one long business trip. It needs to be a return trip with a clear business purpose (which seems to me like a reasonable requirement).
Within the dashboard, your only responsibility is the reporting of expenses and keeping of invoices, as is normal with any company. The accounting, tax filing and compliance are handled entirely by Xolo.
Xolo Leap pros and cons
To conclude, let me point out some of the features as well as potential limitations of the service.
Things to be aware of
No cash withdrawals. While you can technically withdraw cash at any ATM using your Transferwise Borderless or LHV debit card, you are not meant to do this as a Xolo customer. To keep things simple, Xolo just wants all expenses to be paid electronically. Of course, this is not a big deal if you run an online business. Common expenses like buying software/hardware or accommodation and flights for a business trip can all be done via debit card.
No USD at LHV. You can’t receive USD on an LHV bank account at the moment. Fortunately, this is not an issue if you also use PayPal or TransferWise.
One shareholder only. Xolo is intended for creating a limited liability company with one shareholder. Other providers (like this one) may allow multiple shareholders. While it supports only one shareholder, you can still of course hire freelancers or even employ people directly.
Not all business types accepted. You can use the registration form to check if your type of business qualifies. One thing that’s explicitly excluded at the moment is selling physical goods (e.g. dropshipping or selling via Amazon FSB is not supported).
Not a tax haven. Just to be clear, Estonia is not a tax haven. It has a regular 20% corporate tax rate. e-Residency in Estonia can be convenient in many ways, but it won’t in itself lower your taxes if that is your goal.
Avoiding bureaucracy. Company registration and management is super smooth. You can enjoy Estonia’s excellent digital services for your company while still remaining income tax resident in your home country or elsewhere.
Designed for online companies. The service is ideal for freelancer, bloggers, remote workers, independent consultants, etc. who sell their digital services internationally. Everything is remote and the Xolo team is accustomed to dealing with nomads and online workers. (This is really nice! Some of my previous bookkeepers didn’t understand my international situation, never heard of things like affiliate payments, etc.)
Postal mail digitization & forwarding. I have not yet had to use this myself, but any mail sent to your physical address at Xolo will be scanned and forwarded to you.
No taxes until distribution. Estonia’s tax law is such that you only pay the 20% corporate tax until money is distributed as dividends or salary. This gives you some tax advantage if you plan to invest company funds (e.g. in stocks or cryptocurrency).
Integrated bank accounts. No manual uploading of CSV files; you can get a real-time view of your accounts via the dashboard.
Cost savings. Fees are pretty low thanks to Estonia being a cost-effective country (packages range from €59 to €99 per month). Speaking just for my situation, this has already halved my admin costs. TransferWise integration can give you further savings on currency conversion fees.
Excellent service. The team is highly responsive and very helpful. In most cases, their excellent FAQ already has the answers to everything you need to know. When something is still unclear, the team usually responds within a day.
When you have an international online business and you realize your company doesn’t have to necessarily be in your home country, you can start looking around globally for a service that best matches your needs. For me, Estonia’s e-Residency with LeapIN ticked a number of boxes.
There are other options around though, so it’s always good to speak to an advisor or do some research on your own. I’ve heard of many different solutions being used by digital nomads or online workers. US-based Stripe Atlas is another one, for example.
A key benefit is that you can keep your company in one place while moving around internationally. I’ve lived in different countries and have been fully nomadic as well. Having one place for my business — one that is accustomed to dealing with nomads and remote workers — can be a real advantage.
Another advantage is that setting up in Estonia with Xolo is totally turn-key and easy to manage. It can be a great way to avoid the bureaucracy that exists in some other places around the world. For example, I know some German online workers using e-Residency for this reason, and it was also a key motivation for myself.
Ultimately, neither e-Residency nor Xolo will be a perfect match for everyone, but it can be an excellent service depending on your requirements. I’ve personally been very satisfied with Xolo’s dashboard, their level of service and the hassle-free experience with e-Residency.
If you’re still wondering if it could be right for you, I recommend checking out the unofficial e-Residency Facebook group, reading the Xolo FAQ, or starting the free sign-up at LeapIN that will let you evaluate if it’s the right service for you.
P.S. Don’t forget that you can use the referral code INDIETRAVELLER at sign-up to get €100 off, which is enough to cover two months. The referral code also gives a reward to me, so if you decide to use it, thank you! All opinions in this post are of course my own (and I use Xolo for my own business).