Estonia's e-Residency was groundbreaking when it launched in 2014. For the first time, a government offered a digital identity to non-residents, allowing them to form and manage a European company remotely. More than 100,000 e-residents from over 170 countries joined the programme. The idea was brilliant.
But in 2026, the picture has changed. Banking difficulties have multiplied. Costs have risen. Tax scrutiny has tightened. And a fundamental misunderstanding persists: e-Residency is not tax residency. It gives you access to an Estonian company, not to Estonian personal taxation.
Latvia, Estonia's neighbour and fellow EU member state, has applied the same corporate tax model since 2018. With a lower rate (20% vs 22%), more accessible banking, and lower operating costs. Without needing a digital card.
What is Estonia's e-Residency?
E-Residency is a digital identity issued by Estonia to non-residents. In practical terms, it is a smart card that allows you to:
- Form and manage an Estonian company (OU) remotely
- Sign documents electronically with legal validity across the EU
- Access Estonian digital services (e-Business Register, e-Tax Board)
- File and pay taxes online
The cost is EUR 100-120 for the card, which must be collected at an embassy or pickup point. The process takes 4-8 weeks.
What e-Residency is not:
- Not a visa: it grants no right of entry or stay in Estonia or the EU
- Not tax residency: you remain taxable in your country of residence
- Not citizenship: no connection to Estonian nationality
- Not a bank account: account opening is not guaranteed (and this is where the problems start)
The growing problems with e-Residency (2024-2026)
The banking crisis
This is the number one issue. LHV, the bank that historically served the majority of e-residents, has drastically restricted account openings since 2024. Wait times range from 3 to 6 months. Many applications are rejected outright, with little detailed explanation.
Wise Business fills some of the gap, but with real limitations: no credit facilities, caps on incoming transfers, and reliance on a single fintech provider. For a business that needs standard banking flows (large SEPA transfers, B2B invoice collection), Wise does not always suffice.
Rising costs
The Estonian government raised corporate tax from 20% to 22% in 2025. That is a 10% increase in relative terms. Service providers (virtual offices, accounting, management firms) now charge between EUR 200 and 400 per month for a complete package. The total cost of running an Estonian OU often exceeds EUR 5,000 per year in administrative fees alone.
Substance scrutiny
Estonian tax authorities now actively investigate e-resident companies that have no real connection to Estonia. A company with no local employees, no physical office, and no Estonian clients may face questions about its economic substance. The risk: tax reclassification or administrative complications.
KYC fatigue
Banks and service providers impose frequent re-verification requirements (Know Your Customer). Providing the same documents every 6 to 12 months, answering compliance questionnaires, proving the source of funds: the administrative burden has increased significantly.
Tax confusion
Many e-residents discover too late that their home country continues to tax them. E-Residency gives you a company, not a tax domicile. A French entrepreneur with an Estonian OU remains liable for tax in France on worldwide income, unless they actually transfer their tax residence.
Latvia vs Estonia: side-by-side comparison
| Factor | Estonia (e-Residency) | Latvia |
|---|---|---|
| CIT on reinvested profits | 0% | 0% |
| CIT on distributed profits | 22% (since 2025) | 20% |
| Remote setup | Yes (e-Residency card) | Yes (power of attorney) |
| Banking access | Very difficult (LHV restrictions) | Easier (multiple banks) |
| Monthly costs | EUR 200-400 (virtual office + accounting) | EUR 150-300 |
| Company type | OU | SIA |
| Minimum capital | EUR 2,500 (can be deferred) | EUR 1 |
| EU / Eurozone / Schengen | Yes / Yes / Yes | Yes / Yes / Yes |
| OECD | Yes | Yes |
| Substance requirements | Increasing scrutiny | Standard EU requirements |
| Tax rate advantage | - | 2% cheaper on distribution |
| Registration fees | EUR 265 | EUR 150-250 |
Why Latvia is the smarter choice in 2026
Same tax model, lower rate
Both countries apply the same principle: 0% CIT on reinvested profits, tax only on distribution. But Latvia's rate is 20% vs 22% in Estonia. On a EUR 100,000 distribution, that is EUR 2,000 saved every year. Over 5 years, EUR 10,000. Not insignificant.
Banking actually works
This may be the most practical argument. In Latvia, multiple banks accept new business clients: Citadele, SEB, Swedbank. Fintech options are also available. Account opening takes 1-2 weeks, compared to 3-6 months (if accepted) in Estonia. For an entrepreneur who needs to start operating quickly, the difference is decisive.
EUR 1 minimum capital
A Latvian SIA can be formed with a share capital of just EUR 1 (micro-capital). An Estonian OU requires EUR 2,500, even if payment can be deferred. For a freelancer or consultant launching their activity, that is one fewer barrier.
Lower operating costs
In Latvia, accounting starts at around EUR 100 per month for a simple activity. A registered address (legal seat) costs from EUR 50 per month. The total package remains lower than Estonian service providers, who have raised their prices in response to growing demand.
No e-Residency card needed
A Latvian SIA is formed via notarised power of attorney. No need to order a card, wait 6 weeks, travel to an embassy to collect it, then renew it when it expires. The process is simpler and does not depend on country-specific digital infrastructure.
Same EU credentials
Latvia and Estonia share exactly the same affiliations: European Union, Eurozone, Schengen Area, OECD. The same legal protections apply. Your Latvian company carries the same legitimacy as an Estonian company in the eyes of partners, clients, and financial institutions.
Multilingual support available
Balt Partners operates in French, English, and Dutch. For francophone entrepreneurs (France, Belgium, Switzerland, Luxembourg) and Dutch-speaking entrepreneurs (Netherlands, Belgium), this is a significant practical advantage over Estonian service providers, who operate almost exclusively in English.
Who should still choose Estonia?
It would be dishonest to claim that Latvia is categorically superior. Estonia remains a valid choice in certain situations:
- You already have a functioning Estonian company with an established banking relationship. If your LHV account works, your accountant is competent, and your business is running smoothly, switching countries does not make sense. The transition cost outweighs the 2% CIT saving.
- You specifically need Estonian digital infrastructure. Estonia's electronic signature (e-ID) and associated services are technically more advanced. If your business relies on these specific tools, the Estonian ecosystem remains relevant.
- Your service providers are Estonia-based. If your accountant, lawyer, and key partners are Estonian, the geographic and administrative proximity has value.
How to switch from Estonia to Latvia
For entrepreneurs who want to migrate their activity, here is the concrete process:
- You do not need to close the Estonian OU first. Both entities can coexist during the transition.
- Set up the Latvian SIA: 3 business days once documents are prepared. Bank account opening: 1-2 weeks.
- Gradual migration. Direct new contracts to the Latvian SIA. Invoice new clients from Latvia. Transfer existing contracts as they come up for renewal.
- Transition period. Plan for 3-6 months of parallel operation. This allows a smooth migration without disruption for your clients and partners.
- Close the Estonian OU once the transition is complete. Liquidation takes 2-3 months in Estonia.
How to set up in Latvia directly
For those starting fresh without an existing Estonian company, the process is even simpler:
- Choose your service provider. Select a firm that handles formation, accounting, and administrative support. Verify that they speak your language and understand your home country tax situation.
- SIA registration. 3 business days at the Latvian Commercial Register. Share capital from EUR 1. Documents prepared via power of attorney, no travel required.
- Bank account opening. 1-2 weeks. Multiple options available (Citadele, SEB, Swedbank, fintechs).
- Begin operations. Obtain VAT number if needed (below the EUR 40,000 threshold, registration is voluntary). Set up accounting. Start invoicing.
From first contact to first invoice, expect 2-4 weeks. Discover our company formation service for full support.
Frequently asked questions
Is Latvia's tax system the same as Estonia's?
Yes. Both Latvia and Estonia have applied the same model since 2018: 0% corporate tax on reinvested profits, tax only upon distribution. The key difference: Latvia taxes at 20% vs 22% in Estonia since 2025.
Can I set up a Latvian company remotely?
Yes. A Latvian SIA can be formed remotely via notarised power of attorney. No e-Residency card or embassy visit needed. The process takes 3 business days once documents are prepared.
Is it easier to open a bank account in Latvia than Estonia?
Yes. In Estonia, LHV (the main e-resident bank) has severely restricted account openings, with 3-6 month wait times and many rejections. In Latvia, multiple banks (Citadele, SEB, Swedbank) accept new business clients within 1-2 weeks.
How much cheaper is Latvia compared to Estonia?
CIT on distributed profits is 20% in Latvia vs 22% in Estonia. On EUR 100,000 distributed, that is EUR 2,000 saved. Minimum capital is EUR 1 (vs EUR 2,500). Monthly costs (accounting, registered address) are 25-50% lower depending on the provider.
Do I need an e-Residency card for Latvia?
No. Latvia does not have an e-Residency programme and does not need one. Company formation and management are handled via power of attorney and standard online services. No card to obtain, no card to renew.
Can I transfer my Estonian company to Latvia?
You cannot directly convert an Estonian OU into a Latvian SIA. The recommended approach: set up a new SIA in Latvia (2-4 weeks), gradually migrate clients and contracts, then close the Estonian entity once the transition is complete. Both entities can operate in parallel during the transition period.