Estonias e-Residency vs. Portugals D2 Visa: A Comparison of Digital Nomad Strategies

Last week I received this message: Richard, I am totally confused. Should I apply for Estonia’s e-Residency or go straight for the D2 visa in Portugal? What’s the smarter move for taxes?

And here’s where the first major misconception lies.

These two options are like apples and oranges. Yet they’re compared all the time. I get why—both promise a certain freedom from the German tax system.

But the reality is much more complicated.

As someone who works with international entrepreneurs every day, I see the same misunderstandings crop up repeatedly. That’s why I want to walk you through an honest analysis of both paths today.

You’ll see why e-Residency is no tax haven. And why the D2 visa won’t automatically lower your tax bill. Most importantly, I’ll show you which path is truly right for your specific situation.

Ready for the unvarnished truth?

The Truth About Virtual vs. Physical Residency: What Nobody Tells You

Before we get into the details, let’s bust the biggest myth:

Neither e-Residency nor the D2 visa will automatically solve your tax issues.

I know that’s not what you want to hear. But it’s this honesty that separates me from the tax saving gurus who promise you the world.

What Virtual Residency Really Means

e-Residency gives you digital access to Estonian e-services. That means: you get a digital identity, can start a company, and handle official paperwork online. Sounds great, right?

But—and this is crucial—it does NOT make you an Estonian tax resident.

Your tax obligations still depend on your actual place of residence and where you conduct business. If you spend 200 days a year in Germany, you’re still a German tax resident. Full stop.

What Physical Residency Actually Changes

The D2 visa, on the other hand, allows you legal residency in Portugal. You can settle there, work, and can even apply for citizenship after five years.

The important part: With the D2 visa, you can end your German tax residency—provided you meet all requirements and actually relocate to Portugal.

But again: The tax benefits don’t happen automatically. You need to actively change your tax residency and put the right structures in place.

The Fundamental Difference at a Glance

You see: We’re talking about completely different concepts. That explains why so many entrepreneurs make the wrong choice.

Estonia’s e-Residency: What to Really Expect—and Why It’s No Cure-All

I’m an e-resident in Estonia myself. So I can tell you first-hand: it is a brilliant system—but not what most people imagine.

The Reality of e-Residency

Since its launch in 2014, over 100,000 people have chosen e-Residency. More than 20,000 businesses have been launched.

But here’s the catch: The majority of these entrepreneurs have gained nothing tax-wise.

Why? Because they continue to conduct business from Germany. And that means: German tax liability remains.

When e-Residency Makes Tax Sense

There are, in fact, scenarios where e-Residency brings tax advantages:

• You’re already a non-resident in Germany and are seeking an EU business structure
• Your business runs fully automated with no active operations
• You work remotely and spend less than 183 days per year in Germany
• You have passive income streams like royalties or dividends

In these cases you can benefit from Estonia’s unique tax system: profits are only taxed when distributed. That means: retained profits stay tax-free.

The Practical Advantages of e-Residency

Beyond the tax topic, e-Residency offers real added value:

1. Digital efficiency: All official processes online, 24/7
2. Access to the EU market: SEPA transfers, EU invoicing without issues
3. Low bureaucracy: Year-end closing in just a few clicks
4. International credibility: An EU company opens doors

Hidden Costs and Drawbacks

Here’s what most providers don’t tell you:

• Accounting costs: €100-300 monthly for professional support
• Language barrier: Communication with authorities only in Estonian or English
• Time zone issues: Support often only available during Estonian business hours
• Bank account issues: German banks are often skeptical of Estonian businesses

What’s more: Many German banks deem you “high risk” if you run an Estonian company, which can lead to account closures.

Tax Pitfalls with e-Residency

This is where things get tricky: Even if you meet all requirements, pitfalls remain:

Substance problem: The German tax office increasingly checks the economic substance of foreign companies. If you’re effectively running the company from Germany, it may be deemed a mere “letterbox company.”

The result: German tax liability despite your Estonian entity.

That’s why I always recommend: seek professional tax advice before setting up. The €2,000–5,000 for a proper analysis can save you tens of thousands in back taxes later.

Portugal’s D2 Visa: The Path to Physical EU Residency for Digital Nomads

The D2 visa is Portugal’s answer to the global trend of remote work. And unlike e-Residency, you can use it to actually change your tax residency.

But—as you may have guessed—there are downsides to consider.

What the D2 Visa Really Offers

The D2 visa is a residence permit for the self-employed and freelancers. It allows you to:

• Legally reside in Portugal with the option to work
• Access the EU single market without further visas
• Apply for citizenship after five years’ residence
• Optimize taxes via NHR status (more on that below)

Sounds tempting. But let’s look at the reality.

The Actual Requirements

This is where many fall short. Portugal checks a number of criteria closely:

1. Proof of funds: At least €7,200 in your account (equals minimum wage × 12)
2. Business plan: Detailed plan for your freelance activity
3. Health insurance: Comprehensive coverage for Portugal
4. Police clearance: From all countries where you’ve lived in the last 5 years
5. Proof of address: Rental contract or property purchase

The business plan is key. You must show you’ll actually conduct your business from Portugal. A simple “I work remotely” won’t cut it.

NHR Status: Portugal’s Tax Ace

This is where things get interesting: as a new tax resident, you can apply for NHR (Non-Habitual Resident) status. That means:

• Foreign income often tax-free (under certain conditions)
• Portuguese income taxed at a flat 20% for select professions
• 10-year term without extension option

Sounds amazing, yes? But here’s the biggest pitfall.

The NHR Trap: Why Many Are Disappointed

Portugal has tightened the NHR rules. If you already have NHR, you get to keep it. New applicants currently have slim chances.

That means: the main advantage of the D2 visa has largely disappeared.

Still, relocating can be worthwhile. Portugal’s general tax rate is 14.5% to 48%. For many German entrepreneurs, that’s still attractive compared to German rates.

Practical Challenges of the D2 Visa

Based on my experience, here are the usual stumbling blocks:

Costs of the D2 Visa Route

Expect the following expenses:

• Application fees: €83 for the visa, €72 for the residence permit
• Lawyer/advisor: €3,000–8,000 for full service
• Translations: €500–1,500 for all documents
• Apartment/house: Deposit and first rent (varies widely)
• Tax advice: €2,000–5,000 for structuring

All in, you should budget €10,000–20,000 for the whole process.

It’s not cheap. But if you truly want to change your tax residency in the long run, it’s a wise investment.

Tax Realities: An Honest Comparison of Both Options

Now for the heart of the matter: What do these options actually mean tax-wise for you?

Let me walk you through three real-world scenarios with hard numbers. No theory, just practice.

Scenario 1: The Online Marketing Expert (€150,000 annual profit)

Thomas, 34, runs an online marketing agency. His clients are international, he works fully remote.

Current situation in Germany:

• Trade tax: €5,250 (3.5% at a 400% multiplier)
• Corporate tax: €37,500 (25%)
• Solidarity surcharge: €2,063
• Personal withdrawal (€100,000): €26,375 capital gains tax
• Total tax: €71,188 (47.5%)

With e-Residency Estonia:

If Thomas gives up his German tax residency and only retains profits:

• Estonian tax: €0 (only upon distribution)
• German tax: €0 (non-resident)
• Savings: €71,188

But: He must prove that business activities are managed from Estonia—a challenge for online marketing.

With D2 Visa Portugal (without NHR):

• Portuguese corporate tax: €31,500 (21%)
• Personal withdrawal: €17,750 (23.6% average)
• Total tax: €49,250 (32.8%)
• Savings: €21,938

Scenario 2: The Consultant (€80,000 annual profit)

Maria, 41, consults German firms on digitalization. She has strong ties to local clients.

With e-Residency: No tax benefit, as business clearly takes place in Germany.

With D2 Visa: Possible, but she would need to shift her business to Portugal. Not easy with a primarily German client base.

Scenario 3: The Software Developer (€200,000 annual profit)

Robert, 39, sells software licenses internationally. His business is largely automated.

Status quo in Germany:

• Total tax: €97,125 (48.6%)

With e-Residency:

Perfect scenario for Estonia with an automated business:

• Tax on retained earnings: €0
• Savings: €97,125

With D2 Visa Portugal:

• Total tax: €67,500 (33.75%)
• Savings: €29,625

The Truth About Substance Requirements

This is key: German tax authorities are getting more and more thorough. They ask:

• Where are your business decisions made?
• Where are your servers/IT infrastructure located?
• Where do you communicate with clients from?
• Where is your “center of life”?

With e-Residency it’s harder to prove true substance. In Portugal you have physical presence—a clear advantage.

My Practical Tax Planning Tip

Never choose a structure based solely on saving taxes. The best solution is the one that fits your life and business—and is tax efficient at the same time.

I’ve seen too many entrepreneurs get tangled in complicated setups just to save a few percent. In the end, it cost them more time and money than an honest, straightforward solution.

Practical Decision-Maker: Which Path Suits You?

After more than 1,000 consultations, I can tell you: There’s no absolute “best” solution. Only the best solution for your personal circumstances.

That’s why I’ve developed a decision tree that helps clarify your options.

The Estonia Check: When e-Residency Is Right

e-Residency is right for you if you can answer yes to all of the following:

1. Are you willing to give up your German tax residency?
2. Is your business largely automated or location-independent?
3. Do you have no regular German clients/partners?
4. Can you prove that business decisions aren’t made in Germany?
5. Are you happy to forgo immediate profit distributions?

If you answer “no” to even one, e-Residency carries tax risks for you.

The Portugal Check: When the D2 Visa Makes Sense

The D2 visa is a good fit if you answer “yes” to at least 4 of the following:

1. Are you willing to actually move to Portugal?
2. Can you conduct your business from Portugal?
3. Do you have €15,000–25,000 available for the move?
4. Do you speak English or Portuguese?
5. Can you wait 6–12 months for processing?
6. Do you want to stay in the EU long term (5+ years)?
7. Is a warm climate and relaxed lifestyle important to you?

The Alternative: Use Both

Here’s where it gets interesting: you can combine both options.

For example:

1. Start immediately: e-Residency for your first international structure
2. Prepare in parallel: D2 visa application for a long-term solution
3. Switch after relocating: from Estonian to Portuguese structure

Many of my clients use this hybrid approach. It buys you time and flexibility.

Checklist: Your Next Steps

Based on your choice, these are the next steps:

For e-Residency Estonia:

• Preliminary tax analysis by specialists (€2,000–3,000)
• Plan shifting economic substance
• e-Residency application (online, ~3–4 weeks)
• Company formation and open a bank account
• Deregister from Germany (if possible)

For Portugal’s D2 Visa:

• Find a lawyer/advisor in Portugal
• Develop a business plan
• Gather and translate all documents
• Rent an apartment in Portugal
• Apply for the visa at the Portuguese consulate

For both paths:

• Exit strategy with German tax advisor
• International tax advisor for your new structure
• Legally compliant documentation of all steps

Avoid The Most Common Mistakes

I see these mistakes time and again:

Mistake 1: Setting up a structure without prior tax clarification
Mistake 2: Ending German tax residency with no backup plan
Mistake 3: Overcomplicated structures without added value
Mistake 4: Underestimating substance requirements

Take your time making this decision. A year of preparation can save you decades of problems down the road.

My Recommendations for Different Entrepreneur Types: Which Path Leads to Your Goals?

After this detailed comparison, you’re probably asking: Okay Richard, but what should I do?

Based on my experience with hundreds of international entrepreneurs, here are my honest recommendations for different types of business owners.

Type 1: The Location-Independent Freelancer

Profile: Web designer, programmer, translator, online marketer
Revenue: €50,000–150,000/year
Clients: International

My recommendation: e-Residency Estonia

Why? You already have ideal conditions:

• Location-independent work
• International clients
• Digital workflow
• Flexible lifestyle

Important: Ensure real substance. Spend at least 3–4 months per year in Estonia or other EU countries, and document your stays meticulously.

Type 2: The Established Consultant

Profile: Business consultant, coach, lawyer
Revenue: €200,000–500,000/year
Clients: Primarily Germany/DACH

My recommendation: Exercise caution with both options

Honestly: Relocating abroad is tough. Your clients are local, your expertise is tied to the German market.

Better: Optimize your German structure. A well-structured GmbH with retained profits can already yield major tax benefits.

If you’re set on going abroad: Portugal via D2 visa, but only with a long-term plan to internationalize your client base.

Type 3: The E-Commerce Entrepreneur

Profile: Amazon FBA, Shopify store, dropshipping
Revenue: €100,000–300,000/year
Clients: Europe, USA

My recommendation: Hybrid approach

1. Phase 1: e-Residency for an EU structure and SEPA access
2. Phase 2: D2 visa for personal security
3. Phase 3: Potential move to a Portuguese holding structure

E-commerce is ideal for international structures. You have real substance (warehousing, logistics) and you can move these flexibly.

Type 4: The SaaS Founder

Profile: Software-as-a-service, app development
Revenue: €50,000–1,000,000+/year
Clients: Global

My recommendation: Definitely e-Residency

You’re the perfect candidate for Estonia:

• Digital product
• Scalable technology
• International client base
• High profit margins

Leverage Estonia’s profit-retention model to fuel rapid growth. Invest your tax savings in product development and marketing.

Type 5: The Investment Entrepreneur

Profile: Real estate investor, trader, capital investor
Revenue: Variable, often passive
Clients: Not applicable

My recommendation: Portugal with D2 visa

Why? Investors benefit from:

• Favorable real estate taxation in Portugal
• Access to EU capital markets
• Stable legal environment
• High quality of life

Plus: you likely have the funds for the more involved D2 visa process.

Type 6: The Content Creator

Profile: YouTuber, influencer, online course creator
Revenue: €75,000–250,000/year
Clients: Social media, international audience

My recommendation: Portugal via D2 visa

Content creators benefit from:

• Image rights and IP protection in the EU
• Favorable tax rates for licensing
• Fresh inspiration from a new environment
• More content opportunities from relocating

Plus: Portugal is popular with creators. You’ll quickly find a community there.

Type 7: The Lifestyle Entrepreneur

Profile: Various online projects, location-independent
Revenue: €60,000–120,000/year
Clients: Mixed

My recommendation: Try Portugal first, then decide

Many lifestyle entrepreneurs overestimate their flexibility. So:

1. Live in Portugal for 6 months (tourist visa)
2. Test running your business from there
3. If it works: apply for a D2 visa
4. If not: e-Residency as plan B

My Personal Advice

No matter which type you are—don’t be hasty. I always recommend this sequence:

1. Assessment: Where do you stand for taxes right now?
2. Define goals: What do you want to achieve?
3. Feasibility check: What’s actually realistic?
4. Test phase: Try it out first
5. Implementation: Then take the full step

And remember: Both approaches—e-Residency and D2 visa—are not one-way streets. You can adjust or switch back at any time.

That gives you the peace of mind to make a well-considered decision.

Still have questions about your individual case? Let’s talk. As your tax mentor, I’m happy to guide you through the process.

Yours, RMS

Frequently Asked Questions

Can I have both e-Residency and a D2 visa at the same time?

Yes, you can. e-Residency is a digital service, not a residency permit. You can apply for the D2 visa in parallel and combine both options.

Do I ever need to travel to Estonia for e-Residency?

No, you do not need to visit Estonia just for e-Residency. However, physical presence in the EU is recommended for tax substance. Many e-residents visit Estonia once a year.

How long does the D2 visa application actually take?

In practice, 6–12 months. The official 60 days only apply to processing after submitting all documents. Collecting everything usually takes 4–8 months.

Can I keep a German bank account with e-Residency?

That depends on your bank. Many German banks are wary of Estonian companies. Inform your bank of your plans in advance to avoid account closures.

What happens to my German health insurance?

When you give up German tax residency, mandatory health insurance usually ends as well. You’ll need coverage in your new country or an international policy.

Is NHR status in Portugal really no longer available?

Portugal has tightened the NHR rules. If you already have it, you keep it for the full 10-year period. New applicants currently have little chance.

What are the ongoing costs for both options?

e-Residency: €1,000–3,000 annually (accounting, compliance). D2 visa: €2,000–5,000 annually (tax advice, lawyer, residence permit renewal).

Can employees use e-Residency?

e-Residency is designed for entrepreneurs. Employees normally do not benefit tax-wise. The D2 visa is also aimed at self-employed persons.

What do I need to know about bringing my family?

e-Residency only covers you personally. With the D2 visa, spouses and minor children can apply together. Separate applications and documentation are required.

How safe are both options legally?

Both programmes are established and legally secure. e-Residency has been running since 2014, the D2 visa since 2007. Changes are generally announced in advance and only affect new applicants.