You're not wrong, but you're missing the best part. Estonian company does not pay taxes (*). As long as the money stays within the company he's golden. The company can pay for his car, his apartment/office, etc.

It is only when he decides to withdraw the money the problem occurs.

What you're saying applies to most EU countries. Here where I live you have to reside for majority of the year in given residency to pay taxes over there.

Here's the tricky part.

Estonia is part of Schengen Area. Which means you can travel there and back without passport. There's no paper trail of your arrangements. You can easily create a reality in which you reside there for majority of time.

But again, that's not the selling part of Estonian LTD. Which is - it's extremely easygoing and as long as money stays in the company you're not paying taxes.