If you own and run an Estonian company, Xolo assumes the company is an Estonian tax resident which does not have any foreign permanent establishment. If correct, please follow the principles below. If this is not correct (anymore), Xolo cannot provide support for your company and you need to find an alternative service provider.
If you operate outside Estonia, the following taxes apply.
- If you don't take any money out of your company, you don't need to pay corporate income tax in Estonia. You can keep the earned money on your company's account indefinitely and you won't have to pay income tax on it. You only need to start paying the relevant taxes when you start taking money out of the company, meaning paying yourself a salary, taking out dividends, etc.
- If you receive a salary from your company, it is classified as an employee salary, and no personal income tax nor social tax is paid on the salary in Estonia. Whilst the salary payments are not declared in Estonia, they are not tax-free. You’re responsible for declaring and paying taxes in the country where you are a tax resident as an individual person and/or where you perform your duties. Please contact the local authorities in the country to learn about the relevant tax rules and the procedures for declaring and making payments properly. Unfortunately, we can't assist you with this yet. However, please be ready to provide tangible evidence about the actual tax declarations and payments in your location upon request by Estonian tax authorities or Xolo.
- If you receive dividends from your company, the corporate income tax is paid in Estonia. The rate is 20% (22% from Jan 1, 2025), calculated as 20/80 (22/78 from Jan 1, 2025) from the net payment you receive. For example, if you receive €800 net as dividends, the corporate income tax of €200 has to be paid in Estonia. No personal income tax is added in Estonia. However, the personal income tax is likely to be declared and paid in the country where you are a tax resident. Please contact the local authorities in the country to learn about the income tax rules and the procedures for declaring dividends received and making the payments properly. Unfortunately, we can't assist you with this yet either. In the case of regular dividend payments (each year), different tax rules may be due (removed from Jan 1, 2025).
The principles listed above are valid only if you spend most of your time/efforts on tasks that contribute directly to your company’s core business (deliver a service, build a software product, promote your service, etc) while keeping the proportion of management/administrative tasks at a minimal level. If this assumption is not true i.e. you are mainly involved in management/administrative tasks in your company (e.g. having the core business functions fully outsourced), the % of salary paid for the management/administrative tasks is reported and taxed in Estonia independent of your actual location.
See more: How can I pay myself salary (operating in Estonia)?