If you operate in Estonia on a permanent basis and are a tax resident there, the following principles apply to you regarding salary payments.
All the salary payments you receive from your company are classified as a board member's remuneration as you're the sole management board member of your company.
When and how much to pay
You can receive a salary any time, regularly per month, or as a once-off performance bonus. It's up to you how you decide to do it. There's no obligation to pay yourself a salary on a regular basis. It’s reasonable to argue that when a business is still in its infancy, the company can’t afford to pay out anything. So you can start operating your company without receiving any salary.
There's no maximum for the salary either, and you can change the sums you pay and the frequency of payments whenever you like in the future - it's your agreement with your company (you're sitting in both chairs).
Please note, if you decide to receive dividends from your company, it triggers a requirement to receive an average sum of salary as well. See “Why do I have to pay salary when I pay dividends?” for more details.
Process of paying salary
- Once you start paying yourself a salary and make an actual payment from your company’s bank account to your personal one, we'll detect it on your bank statement. Please make sure we have the transaction data in a timely manner (at the latest by the 5th day of the month following the actual payment). Please make a transfer mentioning 'Board member remuneration', in the description, as we can then see all the necessary information on your bank statement.
- We'll register you in the official Employment Registry in Estonia.
- We'll declare the relevant taxes in Estonia, and let you know how much and when to pay. The deadline is the 10th of the month following the actual payment. In Estonia, taxes are declared and paid on a monthly basis.
- You'll make the tax payments in time to avoid penalties (the interest for late payments is 0.06% per day).
- It's optional to have a board member agreement (between you and your company) signed digitally, and we can send the relevant draft if you'd like.
Board member vs employee salary
Please note that since your salary is classified as a board member's remuneration (not an employee salary), it has the following implications in Estonia:
- Enables flexibility - there's no requirement to pay a minimum salary each month ((in contrast to an employee salary which has the minimum of €820 (€725 until 31.12.2023) gross per month, and failing to pay this triggers an additional social tax payment of €239.25 (€215.82 until 31.12.2023))
- No unemployment benefits (in contrast to an employee salary)
- Social security in Estonia is granted with a minimum of €725 (€654 until 31.12.2023) paid as board member salary and/or employee salary (gross amount)