Board Member taxation | Salary Estonia | e-residency

Board Member taxation | Salary Estonia | e-residency

Tax and Legal
9 June 2022

We will be discussing a lesser-known opportunity over the benefit of being taxed as a Board Member in Estonia.

The Estonian tax system is relatively simple, with only three main taxes businesses need to be aware of: Labor taxes (income tax and social tax), dividends tax and value-added tax (VAT).

However, there is one important opportunity for the board members’ salary: if you are a board member of your Estonian company, your board member’s salary will be subject to personal income tax (20%) and social tax (33%).

According to the Estonian Social Tax Act, social security contributions to Director’s fees must always be paid in Estonia. However, the EU Regulation (EC) No 883/2004 overrides the domestic law. According to that article, a person pursuing an activity as an employed or self-employed person in a Member State shall be subject to the legislation of that Member State. Social security contributions on salaries and Director’s fees must be paid in at least one of the EU Member States. This applies irrespective of whether the board member has obtained form A1 or not.

The additional benefit of paying only 20% income tax to Estonia is that this paid income is subject to withholding tax in Estonia. If you are reporting this to any other country, it won’t be taxed twice.

This is one of many tax simple benefits that you can use in Estonia and with Comistar Estonia.

If you have any questions about any other tax opportunities that you like to use for your Estonian company, don’t hesitate to reach out to us!