In Estonia, companies can compensate individuals in two primary ways: a regular salary or a board member’s fee. These payments are taxed differently and serve different purposes.

• A regular salary is paid for active, value-creating work within the company (e.g. sales, development, marketing).

• A board member’s fee is paid for fulfilling management or administrative duties.

If you are both the owner and employee of your Estonian company, you may choose to pay yourself one or the other—or a combination of both.

Taxation for Estonian tax residents

• Regular salary is subject to:

  • 24% personal income tax

  • 33% social tax

  • 1.6% employee unemployment insurance

  • 0.8% employer unemployment insurance

  • 2% mandatory pension contribution

Estonian residents are also entitled to a basic tax-free income allowance (up to €500/month), which gradually decreases as salary increases.

If you live and work in Estonia, you must pay both income and social taxes in Estonia. This gives you access to local health insurance and social benefits—which you can only receive from one country at a time.

Foreign residents and digital nomads

If the person receiving a salary is not an Estonian tax resident and does not work in Estonia, salary taxes should be paid in the country where they actually live and work.

Board member fees, however, follow different rules:

• If the board member is not an Estonian tax resident, Estonia still requires 20% income tax on the board member’s fee.

• Social tax is paid either in Estonia or in the board member’s country of residence—depending on where they claim social benefits.

Important note for digital nomads

If you’re a digital nomad without fixed tax residency, tax liability can become complex. You must still pay taxes somewhere. The general rule is: you should pay income and social taxes in the country where you physically stay and work. If you don’t, another country may later claim that you owe taxes under their jurisdiction.

Lead-in:
In Estonia, whether you pay yourself a salary or a board member’s fee affects how—and where—your taxes are paid. Choosing the right structure depends on your residency, where you work, and which country you want to claim social benefits from.