Anyone here have experience with have an Estonian company?

[tkrunning (Thomas K. Running)]

Just to add some extra details here. I wrote to the Estonian tax board with a few clarifying questions. This is my initial email:

@my email

1. As a non-resident, does the 33% social tax that is applied to board member salaries give the individual any social benefits in Estonia? Can you get an A1 form from Estonia in this case (assume I can’t get an A1 from another EU country)? If not, why is a social tax applicable?

2. Are you legally required to pay a board member salary, as a sole owner and board member of an OÜ? I mean, the role of the board is generally just to make decisions at the general meeting, and in between those to me it seems logical to pay a regular salary for actually running the business (you’ll mostly be providing value to clients, etc) and hence pay a regular salary for that? Say you spend about 4 hours on board duties per year, would paying yourself 25 EUR per hour = 100 EUR per year as a board member salary be reasonable and acceptable?

3. Can the 20% tax on board members salaries be reduced or eliminated by tax treaties, or is it outside the scope of such treaties?

And their response:

@their response

1. According to the § 2 (1) 4) of the Social Tax Act social tax shall be paid on remuneration paid to members of the management or controlling bodies of legal persons.
   If you can not provide social insurance form A1 from any other EU country you should pay social tax in Estonia.
   Please ask from Social Insurance Board (info@sotsiaalkindlustusamet.ee) can they issue an A1 to you and which kind of social benefits it is possible to receive from Estonia.

2. There is no such strict or clear rule about obligation to pay salary.
   If payment is made finally, the taxation must be in accordance with the type of income.

3. In general directors’ fees may be taxed in the country of residence of the company.
   You should find out exact information from the concrete tax treaty: https://www.emta.ee/eng/business-client/income-expenses-supply-profits/international-agreements

I’ve sent an email to the Social Insurance Board to follow up on number 1.

A few thoughts though:

• Due to how most double tax treaties are set up, if you are tax resident in a EU country with low/no social security contributions but high tax on salaries (e.g. Denmark), you can lower your tax bill by effectively paying income tax in Estonia (20%) and whatever rate social tax is where you’re resident.
• As long as you’re actually tax resident in a country where Estonia has a DTA, you generally shouldn’t pay tax on the board member salary where you’re resident (except perhaps social taxes, if applicable).
• You have a lot of control over how much of which type of salary you pay yourself.
• This, and many other aspects of the Estonia’s suitability as an effective corporate jurisdiction (as a solopreneur) depends in large part on your personal tax residency. It can be a good match for many “micro multinationals” but definitely not for all.

Also see https://www.emta.ee/eng/private-client/taxation-tax-system/e-residency