The money is in the company and you want to get hold of it. There are exactly three lawful routes: board member's remuneration, salary and dividend. Each one is taxed differently. Which one fits depends on two things: who does the work, and where you live.
This article deals with the most common case: the owner of the company lives abroad.
The three routes in short
Board member's remuneration is payment for running the company. It is always taxed in Estonia — also when the board member lives abroad and performs the duties of the board outside Estonia. The law states that tax is charged on income "which a non-resident received for the performance of the duties of a member of the management or controlling body (§ 9) of a resident legal person, or of a member of the management body of a permanent establishment of a non-resident located in Estonia" (Income Tax Act § 29 subsection 2).
Salary is payment for work done — sales, development, advice, whatever the company does. Here the place decides. A person living abroad pays Estonian income tax on salary only for work done in Estonia. Work done outside Estonia brings no tax in Estonia — it is taxed by your country of residence.
Dividend is the payment of profit to the owner. While the profit stays in the company, there is no tax. On payout the company pays income tax of 22/78 — that is 22% of the gross amount paid out (220 euros on 1,000 euros). From 2025 Estonia no longer withholds any further income tax from an owner living abroad — your home country taxes what you receive.
How to choose
The short rule: it depends on who does the work and where you live.
- You work alone from home abroad → salary fits. It shows in black and white that all the work takes place where you live. That is exactly what the tax authority of your home country looks at.
- You take profit out now and then → dividend fits. The tax arises only on payout and there is no need to run monthly payroll.
- You are paid precisely for the role of director → board member's remuneration fits.
Two common mistakes
Taking money out with no route at all. Year after year an "owner's loan", or paying personal costs with the company card. Estonian law treats such money as a fringe benefit or a hidden profit distribution. The tax comes out higher than on any of the honest routes.
Carrying over the logic of another country. "Salary goes into costs, so it is cheaper" holds in classic systems, but not in Estonia. Here the tax arrives when profit is distributed, not when it is earned.
Keep social tax in mind as well. Board member's remuneration usually carries 33% social tax. A resident of the European Economic Area who holds an A1 certificate pays social tax in their home country and does not have to pay Estonian social tax. There is no social tax on a dividend — which also means that a dividend gives no pension and no health insurance.
A short recommendation
For an owner living abroad, in the first years: dividend as the default choice. Salary is added when the work really and provably takes place abroad. Board member's remuneration when you are genuinely paying for the role of director. Work it all through before the first large payout. Paper that does not match the facts will not survive questions from the tax authority.
This article was prepared with the help of artificial intelligence.