How to pay yourself money from an Estonian company - salary, board member fee or dividends? (2026)

Sooner or later, every business owner comes to the same question.

The company is making a profit. How do you withdraw money from it in a way that is legal and makes the most sense in your situation?

There are usually three options to choose from:

salary;

board member fee;

dividends.

All three are legal, but their taxation, impact on Social Security, and suitability in different situations are not the same.

Many guides focus solely on tax rates. In reality, the right choice depends largely on where you live, what kind of work you do at the company, and how much money you want to withdraw from the company.

This article will help you understand when which solution makes the most sense.

Note: This article primarily addresses the situation where the owner of an Estonian company is a tax resident of a foreign country. For entrepreneurs residing in Estonia, some taxation principles may be different.

Sooner or later, every business owner comes to the same question.

The company is making a profit. How do you withdraw money from it in a way that is legal and makes the most sense in your situation?

There are usually three options to choose from:

• salary;
• board member fee;
• dividends.

All three are legal, but their taxation, impact on Social Security, and suitability in different situations are not the same.

Many guides focus solely on tax rates. In reality, the right choice depends largely on where you live, what kind of work you do at the company, and how much money you want to withdraw from the company.

This article will help you understand when which solution makes the most sense.

Note: This article primarily addresses the situation where the owner of an Estonian company is a tax resident of a foreign country. For entrepreneurs residing in Estonia, some taxation principles may be different.

Answer three questions before making a decision

Before choosing between salary, board member remuneration, or dividends, it is worth answering three simple questions.

1. Where do you actually work?

If all work takes place outside of Estonia and you are a tax resident of that country, this may affect both taxation and the company's tax risk.

If part of the work takes place in Estonia, the rules may be different.

2. How much money do you want to withdraw from the company?

For smaller and irregular payments, one solution may make more sense.

For regular income or larger amounts, the optimal choice may be completely different.

There is no universal solution.

3. Do you need social security?

Salary and board member fees may entitle you to pension and health insurance.

Dividends generally don't do this.

If social guarantees are important to you, this may influence the overall decision more than tax rates.

Three legal options

Salary

Salary is the payment for work done in a company.

This is suitable for situations where you work in a company on a daily basis - for example, developing products, selling services, or managing daily operations.

In the case of a foreign resident, the taxation of wages depends primarily on where the work is physically performed.

Board member fee

A board member's fee is paid for managing the company.

This is not the same as salary.

If you run a company as a board member, such remuneration may be natural and justified.

Its taxation differs from that of wages and depends, among other things, on your residency and applicable international rules.

Dividends

A dividend means the distribution of a company's profits to the owner.

A dividend is not a reward for doing work.

This is a payment of profits earned by a company after the company has fulfilled its legal obligations.

For many entrepreneurs, dividends are the most flexible way to withdraw money from the company, but they are not always the most affordable solution.

Which solution is most suitable?

In real life, these options are often used together.

For example, a company owner may receive a modest board member fee and withdraw the remaining profits as dividends.

It is important that the chosen solution corresponds to the actual activities of the company.

What do your payments show about your business?

Many entrepreneurs focus only on taxes.

Equally important, however, is the picture of the company's operations that different payouts leave.

For example, a regular salary to a sole proprietor living abroad may indicate that the actual management of the company takes place outside of Estonia.

Dividends are generally a common way of distributing profits.

The remuneration of a board member shows that the management of the company is transparent and that appropriate remuneration is paid for it.

It is important that the chosen solution reflects the actual situation.

Common mistakes

In practice, we most often encounter the following mistakes.

Money is being taken out of the company without legal basis

A company bank card is used to cover personal expenses or transfers are made to the owner's account without being properly formalized.

Such a solution may later cause both tax and accounting problems.

The decision is made solely based on the tax rate.

The cheapest solution on paper may not be the most affordable in reality.

You also need to take into account the tax rules, social security, and actual management of the company in your country of residence.

The same solution remains unchanged for years

The company is developing. Profits are growing. Residence may change.

Therefore, it is worth reviewing the company's cash withdrawal model at least once a year.

What do we usually recommend?

In most cases, there is no one solution that fits all.

If the business owner lives abroad, it often makes sense to:

• use dividends to withdraw profits;
• pay the remuneration of a board member only if there is a real basis for this;
• Use salary in a situation where daily work is performed in the company and it corresponds to the actual work organization.

The best solution always depends on the company's activities, the owner's residency, and the desired payout amount.

Can you decide for yourself?

Probably yes, if:

• you are the sole owner of the company;
• your action is simple;
• you live in only one country;
• you want to make single or smaller withdrawals.

It is worth seeking the help of an expert if:

• the company's operations take place in several countries;
• the company has several owners;
• you want to withdraw larger amounts;
• you want to optimize your tax burden in a legal way;
• You are not sure which solution is best for your situation.

Need help?

The right payout method always depends on your company, residency, and goals.

If you would like to know which solution makes the most sense in your situation before making a decision, book a free 15-minute consultation.

We will review your company's situation together and help you choose a solution that is both legal and tax-wise reasonable.