How can I pay myself a salary (operating outside Estonia)?

Last updated: December 20, 2018

If you operate outside Estonia on a permanent basis and are not a tax resident in Estonia, the following principles apply to you regarding salary payments.

  • If you pay yourself a salary from your Estonian company for your contribution in the core business activities (e.g. providing a service, building a software product, marketing your services etc), these salary payments are classified as an employee salary.

  • You can receive salary any time, regularly per month or as once-off performance bonuses. It's up to you how you decide to do it. There is no obligation to pay yourself a salary on a regular basis (we presume that you will not submit any claims against your company). There's no required minimum or maximum for the salary, and you can change the sums you pay and the frequency of payments whenever you like in future - it's your agreement with your company (you're sitting in both chairs).

  • The salary is not taxed in Estonia. There's no official registration needed for this salary in Estonia. However, you could collect and store some written evidence to prove you actually delivered value to the company as a professional, should tax authorities ask for it later on.

  • Even though salary payments are not declared in Estonia, they are not tax-free. It’s your own responsibility to learn whether and where you have a tax obligation regarding the received salary, and report and pay the relevant taxes. Here you need to take into account your actual legal status of tax residency and the country where you actually perform your duties. Unfortunately, we can't assist you with this yet. However, please be ready to provide tangible evidence about the actual tax declarations and payments in your location upon a request by Estonian tax authorities or Xolo.

The principles listed above are valid only if you spend most of your time/efforts on tasks which contribute directly to your company’s core business (deliver a service, build a software product, promote your service etc) while keeping the proportion of management/administrative tasks at a minimal level. If the assumption is not true i.e. you’re mainly involved in management/administrative tasks in your company (e.g. having the core business functions fully outsourced), the % of salary paid for the management/administrative tasks is reported and taxed in Estonia independent of your actual location. See also “How can I pay myself salary (operating in Estonia)?".

The principles listed above are valid only if you have agreed on the following terms in advance:

  • You agree to report your current actual location of operations and personal tax residency to Xolo, and update it in a timely manner in case of any changes (e.g. if you relocate to a new permanent location).

  • You understand and accept that it is your own responsibility to report all your salary payments to the tax authorities in your actual location of operations (and/or country where you perform your duties), and pay the relevant taxes.

  • You accept your responsibility to prove that the employee salary payments have been reported to the tax authorities in your actual location of operations (and/or the country of your tax residency), and the applicable taxes have been paid. If Xolo requests, you will submit the relevant tangible proof in a timely manner.

    • As an exception: if you can reasonably prove you are a so-called digital nomad without a personal tax residency in any particular location.

  • You grant permission to Xolo to share the data about the salary payments you have received with the public authorities (e.g. tax authorities in Estonia and in your actual location of operations or the country of your tax residency ) upon their request OR if Xolo themselves find it appropriate.

Please make a transfer mentioning 'Employee salary', in the description, as we can then see all the necessary information on your bank statement.

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