As a Xolo Leap customer, if you own and operate an Estonian company while being a tax resident in Estonia, there are three main ways to receive funds from your company:
There is no obligation to pay yourself board member remuneration, employee salary, or dividends. Especially in the early stages of a business, it is reasonable not to take any payouts and instead reinvest funds back into the company.
However, if you wish to distribute dividends, it is also important to pay yourself a reasonable level of remuneration (employee salary or board member remuneration). This is because, as an active contributor to the business, part of the income should be taxed as employment-related income (subject to payroll taxes).
The Estonian Tax Authority’s guiding principle is that:
- You should receive fair compensation for your active work (employee salary or board member remuneration), and
- The remaining profit may then be distributed as dividends.
In summary, you have the following combinations available:
- Reinvest all profits into the company to boost your business, or
- Pay yourself employee salary and/or board member remuneration, or
- Pay yourself employee salary and/or board member remuneration, together with dividends.