Salary Tax Calculator for Estonian e-residents
We created a Salary Tax Calculator tool for e-residents to make it easier for you to understand what taxes you’ll have to pay for your salary. In this article, we explain everything you need to know about taxes for your salary, and how this tool works.
Things to Know Before Trying the Tax Calculator
As a board member of your Estonian company, you are entitled to receive a salary for your work at the company, either as a board member or as an employee.
The type of salary, and whether you live in Estonia or somewhere else, will affect the taxes that you pay for that salary.
Before going into how our tax calculator works, you may want to read our article about how to pay you a salary if you are a board member or shareholder of your business.
Board Member or Employee Salary
The general principle is: board members of SMEs will usually work in something related to the business (marketing, development, design…) and also have a role as members of the board.
The first activity is not taxed in Estonia if you are not a country resident. The second one is taxed in Estonia, as it’s supposed to happen there, regardless of where you live.
Regarding taxes, the rules can be different for residents and non-residents. If you’re an Estonian resident, you must pay your taxes there. However, if you’re a non-resident, you have three options to consider:
a) Distribute it as dividends.
b) Invoice your company as a freelancer in the country where you are a tax resident. This allows you to bill your company for your services as a freelancer, following the tax regulations of your resident country.
c) You can hire yourself as an employee of your company in the country where you are a resident. This involves becoming an employee of your own company and abiding by the employment regulations of your resident country.
Hiring someone, whether it’s yourself or another individual, can be complex due to the various regulations involved. However, we have a solution that simplifies the entire process: Companio Work. With Companio Work, you can easily navigate compliance requirements, making the process a piece of cake.
Finally, this distinction between the board member and employee salary is only relevant for e-residents who are board members of their companies and live outside of Estonia. If you are not a board member, you don’t have a board member salary (only employee salary, which is not taxed in Estonia). If you live in Estonia, special taxes apply to the whole amount of your salary, as we are about to explain.
Taxes Paid for the Board Member Salary
If you live outside of Estonia, your board member salary pays 20% gross in income tax (25% net) plus 33% in social tax. So for a board member’s salary of 200€, you pay 132.50€ in taxes. That’s 200 x 25% = 50 plus (200+50) x 33% = 82,50€, total 132,50€ in taxes. The company is the taxable subject (the one paying the taxes).
Your employee salary, as mentioned above, does not pay taxes in Estonia. It may pay taxes in your country of residence if any.
What About Estonian Residents?
If you are an Estonian resident, things change. Your whole salary is taxed in Estonia, so the difference between employee and board member salaries makes no sense anymore. You will pay full taxes (income tax plus social tax) for the whole amount.
Also, you will pay some extra taxes for unemployment insurance and your pension fund. Your employer will also pay some extra taxes for your unemployment insurance.
Salary Tax Calculator
All this may seem too complicated, but worry not! We have developed a salary tax calculator tool so you can easily calculate the taxes of a salary (either gross or net) in a couple of clicks.
How? Well, it’s quite simple.
First, enter your desired net salary (the amount you want to receive in your bank account). If this is a board member salary, and you live outside of Estonia, enter just the amount of board member salary (usually 20%). If you live in Estonia, your whole wage.
Next, let us know if you live in Estonia, as this will affect the tax calculation.
The tax calculator will show you the tax distribution, including gross and net salaries, the total cost for the employer (your company), and the pension/unemployment insurance if applicable. Easy, right?
Try the Tax Calculator for Yourself
Some important assumptions to keep in mind. First, this calculation supposes that the salary is for a full-time job (40+ weekly hours). Also, we assume that we apply a tax-free reduction to Estonian residents (living in Estonia) according to their incomes.
Do you live in Estonia?
Enter your desired net salary (your whole wage):
This is the result of a 1000€ salary of an e-resident who lives in Estonia.
|Social Tax (paid by the employer)||385.11€|
|Unemployment insurance (paid by the employer)||9.34€|
|Total Cost for the employer (Wage Fund)||1561.45€|
|Funded pension (paid by the employee)||23.34€|
|Unemployment insurance (paid by the employee)||18.67|
Our Experienced Accounting Team Is Always Here to Help
As an entrepreneur, you’ve got bigger things to worry about than accounting duties. Our experienced team of accountants can handle all of the bookkeeping, compliance, and taxes for you for a very low monthly fee. Because your time is worth much more than that.