EE Salary (Contributions + Foreign Employer)

[inector]

This is assuming for an actual employee, not director.

Obviously - "The salary, wages, and business income of a non-resident is taxed only in the extent of income received while being in Estonia.”

Got it, out of the way.

Then, this comes in the way:

"Please note that it is likely that your Estonian company would have to register as a foreign employer and start paying payroll taxes in the country where you are based."

1. Where would Estonian company *not need* to register, would Bulgaria work (with 10% income tax it's amazing)?
2. After that, what about employER social contributions? i.e. in Bulgaria it's roughly 17% of employER contributions, do they just disappear?

 

[Don]

This is assuming for an actual employee, not director.

Obviously - "The salary, wages, and business income of a non-resident is taxed only in the extent of income received while being in Estonia.”

Got it, out of the way.

Then, this comes in the way:


1. Where would Estonian company *not need* to register, would Bulgaria work (with 10% income tax it's amazing)?
2. After that, what about employER social contributions? i.e. in Bulgaria it's roughly 17% of employER contributions, do they just disappear?

If you register a branch of an Estonian company in Bulgaria and don't employ yourself over there then it could be effective 10% tax as profits from the branch can be repatriated tax free to Estonian holding and its shareholders.
Assuming you don't work longer than 183 days per year in Bulgaria you could keep your Estonian employment (e.g., minimum salary and pay on top of that tax free allowances 1.2k/month, that's like 12% effective tax on employment).
If you exceed 183 days you need to pay employment taxes in Bulgaria, and possibly trigger Bulgarian tax residence.

Tax free employment from Estonian company works well in jurisdictions, where there are no employment taxes at all. There are a few places where you can also establish residence without physical presence and tax residence and thus remain tax free. Then there are tons of people who just get away with non-enforcement - they might avoid declaring the income or consider it as foreign source income, which might not be taxable, otherwise normally you would trigger a PE.

 

[myhand]

There are a few places where you can also establish residence without physical presence and tax residence and thus remain tax free.

Do you consider Dubai ?

Estonia company works like any other company where you employ staff, you get taxed and the company does where the management live if you do so.

 

[Don]

Resident or non-resident natural persons (individuals) shall only be subject to Corporate Tax where the turnover or gross amount of income derived from Businesses or Business Activities exceeds AED 1,000,000 within a Gregorian calendar year.

This means that you can run an unincorporated partnership in Dubai together with your Estonian entity completely legal, without registration and cash out tax free 999.999 AED per year (as unincorporated partnerships are tax transparent).

Its indeed quite decent setup considering the easy access to banking facilities, cheap payment processing, cheap substance, low bureaucracy, clear legal system and easy management.
Such setup will cost you 5-10k year, and offers flexibility as if you exceed 1M AED revenue/profits, undistributed profits are anyway tax free in Estonia.
Its important to have a local director appointed to avoid creating permanent establishment for the company itself though.

+ You have in general unmatched possibilities of cashing out all profits either as salary or through liquidation of the entity, debt pushdown schemes, etc., without any tax.

 

[inector]

If you register a branch of an Estonian company in Bulgaria and don't employ yourself over there then it could be effective 10% tax as profits

I meant to pay salary to non-residents - does Estonian company pay contributions in Estonia? (assuming not contractor, but actual employee)

Because it's like up to 33.8%

Do you consider Dubai ?

Yes Dubai would work for this setup. Just that the thread is more about social contributions at core.

unincorporated partnership in Dubai together with your Estonian entity

This is insane, thanks for the info.

 

[Don]

I meant to pay salary to non-residents - does Estonian company pay contributions in Estonia? (assuming not contractor, but actual employee)

Not if the work is performed outside Estonia and even if it is you can still work up to 30 days in Estonia without paying any tax (there are exceptions to the exceptions though)

Because it's like up to 33.8%

Yes Dubai would work for this setup. Just that the thread is more about social contributions at core.

Thats the price of free public transport, healthcare and some of the best maternity benefits in the world that you would access as a resident.
Indeed, Estonia is not anymore the place to go for cheap labour as it once was.
In early nineties average german earned 24x more than Estonian, but todays young generation of Estonians have surpassed Germany, and according to publicly available statistics have 2x net assets compared to Germans.

This is insane, thanks for the info.

Happy to advise further.
Estonian offshore sector is still rather small but the growth rate is quite amazing. With 100k+ e-residents and just over a million population probably in a few years the number of non-residents doing business in Estonia will surpass the size of its population.

 

[TheCryptoAnt]

1. Where would Estonian company *not need* to register, would Bulgaria work (with 10% income tax it's amazing)?
2. After that, what about employER social contributions? i.e. in Bulgaria it's roughly 17% of employER contributions, do they just disappear?

Bill the Estonian company through an UK LLP/US LLC for 'management services' or something like that.

 

[inector]

Not if the work is performed outside Estonia and even if it is you can still work up to 30 days in Estonia without paying any tax (there are exceptions to the exceptions though)

Thanks

Bill the Estonian company through an UK LLP/US LLC for 'management services' or something like that.

That sounds good but then PE issues can arise. For US it might be fine, since it's FATCA and they barely communicate, but UK would be an issue I guess.

 

[Don]

Bill the Estonian company through an UK LLP/US LLC for 'management services' or something like that.

It is very bad advice to use "management services" as a description as this is one of the rare cases where you would have to pay withholding tax.

 

[TheCryptoAnt]

It is very bad advice to use "management services" as a description as this is one of the rare cases where you would have to pay withholding tax.

You could bill the EE corp for 'business development' or whatever. TBH for what ive seen they dont care much.

 

[Don]

You could bill the EE corp for 'business development' or whatever. TBH for what ive seen they dont care much.

Yes that would work. Description of the service on the invoice is crucial to get right - that was the point.

 

[Jerry1911]

Tax free employment from Estonian company

What would be the maximum amount one could take out from an Estonian company this way, at least as far as Estonian authorities are concerned?

 

[JustAnotherNomad]

What would be the maximum amount one could take out from an Estonian company this way, at least as far as Estonian authorities are concerned?

I've heard of about 200-300k max. It's important to have a proper employment contract.
I believe management work (managing the company) would always be taxable in Estonia, though. So make sure that the salary is only for other types of work.

Bill the Estonian company through an UK LLP/US LLC for 'management services' or something like that.

Then you have to be very careful about transfer pricing restrictions.

That sounds good but then PE issues can arise. For US it might be fine, since it's FATCA and they barely communicate, but UK would be an issue I guess.

What do you mean?

 

[Don]

What would be the maximum amount one could take out from an Estonian company this way, at least as far as Estonian authorities are concerned?

Theoretically unlimited in certain cases.

I've heard of about 200-300k max. It's important to have a proper employment contract.
I believe management work (managing the company) would always be taxable in Estonia, though. So make sure that the salary is only for other types of work.

Yes, the board member fee is always taxed in Estonia.