Articles on: Companio Work
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How Can I Pay Myself a Salary?

Paying yourself a salary without having a formal job or being a contractor (like a freelancer or independent worker) and trying to pay taxes in Estonia without being a tax resident there can be considered an irregular situation in your home country.

This happens because your home country might consider you a tax resident and require you to pay taxes there instead of in Estonia. In short, you can't pay social security contributions (neither your Estonian company nor yourself) for the "salaries" received from Estonia.

This situation is based on the principle of residence-based taxation, which is applied in all European Union countries. This principle generally means you can only receive regular income (excluding dividends, passive income, investments, etc.) in two situations:

If you're an official employee, and your employer pays social taxes, unemployment benefits, pension contributions, etc., on your behalf. However, this is usually only possible if your company has legally established an entity in the country where you're a tax resident and formally hires you. Another option is to do it through agreements with third parties, often facilitated by services like Companio Work. In short, a company based in country A, which is not your tax residence, typically cannot hire you and manage your tax and social security obligations in country B.

You work as an independent contractor or freelancer and invoice for the products or services you provide.

For more information on this, you can check the official European Union website.

So, receiving a salary as a board member in Estonia generally doesn't align with legal standards. Even if it seems like a "conventional employment" arrangement, it could expose you to potential legal issues with tax authorities in both your country of residence and Estonia.

Our main goal is to ensure your peace of mind and compliance with the current laws, no matter where you are. That's why we offer Companio Work as a legal and convenient alternative.

Companio Work allows you to legally hire talent or employ yourself within your country of residence. This option guarantees a salary structure that complies with local regulations and lets you contribute to social taxes, access unemployment benefits, and participate in pension plans. Furthermore, it provides a payroll system that complies with local legal requirements.

The choice of whether to work as an employee or as a freelancer or contractor for your Estonian company is ultimately yours, along with the associated responsibilities. However, it's essential to understand that not following the legal requirements we've mentioned could result in an irregular situation with its respective consequences.

Updated on: 13/10/2023

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