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."
Click to expand...

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]

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 be︀ repatriated tax free to Estonian holding and its shareholders.
Assuming you don't work longer than︁ 183 days per year in Bulgaria you could keep your Estonian employment (e.g., minimum salary︂ and pay on top of that tax free allowances 1.2k/month, that's like 12% effective tax︃ 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 in︅ jurisdictions, where there are no employment taxes at all. There are a few places where︆ you can also establish residence without physical presence and tax residence and thus remain tax︇ free. Then there are tons of people who just get away with non-enforcement - they︈ might avoid declaring the income or consider it as foreign source income, which might not︉ be taxable, otherwise normally you would trigger a PE.

 

[myhand]

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 flexibility︀ 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 the︂ company itself though.

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

 

[inector]

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%
Yes Dubai would work for this setup.⁣ Just that the thread is more about social contributions at core.
This is insane, thanks for︀ the info.

 

[Don]

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)⁤

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 the︀ place to go for cheap labour as it once was.
In early nineties average german︁ earned 24x more than Estonian, but todays young generation of Estonians have surpassed Germany, and︂ according to publicly available statistics have 2x net assets compared to Germans.

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

 

[TheCryptoAnt]

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

 

[inector]

Thanks
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]

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]

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

 

[Don]

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

 

[Jerry1911]

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]

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.

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

What do you mean?

 

[Don]

Theoretically unlimited in certain cases.
Yes, the board member fee is always taxed in⁢ Estonia.