Most Estonian OÜ owners know there are three ways to take money out: board member fees, salary, and dividends. What's less obvious is how dramatically the total tax cost changes depending on which method you use — and in what combination. A solo founder targeting EUR 30,000 net per year could pay anywhere from EUR 0 to EUR 18,000 in taxes, depending on the mix.
This post walks through four concrete scenarios with 2026 tax rates, so you can see the numbers side by side.
The Three Payment Methods at a Glance
Before diving into the scenarios, here's how each method is taxed in 2026.
Board Member Fee
A board member fee covers management and administrative duties. It's taxed like employment income but without unemployment insurance contributions.
| Tax | Rate | Paid by |
|---|---|---|
| Personal income tax (PIT) | 22% | Withheld from gross |
| Social tax | 33% | Company (on top of gross) |
| Basic exemption | EUR 700/month (EUR 8,400/year) | Reduces PIT base |
Minimum social tax rule: If you pay any board fee in a given month, social tax is due on at least EUR 886 (the 2026 minimum base). That's EUR 292.38/month minimum, even if the actual fee is lower.
Board member fees are always taxable in Estonia, regardless of where the board member lives. This makes them the standard choice for e-residents.
A1 certificate exception: Board members living in an EEA country or Switzerland who hold an A1 certificate proving social insurance coverage in their home country can be exempt from Estonian social tax. This significantly reduces the total cost.
Salary
Salary covers active, value-creating work (development, client delivery, design). It carries the same taxes as a board fee, plus unemployment insurance.
| Tax | Rate | Paid by |
|---|---|---|
| Personal income tax (PIT) | 22% | Withheld from gross |
| Social tax | 33% | Company |
| Unemployment insurance | 1.6% | Withheld from gross |
| Unemployment insurance | 0.8% | Company |
For non-residents working outside Estonia, salary is generally not taxable in Estonia — neither PIT nor social tax applies. That's why most e-residents abroad use board member fees instead of salary.
Dividends
Dividends are distributions of accumulated profit. No payroll taxes apply. Instead, the company pays corporate income tax (CIT) at 22/78 on the gross distribution.
| Component | Calculation |
|---|---|
| Net dividend | EUR 1,000 (what the shareholder receives) |
| Gross-up | 1,000 / 0.78 = EUR 1,282.05 |
| CIT | EUR 282.05 |
| Effective rate on net | ~28.21% |
No personal income tax applies on dividends within Estonia. Your country of residence may tax dividend income separately — check local rules and any applicable double tax treaty.
Dividends are declared on TSD Annex 7 and paid by the 10th of the following month.
Key limitation: You can only distribute dividends from existing retained earnings. No accumulated profit means no dividends.
Trade-off: Dividends do not generate social tax contributions. That means no Estonian health insurance coverage and no pension credits from dividend payments. For Estonian residents relying on the public healthcare system, this matters.
Four Scenarios: EUR 30,000 Net Target
All scenarios use 2026 rates. Assumptions: solo founder, no funded pension (II pillar), no A1 certificate, full basic exemption applied (EUR 8,400/year).
Scenario 1: 100% Board Member Fee
Everything paid as a board member fee.
| Component | Amount |
|---|---|
| Target net | EUR 30,000 |
| Gross board fee needed | EUR 36,092 |
| PIT (22% on gross minus EUR 8,400 exemption) | EUR 6,092 |
| Net to you | EUR 30,000 |
| Social tax (33% of gross) | EUR 11,910 |
| Total company cost | EUR 48,003 |
| Total taxes paid | EUR 18,003 |
How the gross is calculated: You need EUR 30,000 net. PIT is 22% of (gross minus EUR 8,400 basic exemption). So: net = gross x 0.78 + 8,400 x 0.22 = gross x 0.78 + 1,848. Solving for gross: (30,000 - 1,848) / 0.78 = EUR 36,092.
The company pays the EUR 36,092 gross fee plus EUR 11,910 social tax on top, for a total outflow of EUR 48,003.
Scenario 2: 100% Dividends
Everything paid as dividends from retained earnings.
| Component | Amount |
|---|---|
| Target net | EUR 30,000 |
| Gross distribution (30,000 / 0.78) | EUR 38,462 |
| CIT (22/78) | EUR 8,462 |
| Net to you | EUR 30,000 |
| Total company cost | EUR 38,462 |
| Total taxes paid | EUR 8,462 |
The total cost is EUR 9,541 lower than the all-board-fee scenario. However, there are two important considerations:
EMTA scrutiny. The Estonian Tax and Customs Board pays attention to companies that pay dividends but never pay any management board compensation. A company with an active board member who receives no fee for management services may face questions about whether the arrangement reflects economic reality. This doesn't mean it's illegal — but it invites scrutiny.
No social security. Zero board fees means zero social tax contributions. No Estonian health insurance, no pension credits. For e-residents covered by their home country's system, this may not matter. For Estonian residents, it does.
Scenario 3: Minimum Board Fee + Dividends
Pay the minimum social tax base as a board fee (EUR 886/month), then take the rest as dividends. This is the structure many solo OÜ owners use.
| Component | Amount |
|---|---|
| Board fee portion | |
| Gross board fee (EUR 886 x 12) | EUR 10,632 |
| PIT (22% on EUR 10,632 minus EUR 8,400) | EUR 491 |
| Net from board fee | EUR 10,141 |
| Social tax (33% of EUR 10,632) | EUR 3,509 |
| Dividend portion | |
| Remaining net needed (EUR 30,000 - EUR 10,141) | EUR 19,859 |
| Gross distribution (19,859 / 0.78) | EUR 25,460 |
| CIT (22/78) | EUR 5,601 |
| Totals | |
| Net to you | EUR 30,000 |
| Total company cost | EUR 39,601 |
| Total taxes paid | EUR 9,601 |
This scenario costs EUR 1,139 more than the pure dividend route, but it provides 12 months of social tax contributions. It also satisfies the expectation that board members receive compensation for their work.
Scenario 4: Reinvest Everything
Take nothing out. Leave all profits in the company.
| Component | Amount |
|---|---|
| Net to you | EUR 0 |
| CIT | EUR 0 |
| Social tax | EUR 0 |
| PIT | EUR 0 |
| Total company cost | EUR 0 |
| Total taxes paid | EUR 0 |
Estonia's 0% tax on retained profits is the system's defining feature. Every euro that stays in the company compounds tax-free. This is relevant if you're building up capital for investment, covering future expenses, or simply don't need the cash yet.
Of course, you need income from somewhere — another job, savings, or another entity. But for founders with multiple income sources, this is a real option.
Side-by-Side Comparison
| Board Fee Only | Dividends Only | Min Fee + Dividends | Reinvest | |
|---|---|---|---|---|
| Net to you | EUR 30,000 | EUR 30,000 | EUR 30,000 | EUR 0 |
| Total company cost | EUR 48,003 | EUR 38,462 | EUR 39,601 | EUR 0 |
| Total taxes | EUR 18,003 | EUR 8,462 | EUR 9,601 | EUR 0 |
| Tax as % of net | 60.0% | 28.2% | 32.0% | 0% |
| Social security credits | 12 months | None | 12 months | None |
| EMTA scrutiny risk | Low | Higher | Low | None |
What About Salary Instead of Board Fees?
For Estonian residents doing active work in the company, salary is an option. The taxes are similar to board fees but include unemployment insurance: 1.6% withheld from gross (employee share) and 0.8% paid by the company (employer share). The additional cost is modest — roughly EUR 865 more per year at a EUR 36,092 gross level — but salary does provide unemployment insurance coverage that board fees may not.
For non-residents working outside Estonia, salary is generally not subject to Estonian tax, which is why board member fees are the standard approach for e-residents.
Timing and Practicalities
Cash-based taxation. Estonian payroll taxes follow the payment date, not the accrual date. A December board fee paid in January is taxed at January's rates and declared on the January TSD (due 10 February).
TSD filing. Board fees and salary go on TSD Annex 1 (residents) or Annex 2 (non-residents). Dividends go on TSD Annex 7. All are filed via e-MTA by the 10th of the month following payment.
Dividend prerequisites. You need a shareholders' resolution approving the distribution, and the company must have sufficient retained earnings. The approved annual report determines the distributable amount.
See Your Own Numbers
Running these comparisons by hand — with social tax, income tax, the basic exemption, CIT on dividends, and the minimum social tax base all interacting — is error-prone and tedious. Most people give up and just pick one approach without knowing what it actually costs them.
Arvello's Pay Yourself calculator lets you enter your target net amount, toggle between board fee, salary, and dividend combinations, and see the total company cost side by side — with all 2026 rates built in. When you've decided, Arvello records the payment, calculates the withholdings, and generates the TSD filing. Sign up to see your numbers.
