If you own a solo Estonian OÜ, you're almost certainly a board member. But are you also an employee? Many OÜ owners aren't sure — or don't realise the distinction matters. The two statuses carry different tax costs, different legal protections, and different implications if you live outside Estonia.
This post breaks down the practical differences so you can see exactly what each status means for your company's costs, your personal protections, and your obligations in the Employment Register.
Tax Comparison: Board Member Fee vs Salary
The headline tax rates look similar — both involve 22% personal income tax (PIT) and 33% social tax. The differences are in the details.
Side-by-Side: Estonian Resident (2026 Rates)
| Component | Board Member Fee | Salary |
|---|---|---|
| Personal income tax (PIT) | 22% (withheld) | 22% (withheld) |
| Basic exemption | EUR 700/month | EUR 700/month |
| Social tax | 33% (employer) | 33% (employer) |
| Unemployment insurance (employee) | May not apply | 1.6% (withheld) |
| Unemployment insurance (employer) | May not apply | 0.8% (employer) |
| Funded pension (II pillar) | 2%/4%/6% if applicable | 2%/4%/6% if applicable |
| Minimum social tax base | EUR 886/month | EUR 886/month |
| Accommodation allowance | Not eligible | Up to EUR 500/month tax-free (Tallinn/Tartu) |
| Health & sports benefit | Eligible | Eligible |
| Employment law protection | No | Yes |
The two key tax differences: unemployment insurance (2.4% total for employees, may not apply to board members) and the accommodation allowance (employees only).
Worked Example: EUR 2,000/Month Gross
Here's what EUR 2,000/month gross costs as a board member fee versus salary for an Estonian resident. Assumptions: 2% funded pension, basic exemption applied, no A1 certificate.
Board Member Fee — EUR 2,000 gross:
| Component | Calculation | Amount |
|---|---|---|
| Gross fee | — | EUR 2,000.00 |
| Basic exemption | — | –EUR 700.00 |
| PIT (22% of EUR 1,300) | 1,300 x 0.22 | –EUR 286.00 |
| Funded pension (2%) | 2,000 x 0.02 | –EUR 40.00 |
| Net to board member | EUR 1,674.00 | |
| Social tax (33%) | 2,000 x 0.33 | EUR 660.00 |
| Total company cost | EUR 2,660.00 |
Salary — EUR 2,000 gross:
| Component | Calculation | Amount |
|---|---|---|
| Gross salary | — | EUR 2,000.00 |
| Basic exemption | — | –EUR 700.00 |
| Unemployment insurance (employee, 1.6%) | 2,000 x 0.016 | –EUR 32.00 |
| PIT (22% of EUR 1,268) | (2,000 – 700 – 32) x 0.22 | –EUR 278.96 |
| Funded pension (2%) | 2,000 x 0.02 | –EUR 40.00 |
| Net to employee | EUR 1,649.04 | |
| Social tax (33%) | 2,000 x 0.33 | EUR 660.00 |
| Unemployment insurance (employer, 0.8%) | 2,000 x 0.008 | EUR 16.00 |
| Total company cost | EUR 2,676.00 |
Difference: The salary costs EUR 16.00 more per month in total company cost (EUR 192/year), and the employee receives EUR 24.96 less net. That's the combined effect of unemployment insurance — 1.6% withheld from the employee and 0.8% paid by the employer.
In exchange, the employee gains unemployment insurance coverage. Whether that trade-off matters depends on your situation.
The Accommodation Difference
If you live at least 50 km from your workplace and don't own property closer, the company can reimburse accommodation costs tax-free — but only if you're registered as an employee.
| Location | Tax-free limit (employees only) |
|---|---|
| Tallinn or Tartu | EUR 500/month (EUR 6,000/year) |
| Other locations | EUR 250/month (EUR 3,000/year) |
Board members are not eligible. If your company pays accommodation for a board member, the entire amount is treated as a fringe benefit and taxed at roughly 70% surcharge (CIT 22/78 + social tax 33% on the grossed-up amount).
For someone who qualifies, this can be significant: EUR 500/month tax-free is EUR 6,000/year that would otherwise cost the company substantially more if paid as additional salary or fee.
Legal Differences
The tax cost difference is modest. The legal difference is substantial.
Board Member
- Appointed and removed by a shareholders' resolution (üldkoosoleku otsus)
- No protection under the Employment Contracts Act (töölepingu seadus)
- Mandate can be revoked at any time without notice period or justification
- No statutory severance pay
- No restrictions on termination — shareholders can remove a board member at will
- Relationship governed by the Commercial Code (äriseadustik), not employment law
For a solo OÜ owner, this is mostly theoretical — you're appointing and removing yourself. But it matters if you have co-founders or bring in an external board member.
Employee
- Protected by the Employment Contracts Act (töölepingu seadus)
- Employer must follow statutory notice periods for termination (30-90 calendar days depending on length of service)
- Restrictions on termination — employer needs a valid reason (redundancy, breach of duties, etc.)
- Entitled to unemployment insurance coverage if contributions are paid
- Entitled to vacation (minimum 28 calendar days/year), sick leave, and other statutory benefits
- Disputes resolved through the Labour Dispute Committee
If you're hiring someone to work in your company — especially someone who isn't a shareholder — the employment contract provides protections that a board member appointment does not.
Non-Resident Implications
This is where the board member vs employee distinction matters most. The tax treatment differs fundamentally for non-residents.
Board Member Fee — Always Taxable in Estonia
A board member fee paid by an Estonian company is always subject to Estonian taxes, regardless of where the board member lives or works.
| Tax | Rate | Notes |
|---|---|---|
| PIT | 22% | Withheld by company |
| Social tax | 33% | Paid by company, unless A1 certificate from EEA/Switzerland |
If you're an e-resident living in Germany and your Estonian OÜ pays you a board member fee, Estonian PIT and social tax apply. Your country of residence may also tax this income, subject to the applicable double tax treaty.
A1 certificate exception: If you hold an A1 certificate proving social insurance coverage in another EEA country or Switzerland, the Estonian social tax (33%) does not apply. PIT (22%) still does. This can reduce the total employer cost from EUR 1,330 to EUR 1,000 for a EUR 1,000 gross fee.
Salary for Work Outside Estonia — Not Taxable in Estonia
Salary paid for work physically performed outside Estonia is not subject to Estonian income tax or social tax. This is why most e-residents living abroad pay themselves via board member fees rather than salary — salary for work done abroad creates no Estonian tax obligation, making it pointless to route through the Estonian company.
PE Risk with Salary
If a non-resident registers as an employee of your Estonian OÜ and performs work in their country of residence, this could create a permanent establishment (PE) risk in that country. A PE can trigger local corporate tax obligations on profits attributable to the activities in that country.
This risk is separate from personal income tax. Even if the salary itself is not taxed in Estonia, the existence of an employee working from a fixed location abroad can be interpreted as a PE of the Estonian company.
Board member fees do not typically create PE risk in the same way, as board duties are considered management functions of the Estonian entity.
Employment Register (TOR) Requirements
Both board members and employees must be registered in the Estonian Employment Register (töötamise register, TOR), maintained by EMTA.
| Status | TOR Registration | Entry Type |
|---|---|---|
| Board member | Required | "Juhatuse liige" (board member) |
| Employee | Required | Before the employee starts work |
| Both | Two separate entries | One for each role |
Deadlines:
| Event | Deadline |
|---|---|
| Starting work/appointment | Before the person starts |
| Suspension | Within 10 calendar days |
| Termination/removal | Within 10 calendar days |
Health insurance takes effect after a 14-day waiting period from TOR registration, and ends 2 months after the termination date is recorded.
Failing to register in TOR can result in fines from EMTA. This applies to board members too — a common oversight for solo OÜ owners who don't realise board member registration is required.
When You Need Both Statuses
Some situations call for registering as both a board member and an employee of the same company. This is common when:
- You perform management duties (board member) and also do active value-creating work like software development, design, or client services (employee)
- You want unemployment insurance coverage — which requires employee status with contributions
- You want to use the accommodation allowance — which is available to employees but not board members
- You have a co-founder who does both management and operational work
In this setup, you'd typically have a board member appointment (for management duties, paid via board fee) and an employment contract (for operational work, paid via salary). Both are registered separately in TOR.
The total compensation is split between the two: a board fee for the management component and salary for the rest. Both are declared on TSD Annex 1 (for residents) or Annex 2 (for non-residents), filed by the 10th of the month following payment.
Managing Both in Arvello
Arvello's payroll module handles both board member fees and salaries, including the different tax calculations for each. When you add a person in the People section, you can assign their status — board member, employee, or both — and the system applies the correct tax treatment automatically. Each payroll run generates the TSD data with the right annexes.
