Estonia gives one person four ways to be paid for their own work, and they are not variations on a theme — at €3,000 a month of revenue the cheapest and the most expensive are 18 percentage points apart. The choice is worth more than most people's negotiating position, and almost every English-language guide to it is wrong about at least two of the four.
20% flat, 33% and 22%, or 0% until you take it out
The entrepreneur account is a flat 20% of everything received, with no deductions and no paperwork, capped at €40,000 a year. The FIE pays social tax and income tax on profit after expenses — but on a base that is profit divided by 1.33, not on profit. An OÜ pays nothing at all until money leaves the company.
The most-repeated figure about the entrepreneur account — 40% above €25,000 — was abolished on 1 January 2025. It is still on most sites, and on one of the Tax Board's own PDFs.
Table of Contents
Which one
Entrepreneur account
Selling to consumers, with negligible expenses, under €40,000 a year. Flat 20%, no accounting, no declaration, no expenses to track. Below €2,436.50 of receipts in a month it buys you no health insurance, and if your customer is a business buying a service, the whole advantage disappears — see below.
FIE
Real deductible expenses, or agriculture or forestry. The 1.33 divisor makes the effective social tax 24.81% rather than 33%, the basic exemption applies, and health insurance follows the register entry rather than the profit — so a loss-making FIE is still insured. The cost of that is a minimum social tax bill of €3,509 a year whether you earn it or not.
OÜ
Selling services to businesses, above the ceiling, or reinvesting rather than spending. The advantage is not the rate — it is that undistributed profit is taxed at 0%. Anyone who takes out everything they earn gains much less from an OÜ than they expect, and pays for an accountant besides. What that actually costs a one-person operation is set out separately.
A service contract in your own name
A käsundusleping or töövõtuleping signed as a private individual does not make you self-employed at all. The payer still runs the taxes. What you give up is paid leave, notice, overtime premiums and the labour dispute committee. It is the worst of both worlds and it is what an employer offers when they want flexibility without the price.
The comparison
Annual figures, at three levels of revenue. The assumptions underneath the table are doing a lot of work, so read them before using it.
| Route | €1,500/month | €3,000/month | €6,000/month |
|---|---|---|---|
| Entrepreneur account | €1,200/mo · 20% | €2,400/mo · 20% | Not available — over the ceiling |
| OÜ: minimum salary + dividends | €1,079/mo · 28.04% | €2,249/mo · 25.02% | €4,589/mo · 23.51% |
| FIE | €1,034/mo · 31.09% | €1,913/mo · 36.22% | €3,673/mo · 38.79% |
| OÜ: everything as salary | €1,014/mo · 32.37% | €1,875/mo · 37.5% | €3,596/mo · 40.07% |
Read the assumptions before you use this table
Zero expenses. This is the pure-labour case — a consultant, a writer, a designer. It flatters the entrepreneur account, which cannot deduct anything in any case, and penalises the FIE and the OÜ, which can. If you buy equipment or stock, the ranking changes.
The basic exemption is applied in full, at €700 a month, and assumed not already used against a salaried job. If you have a day job, it is gone, and every rate above rises.
No II sammas, no accounting fees, no bank fees, and steady income across the year. Second-pillar contributions at 2% add roughly one and a half to two points everywhere. Accounting at €100 a month wipes out most of the OÜ's advantage at the lowest level.
The dividend row assumes the Tax Board does not reclassify. At €6,000 a month of revenue from one person's labour against a minimum salary, that is not a safe assumption — see below.
Two things in that table are worth stating in words. The entrepreneur account is genuinely the cheapest thing available to a consumer-facing worker with no costs, and it is not close. And an OÜ that pays everything out as salary is the most expensive of the four at every level — an OÜ used that way is a worse FIE with an accountant's bill attached.
FIE: the sole trader
The 1.33 divisor, which nobody explains
A FIE's profit is not taxed at 33% plus 22%. Social tax is removed from its own base on an accrual basis: the base is profit divided by 1.33. So social tax is 33% × (P ÷ 1.33) = 24.81% of profit, and income tax is 22% of that same reduced base after the basic exemption. You may not also list social tax as a business expense — that is the same relief twice, and the Tax Board says so explicitly.
The minimum bites below about €14,141 of annual profit. The obligation is €3,509 a year — €877 paid quarterly in advance — and it does not fall when your profit does. Under roughly €1,178 a month of profit you are paying social tax you did not earn. It is capped at the other end at €36,868, which is ten times the year's minimum wages at 33% — and that ceiling is itself a good check on whether a site knows the minimum wage rises to €946 on 1 April 2026.
| What | When | How much |
|---|---|---|
| Social tax advances | The 15th of the last month of each quarter, rolling forward off weekends | €877 each |
| Income tax advances | 15 September and 15 December | A quarter of last year's liability each — none if that would be under €300 |
| First year of trading | — | No income tax advances at all |
| Form E with the annual return | 30 April | Required even with no business income |
| Final settlement | 1 October | Balance due, or overpaid advances refunded |
Accounting is on a cash basis — money in and out, not invoices raised. All documented business expenses are deductible; entertainment is capped at 2% of adjusted business income plus €32 a month.
What a FIE gets that the account does not
Three real advantages:
- Health insurance from the register entry, not from the profit. Cover starts after a 14-day wait and continues two months after deletion. A loss-making FIE is still insured — the minimum social tax is what pays for it
- Expenses, and the basic exemption, neither of which the entrepreneur account allows
- Agriculture and forestry: up to €5,000 a year each with no expense documents at all, on unprocessed produce and on timber. Neither can create a loss, and the unused part does not carry forward
And what it costs
Three real disadvantages:
- Unlimited personal liability. The FIE is you — there is no separate legal person and no share capital
- No unemployment insurance for yourself, so no benefit entitlement. You cannot register as unemployed unless the activity is suspended or seasonal
- The dormant-registration trap: stop trading but never file the deregistration and you keep owing €877 a quarter for nothing. The Tax Board states this in terms
The erikonto — a declared special account — defers tax on lumpy income: money paid in is deducted from that year's business income and money taken out is added back. Receipts must reach it within 10 working days, and interest earned on it is itself business income. It smooths a seasonal business across years. It does not reduce social tax below the minimum.
Two exits, both with a sting. Suspension stops the advance payments, but if it runs past 12 months, assets previously deducted are deemed taken into personal use and their market value is added back to business income. Termination does the same immediately for anything not sold. Neither is a reason to avoid the form; both are reasons to plan the last year rather than the first.
The entrepreneur account
This is the most distinctive thing in Estonian personal taxation and the least accurately described. It is a bank account at LHV — the only provider — into which customers pay you, and from which the bank withholds a flat percentage and sends it to the Tax Board. No return, no accounting, no expense records.
The 40% band is gone, and the Tax Board's own PDF still shows it
Until the end of 2024 the rate was 20% up to €25,000 and 40% above it. From 1 January 2025 it is a single flat 20% regardless of amount. The Ministry of Finance's reasoning was that average wages had risen more than 58% since the band was set.
The Tax Board has left a 2021 factsheet online showing the old 20%/40% split, a 20%/80 payer liability and a €1,606 insurance threshold. It is stale, it is on the authority's own domain, and it is almost certainly where every English-language site still publishing 40% got it.
| How it works | |
|---|---|
| Rate | 20% of everything received |
| What that contains | 12% social tax and 8% income tax — the 20% split 33/55 and 22/55 |
| With II sammas | Add your pillar rate on top: 22%, 24% or 26% |
| Annual ceiling | €40,000 |
| Health insurance | Only above €2,436.50 of receipts in the month |
| Bank fee | Free under €500 of monthly turnover, then €5/month |
| Deductions | None. No expenses, no basic exemption, no housing loan interest, no training costs |
| VAT | You cannot be VAT-registered and use it |
If your customer is a business buying a service, the advantage vanishes
You may sell to businesses. But when a company buys a service from an entrepreneur account holder, the payer takes an income tax charge of 22%/78 on top of what it pays you, declared as a non-business expense. The Chamber of Commerce says plainly that this "eliminates the account's tax advantage compared to traditional employment".
Work it through from the client's budget: they can pay you 78% of what they had, and you keep 80% of that — an effective 37.6%. Worse than a FIE, and about the same as taking a salary. The 20% headline only survives selling to consumers.
The health insurance arithmetic is narrow. The social tax component is 12% of gross, and it has to reach the minimum monthly obligation of €292.38 — so you need €2,436.50 of receipts in the month. Twelve of those is €29,238 a year, against a ceiling of €40,000. The window in which the account both insures you and stays legal is roughly €29,238 to €40,000 a year, and that is genuinely tight.
Two further things it will not do: you cannot be registered as unemployed while you hold one, even if nothing is ever received into it; and you cannot be a FIE in the same or a similar field at the same time.
It has worked, which is the honest verdict. There were over 30,000 accounts in active use as at April 2025, tripled in two years, moving over €50m in 2024 — against 17,133 economically active FIEs. Seven years old and it already has more users than a form that has existed for three decades.
OÜ: the company
The full company picture is on starting an OÜ and company tax. What matters here is what changes when the company exists to sell one person's own labour.
The board member salary question, answered properly
There is no statutory rule that an owner-manager must pay themselves a salary. There is also no fixed minimum, and the Tax Board says so: a shareholder "does not always have to receive a salary calculated based on the average rate", and the right level depends on industry, region and the company's financial condition.
What the Tax Board does say is that a significantly lower salary has to be justified, and that dividends may be deemed salary income where a working board member is paid no reasonable remuneration. On reclassification the dividend is re-treated as wages and attracts income tax, social tax, unemployment insurance and pension contributions. The benchmark is the usually-paid fee for that work in that sector and region, and the Tax Board points people at its own published business statistics to find it.
The quantified version is in the table above: at €3,000 a month of revenue the all-salary route costs 37.5% and the minimum-salary-plus-dividends route 25.02%. That 12-point gap is the entire reason the Tax Board runs a campaign about it, and the entire reason you are asking.
There is a second, quieter argument for paying yourself properly. A board member fee attracts social tax and income tax but not unemployment insurance, so it never builds a benefit entitlement — and an owner-manager who takes only dividends has no health insurance and no pension accrual at all from the company. Cover needs social tax of at least €292.38 a month, which means a gross fee of at least €886. Pay less and the company still owes the minimum, so paying less than €886 buys nothing and saves nothing.
| 2026 | |
|---|---|
| Minimum share capital | €0.01 per share — the €2,500 minimum went on 1 February 2023 |
| State fee to register | €265 |
| Retained profit | 0% |
| Distributed profit | 22%/78 — you receive 78% of the gross distribution |
| The 14/86 reduced rate for regular dividends | Repealed 1 January 2025 |
| Annual report | Within 6 months of the year end, even with no activity |
| Accounting | Double-entry, and in practice an accountant |
Miss the annual report and the registrar may fine both the company and its board without warning; leave it six months past the deadline and supervisory proceedings can end in deletion from the register. This is the running cost people forget when they compare an OÜ with an entrepreneur account that has no accounting obligation at all.
Anyone still quoting 14/86 is more than eighteen months out of date
The reduced 14%/86 rate on regularly-paid dividends was repealed with effect from 1 January 2025. One tail survives: profits that were taxed at 14/86 up to 31 December 2024 still carry 7% withholding when redistributed to a natural person, reducible under some tax treaties. That is the only place the old regime still appears.
When a client offers a service contract
| Employment contract | Käsundusleping | Töövõtuleping | |
|---|---|---|---|
| What you owe | Your work, under direction | Diligent effort | A result |
| Subordination | Yes — and that is the test | No | No |
| Paid annual leave | Yes | No | No |
| Regulated hours, breaks, overtime pay | Yes | No | No |
| Written form required | Yes | No | No |
| Disputes | Labour dispute committee or court | Court only | Court only |
A service contract in your own name does not shift the tax — only the rights
This is the part people get backwards. If you sign a käsundusleping or töövõtuleping as a private individual, the payer still runs the payroll taxes. You are not self-employed for tax purposes. You have simply given up leave, notice, overtime premiums and the labour dispute committee, and you get health insurance only if the fee clears €292.38 of social tax in the month — the same €886 gross bar as everyone else.
The tax burden moves to you only if you contract as a FIE, through an OÜ, or via an entrepreneur account. That is the real fork. If a client asks you to invoice from a company, price for it: roughly 33% on top of your target take-home before income tax.
Courts look at the parties' actual intent rather than the label on the contract, so a genuine employment relationship dressed as contracting can be reclassified. The Tax Board takes the same line about labour taxes.
VAT, and where you cross it
Registration is compulsory once taxable turnover passes €40,000 from the start of the calendar year — a strict calendar-year basis since 1 January 2025, where it used to be rolling. You then have 3 working days to apply and the Tax Board has 5 to decide.
At steady turnover that is €3,333 a month, which lands between the middle and top columns of the comparison above. An entrepreneur account holder can never reach it, because they cannot be VAT-registered at all and the ceiling coincides with the threshold. A FIE or an OÜ can, and should plan for it: VAT is neutral if your customers are businesses and a 24% price rise if they are consumers.
Two things worth knowing and rarely written in English. There is a cash-basis VAT scheme available under €200,000 of annual turnover, on notification — useful if your clients pay late, because otherwise you remit VAT on an invoice before you have been paid for it. And a foreign business with no permanent establishment in Estonia has no threshold at all: registration is immediate on making a taxable supply that is not reverse-charged.
What people get wrong
Quoting 40% above €25,000
Abolished on 1 January 2025. Flat 20% now, at any amount up to the ceiling. The Tax Board's own stale PDF is the likely source.
Taxing a FIE at 33% plus 22% of profit
The base is profit divided by 1.33, so social tax is 24.81% of profit and income tax applies to the same reduced base. Getting this wrong overstates a FIE's tax by several points.
Using an entrepreneur account for B2B services
The client picks up 22%/78 on top. A rational client refuses, or cuts your fee to cover it, and your effective rate becomes about 37.6%.
Assuming an OÜ is automatically cheaper
Taken entirely as salary it is the most expensive of the four. Its advantage is the 0% on profit you do not take out — which is worth nothing to someone who spends what they earn.
Closing the business but not the registration
A dormant registered FIE keeps owing €877 a quarter. File the deregistration, or at least the suspension.
Still publishing 14/86 on dividends
Repealed 1 January 2025. Only the 7% withholding on redistributed pre-2025 profits survives.
FAQ
What is the entrepreneur account tax rate in Estonia in 2026?
A flat 20% of everything received into the account, with no deductions of any kind and an annual ceiling of €40,000. The old 40% band on amounts above €25,000 was abolished on 1 January 2025, though it is still published widely — including on a stale factsheet on the Tax Board's own site. If you have joined the second pension pillar, your pillar rate is added on top, making the total 22%, 24% or 26%.
Is a FIE or an OÜ better in Estonia?
It depends on whether you take the money out. An OÜ pays 0% on profit it retains and 22/78 on profit it distributes, so it wins decisively if you are reinvesting — but taken entirely as salary it is the most expensive of the available routes, and it carries an accountant and an annual report. A FIE deducts expenses, keeps the basic exemption, gets health insurance from the register entry rather than from profit, and has the agriculture and forestry allowances. A FIE also carries unlimited personal liability and a minimum social tax bill of €3,508.56 a year whether or not it earns anything.
Does an entrepreneur account give you health insurance in Estonia?
Only in months where receipts exceed €2,436.50. The social tax component of the flat rate is 12% of gross, and it must reach the minimum monthly social tax obligation of €292.38 for you to be insured that month. Twelve such months come to €29,238 a year against a ceiling of €40,000, so the range in which the account both insures you and stays within its limit is narrow.
Does an Estonian company owner have to pay themselves a salary?
There is no statutory rule requiring it and no fixed minimum — the Tax Board explicitly declines to set one, saying the right level depends on industry, region and the company's financial condition. But it also says a significantly lower salary must be justified, and that dividends may be deemed salary income where a working board member takes no reasonable remuneration; on reclassification the dividend attracts income tax, social tax, unemployment insurance and pension contributions. Separately, an owner taking only dividends has no health insurance and no pension accrual, which needs a gross fee of at least €886 a month.
How much does it cost to register as self-employed in Estonia?
€20 to register as a FIE electronically in the commercial register. An entrepreneur account is free to open and free to run under €500 of monthly turnover, then €5 a month. An OÜ costs €265 in state fees, plus accounting from about €50 a month and — if you are an e-resident with no Estonian-resident board member — a contact person and legal address at €200–€400 a year.