How does it work?
A non-resident employer is a foreign company that does not have a registered company, branch, or a permanent place of business (also known as Permanent Establishment or PE) in Estonia, but whose employee works in Estonia.
If the employee performs their work in Estonia, the employer must pay and declare the employee’s taxes in Estonia. For this purpose, the foreign company must either register as an employer in Estonia or use alternative solutions as we describe below in this article.
To register as a non-resident employer, you must appoint an authorized representative in Estonia. We are happy to take on this responsibility and perform the related duties to keep you compliant. You find and hire the talent, we’ll handle the rest.
Obligations of a non-resident employer in Estonia:
- Appoint a local tax representative and contact person
- Register employees in the Employment Register
- Submit the monthly TSD tax declaration
- Pay employee taxes
- Submit reports for Statistics in Estonia (if applicable)
What a non-resident employer does NOT need to do:
- No need to establish an Estonian company
- No need to establish and register a branch or PE in Estonia
- No need to have an office or address in Estonia
- No need to have an Estonian board member
- No need to submit annual financial reports in Estonia
- No need to register for VAT (if no taxable turnover is generated in Estonia)
- No need to conduct audits
In short – the obligations of a non-resident employer in Estonia are limited only to payroll and, if required, statistical reporting. This is a simple and flexible solution for a foreign company whose employee works in Estonia, but which does not need to establish a local company here.
What are the alternatives?
1. Working through the employee’s sole proprietorship (FIE) or local company (service contract)
- High risk of a hidden employment relationship.
- The worker does not have the legal protections of an employment contract.
- Not suitable if the person works like a regular employee (fixed working hours, managers, company equipment).
2. Setting up an Estonian Co., subsidiary or branch
- More expensive and bureaucratic: annual reports, accounting, management board, bank account.
- Unnecessary if there is only one or two employees in Estonia or no local business activity.
3. EOR / PEO service (Employer of Record / Professional Employer Organization)
- On the expensive side (about €500–800 per employee per month).
- You pay the EOR / PEO a monthly fee + salary costs.
- Less control over the employer-employee relationship.
- Better suited as a temporary solution, not for the long term.
An Employer of Record (EOR) or Professional Employer Organization (PEO) is a company that legally employs a worker on your behalf in Estonia, even though the employee works for you and is part of your team.
Our experience shows that many companies later switch from the EOR/PEO model to direct non-resident employer registration, as it’s cheaper, simpler, and gives them full control.
Who are the main prospects for the non-resident employer service?
1. Foreign companies with one or more employees in Estonia
- Most often in IT, startups, marketing, consulting.
- Practical and effective remote work arrangements.
- They do not want to set up an Estonian company and only need payroll and tax reporting.
2. Companies that allow worldwide remote work
- International companies with employees working from different countries.
- They need a simple tax solution, not a subsidiary or branch.
3. Scale-ups whose employee relocates to Estonia
- The employee moves to Estonia, but the company does not want to create a local entity.
4. Companies testing the Estonian market
- They hire one sales manager, project manager, or developer.
- They do not want to set up a local company immediately.
5. Companies unfamiliar with the Estonian tax and labour system
- They need an accountant or local contact person to handle everything.
6. Foreign companies whose employee works temporarily in Estonia
- Consultants, project managers, trainers, technical specialists.
- It is not practical to set up a local company or branch for short-term presence.
Hiring in Estonia from abroad may sound complicated, but with InCorpora, it’s surprisingly easy. We’ve done this many times before, we know all the turns, and we even enjoy the paperwork (yes, we really do).
We help foreign companies that already have an employee in Estonia or plan to hire one, but do not want to establish a company or branch here.
From employer setup, employee registration to monthly payroll, and TSD reporting we make sure your Estonian employees are properly taken care of and that everything stays fully compliant. Compliance is key, and we’re here to make it easy.
InCorpora is your trusted local partner and advisor every step of the way.
Team InCorpora
CONTACT US NOW to learn more. We would be happy to assist you!
