Yes, your company can hire employees, both inside and outside Estonia. There are several possibilities:
If your employees are, or can become, professionals or freelancers in their countries of residence, this is a good option for your business. In that case, even if you sign a work contract with them, these professionals will make you invoices regularly for their work, that is, you will not pay them a salary, but an invoice for their services.
Your company will declare these invoices as expenses, which means that being money reinvested in the company, it will be tax free. Another advantage is that these people will be contributing to their social security and pension as professionals in their countries.
Hiring them as employees
Another option is to hire employees. We must distinguish between employees in Estonia and outside Estonia.
Hiring employees from Estonia
If the employees are residents in Estonia, the situation is very simple. These are Estonian workers hired by an Estonian company. This implies that your company will have to pay a series of taxes for them, as well as social security, like any European employee.
The great advantage is that these workers will be contributing to social security and pension, in a situation of absolute regularization.
Hiring employees from outside Estonia
Your company in Estonia can also hire employees outside Estonia. However, if these employees live permanently in some other country, you will have to take into account a number of factors.
First of all, since you are not residents of Estonia, you will not be contributing to social security or your pension. This means that you do not pay more taxes than the salary assigned to them in full, but also that, depending on their country of residence, these people will not have access to public health or pension.
You must be very transparent with your employees and inform them of this situation. One possibility is to contribute an extra to your salary to provide them with private medical insurance and a private pension scheme. Of course, this is an agreement between the employee and your company.
Another aspect to consider is whether the employee’s activity can trigger a permanent establishment in his country of residence. As a general rule, the permanent establishment only occurs due to the presence of an office or physical location, or the activity in the country of a majority of members of the board with the capacity to conclude contracts on behalf of the company.
This means that having a member of the support team, for example, in another country, generally does not imply permanent establishment of any kind. In fact, in some European countries there have been court rulings that supported this criterion.
However, each country has different fiscal and tax laws, and in some nations, it is possible that the criteria for determining what constitutes a permanent establishment is completely different. It is advisable, if you hire employees in a country other than Estonia, to consult a local lawyer or ask at the Tax Office.