⚠️  The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️

A more comprehensive set of information for this country and work relationship is available on Easop.

If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡

✅ Yes, you can grant non-qualified stock-options (NSO) to contractors in Estonia

In a nutshell, what does taxation look like?

• At grant 👉 No taxation at grant.
  
  
• At exercise 👉 No taxation at exercise.
  
  
• At sale 👉 The difference between the sale price and the “acquisition cost” of the shares is subject to personal income tax.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

For EoR employees, there’s no tax-favored regime but there’s a legislative loophole that may lead to an informal tax exemption that is even more flexible than the legally prescribed tax-favored regime.

✅ Yes, you can grant non-qualified stock-options (NSO) to contractors in Estonia

Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).

In a nutshell, what does taxation look like?

Generally, taxation is not entirely clear as stock options have been initially regulated for employees only, and taxation often depends on the legal form chosen by the contractor to perform its activities.

• At grant 👉 No taxation.
  
  
• At exercise 👉 There would be no taxation in 2 main scenarios.  

• At sale 👉 If the contractor works as a natural person, the difference between the sale price and the “acquisition cost” of the shares is subject to personal income tax. Other rules apply if the contractor works as a management company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Yes, stock options granted to contractors working as a natural person are favorably taxed in Estonia under certain conditions.

What you should know if the grantee works via a personal management company.

It may happen that contractors work via personal management companies.

A personal management company is a corporate vehicle used in some countries outside of the United States, usually set up for limitation of liability, personal accounting and tax purposes, owned and managed by the same natural person and through which such person provides services as a contractor/freelancer.

In Estonia, under certain conditions, there might be nothing to report and no taxes to pay at the time of exercise.