Generally, the board member of an Estonia limited company doesn't need to receive a director's fee (board member's fee).

Paying a salary or board member’s fee is not mandatory for you as a founder. Salary and board member’s fees are taxed differently though so it is best to consult with your accountant on which type of income should you get from the company.

All employees working in Estonia and paid board members need to be registered with the tax office in Estonia before they commence work.

If individuals to whom an Estonian company pays salary under an employment contract are not Estonian residents and live and work in a foreign country, taxes on their salary are not declared or paid in Estonia. Tax declarations need to be submitted and taxes are paid in the country where the work is performed. These individuals must present a certificate of non-residence, meaning they must prove that they are not Estonian residents.

If a member of the board of an Estonian company, who resides and works in a foreign country, receives a board member's fee, income tax and social taxes are paid in Estonia on that director's fee.

An individual can also present an A1 certificate, which proves that social taxes are paid in the country that issued the certificate. This proves the payment of social tax for the individual living in the country. A1 certificates are issued by other EU countries.

There is a tax risk for solopreneur e-residents who do not pay personal taxes in Estonia but receive a salary from their Estonian company that is not taxed in Estonia. A non-resident working and living in a foreign country under an employment contract is not required to pay taxes in Estonia, but when receiving a director's fee for performing the tasks under a board member's contract, taxes must be paid in Estonia.

If there is only one person on the board of the company, and that person is also involved in managing the company, it is logical (but not legally required) to receive a director's fee for performing these duties. However, if the salary is received solely under an employment contract, there is a risk that the Tax and Customs Board may treat (part of) the salary as a director's fee and demand taxes to be paid on the proportion of the fee in Estonia.

There is no obligation to pay a director's fee to a board member. It is not required by any valid law but is a recommendation of the Estonian tax authority.