Director's fee is always taxable in Estonia with 20% personal income tax (PIT) and 33% social tax. Director's personal income tax is declared in Estonia with no exceptions. However, the residents of the EEA and the EU with Ukraine, Canada, Australia, and Switzerland are exempt from paying the social tax in Estonia if they are covered with social security schemes in their homeland. Employees' salaries are taxable in the country of their tax residency.
If the employees are located outside Estonia, there's no need to register them in Estonian jurisdiction. Their salaries will be taxed according to their local tax rules.
One of the most frequently asked questions is about the ability of a director to be an employee at the same time. Yes, it is possible, as paying out the director's fee is not an obligation. It is also an option to pay out a divided salary. For instance, one part can be paid for the management work as a director's fee (taxable in Estonia) and the other part as the employee's salary (taxable in the country of the tax residency). Note that the salaries of Estonian employees will be taxable with the 33+20+2% rates.
You can learn more about corporate taxation in the article
prepared by the Estonian government. If you have any questions about the taxation of your income in your country of tax residency, we advise you to contact your local tax authorities.