Accounting and reporting - Doing Business in Estonia
Estonia is renowned for its business-friendly environment with a simple tax system and digital-first approach to government services.
Whether you wish to launch a startup, expand your corporation through a local branch, or work here as a freelancer, Estonia offers excellent opportunities and an efficient digital ecosystem.
Here are a few reasons why Estonia is an ideal place to do business:
- A company can be established in a day through a fast and straightforward registration process.
- The minimum share capital of a private limited liability company is 0.01 euros.
- Almost all reports and applications can be easily submitted online.
- Estonia's tax system is simple, with a 0% corporate income tax on undistributed profits.
- There are very few restrictions to foreign ownership or management and foreign entrepreneurs are treated equally to Estonian citizens.
- As an EU member state, Estonia provides access to the European single market and operates under the EU legal framework.
Estonia is also an excellent base for your business, even if you don't plan to live here. With the e-Residency program, you can easily manage your company remotely from anywhere in the world. For more detailed steps on establishing a company in Estonia, please see here.
The following guide will answer common questions that may arise when conducting business in Estonia. We hope to provide an overview of the most important things to expect or keep in mind. For any specific inquiries, please contact our team of expert lawyers who are ready to assist you with any issues you may have.
Accounting and reporting
Details on accounting requirements and financial reporting.
Companies are subject to accounting obligations. Entities with accounting obligations must organize their accounting and ensure the information on the company's financial position, financial performance, and cash flows is accurate and reliable. All business transactions must be documented, and source documents must be retained for seven years. Every company must also submit an annual report.
Taxpayers must submit the declaration on income and social tax, mandatory funded pension, and unemployment insurance contribution declaration (TSD). This means primarily taxpayers who have made payments such as salaries or dividends, or similar disbursements or taxable expenses. TSD must be submitted by the 10th day of each month unless the taxpayer has not made any taxable payments in the calendar month. TSD form can be submitted via the e-MTA portal.
If a company is a VAT payer, it must also submit a VAT return declaration (KMD). The VAT taxation period is a calendar month, and the deadline for submitting the VAT return is the 20th day of the month following the taxation period. KMD form can be submitted via the e-EMTA portal.
Every company must submit an annual report pursuant to the Accounting Act. The report must be submitted within six months after the end of the financial year (which is typically the same as a calendar year, unless otherwise specified in the articles of association).
The information required to be disclosed in the annual report depends on the company's size. Micro and small enterprises must submit annual accounts (balance sheet and income statement) along with notes, collectively referred to as abridged annual reports. Small enterprises are additionally required to submit a management report, providing an overview of the company’s activities and key factors for assessing its financial health. Medium-sized and large enterprises must submit full annual accounts (balance sheet, income statement, cash flow statement, and statement of changes in equity) as well as a management report. The definitions for these enterprises can be found in the Accounting Act.
The annual report of a private limited company or a public limited company must be prepared by the management board and approved by the shareholders through the general meeting. In case of a public limited company, the supervisory board must also review the annual report, prepare a report on it, and indicate whether they approve the annual report. The annual report of a public limited company must be audited. An audit is also mandatory for other companies if their financial indicators exceed certain thresholds prescribed by law.
Reports can be submitted through the e-Business Register Portal by authorized persons (e.g., board members, accountants) using an Estonian ID-card, Smart-ID, or Mobile-ID. The process is quite simple and straightforward and can be done by filling in predetermined fields online.
Failure to submit the annual report by the deadline may result in the registrar imposing repeated fines until compliance is achieved. The registrar may also initiate compulsory dissolution proceedings if a warning is ignored. If the required annual report remains unsubmitted three months after the due date set by the registrar, the company may face deletion.
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ALFA International is a leading network of independent law firms, established in 1980. It is the largest legal network offering effective solutions worldwide. We are the only member of this network in Estonia.
Gazelles are rapidly growing companies that have increased their revenue and profit by over 50% in three years and created many new jobs. Less than 1% of Estonian companies are gazelles. We have won the Gazelle Company title twice.
The Estonian Chamber of Commerce and Industry is the largest and most influential organization representing entrepreneurs in Estonia, with 99 years of activity. The Chamber has over 3,500 members, whose contribution accounts for more than 40% of the net turnover and tax revenue of Estonian companies.