Accounting Services in Estonia

Accounting services for non-VAT registered companies
Companies that have no monthly payments, purchases, invoices and VAT number can do accounts once a year before submitting an annual report.
50 EUR/month
Accounting services for VAT registered companies
The cost of service depends on the number of source documents to be processed, the number of employees, and the number of loan and leasing agreements. The complete accounting service is mandatory for VAT-registered companies since they shall submit at least two reports to the Estonian Tax and Customs Board every month. The cost of complete accounting service includes the provision of advice on Estonian tax law + tax optimization advice.
100 EUR/month
Assistance in registering VAT in Estonia
Companies are obliged to register VAT in cases when sales in Estonia exceed  40,000 EUR from the beginning of the calendar year. A company can also apply for VAT registration before this threshold value is reached.
400 EUR
Assistance in obtaining an EORI number
EORI is a unique number required for companies engaged in international trade in the European Union. Since July 1, 2009, an EORI number is mandatory for companies involved in international trade in case of import, transit, export or other customs procedures in order to identify the company throughout the European Union.
50 EUR
Annual report
Annual reporting is mandatory for all companies registered in Estonia, even for companies that had no activities during the financial year. The annual report shall be submitted within six months after the end of the financial year of the company. Thus, if your financial year ends on December 31, you shall submit the report no later than June 30 of the next year.
100 EUR

Overview

Accounting is an integral part of doing business on behalf of an Estonian company, the purpose of which is to keep records and obtain an overview of the economic performance and financial state of the company.

All companies and branches of foreign companies operating in Estonia are subject to accounting. Accounting for each company must comply with government-set standards for the results to be comparable and understandable.

Basic requirements for the organisation of accounting

  • Each company must prepare and submit an annual return to the Commercial Register for the previous year by June 30 of the current year.
  • All business transactions must be recorded in accounting programs.
  • All business transactions must be documented.
  • Accounting should provide a reliable, objective, and comparable view of the financial situation, performance, and cash flows of the company.
  • All accounting documents must be kept in the archive for at least 7 years.

Opening balance sheet

To begin with, you should prepare an opening balance sheet, which lists the assets, liabilities, and the share capital of your company before you start an economic activity.

Accounting policies and procedures

Procedures for maintaining internal accounting should be developed at the beginning of the activity.

Internal accounting procedures should:

  • Describe the required chart of accounts with a description of the content of these accounts.
  • Regulate the procedure for documenting and recording transactions.
  • Establish circulation and storage of primary documents.
  • Regulate the maintenance of accounting registers.
  • Reflect income and expenses in the profit and loss statement.
  • Describe the inventory, assets, and liabilities of the company.
  • Determine the accounting policy, reporting procedure and other accounting.

Internal accounting rules are binding and individual for each and every company.

Charts of accounting

Estonian companies can choose between two types of income statement schemes. In Chart 1 of the income statement, business expenses are divided by the nature of expenses (for example, material costs, labor costs, depreciation deductions). This is often used by smaller companies that do not need to assort costs by function.

In Chart 2 of the income statement, operating expenses are assorted by function (e.g. cost of goods sold, advertising costs, general administrative expenses). Chart 2 is usually more difficult to implement because all business expenses require a decision about which business function they are associated with. Certain costs (for example, labor costs) must be apportioned pro rata across the various functions. The profit statement based on Chart 2 gives a better overview of the costs of various functions of the company, while the distribution of costs by function is subjective.

The choice of the appropriate chart for the profit statement should be based on which division gives the best idea of ​​the dynamics of the economic activity. However, if it turns out that the current choice of the chart has not justified itself, you can switch to another chart. It should be borne in mind that when moving from one chart to another, comparable indicators of the previous period must also be adjusted retrospectively (in accordance with the new method).

An entity is also required to indicate in its internal accounting procedures whether it is a micro, small, medium, or large company, since there are significant differences in accounting policies and reporting forms depending on the business category.

Methods of accounting

There are two systems for accounting for business transactions in Estonia – accrual and cash accounting. Accounting in Estonian companies is on an accrual basis, but sole proprietors (FIEs) are allowed to account on a cash basis. In the case of accrual accounting, transactions should be recorded as they occurred, regardless of whether the related funds were received or disbursed.

Annual report of an Estonian company

Annually, no later than 6 months after the end of the financial year, an annual report should be prepared and submitted to the Commercial Register containing a comprehensive overview of the company’s results for the previous financial year. In addition to the above, additional reports and declarations must be submitted in accordance with the form, structure, and scope of the enterprise.

The annual report is mandatory for all accounting organisations in Estonia and must comply with the form prescribed by law. The annual report consists of an annual accounting report and a report on the activities of the company.

Financial year report

The financial year of the company is 12 months. In most cases, the fiscal year is a calendar year (from January 1 to December 31), but a company charter or other document that regulates its activities may also set a different fiscal year in accordance with the operating cycle of the accounting entity. In exceptional cases, the financial year may be shorter or longer than 12 months, but not longer than 18 months.

Stages of preparation of the an annual report

  1. Preparation of annual accounts
  2. Preparation of a report on the activities of the enterprise
  3. Approval of the annual report

Filing of the annual report includes the following steps:

  • Audit
  • Drawing up a proposal for the distribution of profits or coverage of losses for the financial year
  • Submission of an annual report for approval

The annual financial statements must contain up-to-date and truthful information about the financial situation, financial results, and cash flows of the accounting organisation. The annual report consists of the main reports (balance sheet, profit and loss statement, cash flow statement and statement of changes in equity) and annexes.

  • Micro-enterprise

According to the Accounting Law, micro- and small-scale enterprises can prepare an abridged annual report, which consists of at least two main reports – a balance sheet and a profit statement, as well as up to 3 annexes. The micro-enterprise can (optionally) prepare an abridged or full annual report. Therefore, a micro-enterprise that uses the abridged annual report option is not required to prepare a management report.

  • Small-scale business

The abridged annual report of a small-scale company is drawn up in accordance with the Estonian financial reporting standard and consists of two main reports: a detailed balance sheet and an income statement, as well as up to 9 annexes. The small business also undertakes to prepare a management report.

  • Medium-sized and large enterprise

The annual report is drawn up either in accordance with the requirements of the Estonian financial reporting standard, or in accordance with the requirements of the International Financial Reporting Standards (IFRS): a management report, 4 main reports, and an average of 15 annexes. A full annual report is required for medium-sized and large companies as well as non-profit associations and foundations.

Financial statements are prepared in Estonian language in euros (the official currency of Estonia), indicating the degree of accuracy used in figures.

Components of the annual report

1. Balance sheet and income statement

The balance sheet reflects the financial situation (assets, liabilities, and capital) of the accounting entity at the end of the financial year. The income statement is a statement of income and expenses and reflects the economic results for the reporting period.

2. Statement of cash flow

This report reflects the cash flow for the reporting period (receipts and payments of cash). The indication of receipts and payments for the reporting period occurs by grouping them in accordance with their purpose for financial, investment, and commercial activities.

3. Statement of changes in share capital

This report reflects changes in the equity of the company during the reporting period. The financial statements include contributions to the share capital and distributions to owners, profit or loss, the effect of changes in accounting policies, increases and decreases in provisions, and other transactions that impact entries in equity.

4. Attachments

The number of attachments to the annual report depends on the specifics of the company, but you should definitely include:

  • Specification of the financial reporting standard, on the basis of which the annual accounting report was prepared
  • The accounting policy used in preparing the annual report
  • Clarification of material items of the main reports and their changes during the reporting period
  • Other significant circumstances related to the entity’s financial situation, performance, and cash flows

Company management report

The management report provides an overview of the company’s operations and the circumstances that have played a decisive role in assessing the financial situation and business activities, significant events in the financial year, and the expected directions of development in the next financial year.

If at the end of the financial year the capital of the company does not comply with the requirements of the Commercial Code (that is, it is negative), then the management report should describe the actions that are being taken to ensure the stability of the enterprise in the future, if such have not yet been taken.

For accounting entities subject to audit, the management report must include the main financial ratios for the financial year and the previous financial year, as well as the methodology (formulas) for their calculation.

Audit of Estonian companies

An audit or review of the annual financial statement aims to increase the reliability of your company’s financial information in the eyes of investors, shareholders, and the public.

Liabilities

If the company is to be audited, the annual report must be accompanied by a certified/sworn auditor’s report. An audit of annual report is mandatory for accounting entities, the annual report of which must include at least two indicators of the financial year that exceed the following conditions:

  • Income/profit from sales – 4,000,000 EUR
  • Total assets at the reporting date – 2,000,000 EUR
  • Personnel of the company – 50 people

Also, an audit of annual report is mandatory for accounting entities, in whose annual statements at least one of the indicators of the financial year exceeds the following conditions:

  • Income/profit from sales – 12,000,000 EUR
  • Total amount of assets at the reporting date – 6,000,000 EUR
  • The number of personnel is 180 people

An audit of annual accounting is mandatory for:

  • All public limited liability partnerships with more than two shareholders
  • Local authority
  • A state accounting institution
  • Legal entities governed by public law
  • Political parties and companies receiving funding from the state budget

Organisation of audits

The audit is carried out by an independent appraiser, that is, a certified auditor or an audit firm. The Board of the company appoints an auditor, determines the number of auditors, terms of payment, and the deadline of full powers. Appointment of an auditor requires their written consent. Prior to the audit, it is necessary to conclude a contract with a natural person included in the list of certified auditors in Estonia.

Liability of the parties

The certified auditor is obliged to keep confidential the information obtained during the audit and is liable for damage caused by violation of their duties arising from their professional activities.

It is important to remember that a certified audit report does not relieve the Management Board from liability for the content of the accounting report.

 

Company in Estonia OÜ offers accounting services for Estonian companies that already have a VAT number, as well as accounting services for companies without a VAT number. We have successful experience in various business segments and are currently developing over 900+ companies in Estonia and abroad. Therefore, our company additionally offers clients assistance in registering a VAT number in Estonia, assistance in obtaining an EORI number, and drawing up an annual report.

FREQUENTLY ASKED QUESTIONS

  • Why do I need to keep accounting for my company?
    When doing business in Estonia, an entrepreneur undertakes to comply with local accounting standards. The company needs to maintain accounting records so that creditors and business partners can be confident in the company’s financial position, as well as for accurate tax calculations.
  • Is it possible to order accounting services for previous financial periods?
    Yes. In this case, the price will depend on the number of transactions for the relevant financial period. Please contact us for a quote.
    • Up to 30 documents per month – 100 EUR
    • From 31 to 60 documents per month – 150 EUR
    • From 61 to 120 documents per month – 200 EUR
    Monthly fee for accounting services for active non-VAT-registered companies starts from 50 EUR a month.
  • Who is responsible for providing false information?
    Responsibility for providing false information lies with the contracting organisation and the Accountant at the same time. The client is responsible for ensuring the accuracy of the provided data on the income and expenses of the organisation, while the Accountant is responsible for the use and processing of the initial data in accordance with the letter of the law.
  • How to grant an Accountant access permission to the Tax and Customs Board?
    You can grant us access to your accounting by using a digital signature through authorisation in the e-MTA, send a power of attorney/application by email or in person at a service bureau.
    A step-by-step guide is added to the order confirmation of our services.
  • What is the deadline for submitting an annual report in Estonia?
    Annually, no later than 6 months after the end of the financial year (often – the calendar year, from 1 January to 31 December), an annual report should be prepared and submitted to the Commercial Register containing a comprehensive overview of the company’s performance for the previous financial year.
  • Do I need to submit an annual report every year?
    Yes, even if there was no business activity.
  • What should be included in the annual report?
    The information that must be provided in the annual report depends directly on the size of the company.
    • Micro-enterprise
      According to the Accounting Law, micro- and small-scale enterprises can prepare an abridged annual report, which consists of at least two main reports – a balance sheet and a profit statement, as well as up to 3 annexes. The micro-enterprise can (optionally) prepare an abridged or full annual report. Therefore, a micro-enterprise that uses the abridged annual report option is not required to prepare a management report.
    • Small-scale business
      The abridged annual report of a small-scale company is drawn up in accordance with the Estonian financial reporting standard and consists of two main reports: a detailed balance sheet and an income statement, as well as up to 9 annexes. The small business also undertakes to prepare a management report.
    • Medium-sized and large enterprise
      The annual report is drawn up either in accordance with the requirements of the Estonian financial reporting standard, or in accordance with the requirements of the International Financial Reporting Standards (IFRS): a management report, 4 main reports, and an average of 15 annexes. A full annual report is required for medium-sized and large companies as well as non-profit associations and foundations.
  • What language should the source documents be in?
    We accept documents in many languages (the accounting department considers each case on an individual basis). Be prepared that we can contact you to clarify the content of the source documents. Financial statements are prepared in Estonian (in the official currency of Estonia – the euro, indicating the degree of accuracy used in figures).
  • What data should the source accounts contain?
    Purchase and sales invoices must include the following information:
    • Title
    • Account number
    • Date of issue
    • Description of purchased goods or services
    • Amounts (quantity, unit price, total amount)
    • Names of supplier and customer
    • Addresses of supplier and customer
    • Supplier company registration number
    • VAT number of the company
  • In what format should a bank statement be submitted?
    Bank statements are allowed in PDF and XML formats.
  • Do I have to pay taxes for employees outside Estonia?
    No. If the company has employees who are not tax residents of Estonia and work outside Estonia, the salary payments to these foreign employees are not taxed in Estonia and we do not file tax returns for these employees. Foreign employees must declare their income on behalf of an Estonian company in the country in which they are taxable.
  • How will the transaction documents be delivered?
    After concluding with us an agreement on the provision of accounting services, all the source documents of your company must be sent to the provided email address of your assigned Accountant.
  • How do I access my business data?
    You will receive an access to enter our electronic accounting environment by email, where all information about your business is stored.
  • What accounting software do you use?
    Our Accountants use the following softwares: SimpleBooks, e-arveldaja, and 1C Company..
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