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.
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.
Procedures for maintaining internal accounting should be developed at the beginning of the activity.
Internal accounting procedures should:
Internal accounting rules are binding and individual for each and every company.
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.
| Minimum service cost | 90 EUR/month | Capital obligation | not required |
| Annual report writing | from 250 EUR | Local staff member | not required |
| Corporate income tax | 0% | Physical office | not required |
| Convention for the Avoidance of Double Taxation | 62 countries | Accounting audit | not required |
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
The number of attachments to the annual report depends on the specifics of the company, but you should definitely include:
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.
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.
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:
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:
An audit of annual accounting is mandatory for:
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.
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.
| Title | Description |
|---|---|
 EMTA |
Estonian Tax and Customs Board |
 ariregister.rik.ee |
Business register |
 creditinfo.ee |
Krediidiinfo |
 kalkulaator.ee |
Salary/Wage and Tax Calculator |
The Estonian Economic Code permits the establishment of a limited liability partnership without contribution, but prohibits the increase and reduction of the charter capital of a limited liability partnership, and payments from a limited liability company until the deposits are paid in full. Therefore, in order to be able to make payments from accumulated profits to shareholders, the authorized capital must be paid in full.
Only an individual can be a shareholder in a private limited liability company without a deposit. Prohibited payments mean payments to shareholders from capital (dividends, buybacks of own shares, etc. etc.), so payments made in the ordinary course of business (wages, remuneration of a member of the board of directors, etc. are not subject to the prohibition.
The distribution of dividends in a limited liability company requires the existence of already distributed profits. Thus, in addition to monetary and non-monetary contributions, the question also arises as to whether and to what extent the equity of a private company can be paid without contributions from (free or tied) equity, i.e. issue a fund and/or compensate (dividend) claim. When the nominal value of a share increases due to free capital, that is. e. in the case of the issue of the fund, there is no obligation to pay profits to shareholders (as opposed to paying dividends to shareholders)and thus one or the other solution may also mean another tax regime.
Until the contribution is paid in full, the distribution of profits (dividends) among the shareholders is excluded, and thus there can be no shareholder claim for payment of dividends (to be deducted) to the limited liability company. This is primarily because the dividends cannot be distributed chronologically until an internal payment is made. In practice, the interpretations of the Ministry of Justice and the Commercial Register (courts) differ. The Ministry considers the real «monetary» payment to shareholders as a payment, and the Commercial Register considers the payment as creation of a claim. If a private limited liability company has money, in practice it is still possible to lend to shareholders and compensate for later liability on payment of dividends with a comparable loan requirement. Such conduct is not likely to infringe the interests of creditors, but is contrary to the prohibition of lending in the Economic Code. The interpretation of the Ministry of Justice can be assessed in the same way, in which case the interests of creditors are not violated, but contradicts the ban on payments provided by the Economic Code. For example, such profit sharing is considered as shareholder sharing for tax purposes.
Although, according to the Commercial Code, a limited liability company may increase its authorised capital at the expense of the equity of a limited liability company without making contributions (issue of a fund)the share of the shareholder increases in proportion to the nominal value of the share in the event of the release of the fund. Since the Economic Code prohibits increasing (and reducing) the authorised capital of a private company until the full payment of contributions, and the increase in the nominal value of a share means an increase in the authorised capital, it becomes unrealistic to make a contribution from own capital. It also does not depend on the treatment of unpaid authorised capital, as:
In the first case, the issue of a fund would clearly mean an increase in the authorised capital and, would thus, be contrary to the prohibition of an increase in the authorised capital in the Economic Code. The second and third options, too, will not be much better, so the surest way to pay for a deposit is a monetary or non-monetary contribution to the charter capital.
Running an Estonian company requires a comprehensive understanding of the country’s legal and tax framework and corporate accounting principles, which makes Estonia attractive to international entrepreneurs due to its openness and tax transparency. Despite these advantages, insufficient knowledge of local legislation can be a serious obstacle. As part of our law firm, we provide comprehensive accounting services in Estonia, allowing clients to optimise resource allocation and focus on business development.
Our services include the accurate recording of all economic transactions throughout the month, ensuring the completeness and legality of financial documentation. We carry out monthly declarations of VAT and other taxes, provide tax optimisation for dividend and payroll calculations, and file the necessary Intrastat declarations in the case of international trade.
According to Estonian law, every company is obliged to keep documented records of its activities. Our team of specialists is ready to provide in-depth expertise and support in setting up efficient accounting and taxation, developing personalised solutions for your business.
Our list of services includes:
We strive to offer competitive pricing and customised commercial offers, taking into account the unique characteristics and needs of each business. Our services cover a wide range of industries, including high-tech startups, e-commerce and crypto projects. In addition, we offer free use of our online accounting system, which greatly simplifies financial transactions and increases control over a company’s economic health.
Comprehensive accounting and legal support: Our firm offers qualified accounting and legal support services for start-up companies and those seeking to restructure internal processes. We will conduct a thorough analysis of your intended business processes, discuss tax and accounting aspects with you, and develop an efficient internal infrastructure to ensure your business successfully enters the market.
Tax and accounting consulting services: The goal of our services is to increase the efficiency of accounting and tax accounting management. Our experts will help you choose the optimal business model and organise internal processes so that every aspect of your business is clear and predictable.
Organisation of the accounting system: Before starting a business, it’s important to carefully consider all aspects of your accounting processes. We can help you formulate and approve internal rules and instructions for accounting, including how to keep track of fixed assets, how to conduct inventory, and much more.
Preparation of the opening balance sheet: All companies are required to prepare an opening balance sheet showing assets and liabilities prior to commencing operations. This document is the basis for starting the accounting process and defining the financial strategy.
VAT registration and obtaining an EORI number in Estonia: We can help you register for VAT if your annual turnover exceeds 40,000 euros, or apply on a voluntary basis depending on the specifics of your business. We also provide assistance in obtaining an EORI number for international traders.
Our services are designed to ensure that your business can not only comply with all legal requirements, but also grow effectively with reliable accounting and tax practices. Our goal is to provide you with the tools you need for a successful and stable business.
Overview of Financial Statements: Financial statements are a unified document that provides information about an organisation’s financial position, performance and changes in financial position. It is a key tool for providing objective and reliable data on a company’s financial performance to its government, business partners and the public.
Annual Accounts: In line with the principles of reliability, consistency and transparency, our experts provide a full range of services for the compilation and preparation of annual and other types of financial statements, taking into account the specifics and needs of your business.
Submission of annual reports: All companies registered in Estonia are obliged to submit an annual report to the Commercial Register within six months after the end of the financial year. The report must include a balance sheet, income statement, explanatory note and cash flow statement.
Zero Balance Annual Report: Even if a company has no business activity, it is required to file a zero balance annual report confirming that there are no transactions for the reporting period.
Interim financial reporting: Reporting for periods other than the financial year is necessary for internal company needs, including determining seasonal financial indicators, or to provide information to creditors and partners.
Statistical reporting: Enterprises participate in the collection of data for statistical surveys that help to assess the economic development of Estonia. These reports are submitted through the electronic system eSTAT.
Verification and correction of financial statements: Our accountants closely monitor the correctness of financial statements, ensuring that errors are detected and corrected in a timely manner, which guarantees the accuracy of the data presented.
Each of these services is focused on meeting the needs of your business and ensuring compliance with Estonian legislation, while maintaining the transparency and reliability of your financial transactions.
Preparation and filing of VAT (KMD) and income tax (TCS) returns
General aspects of tax reporting: Tax reporting is a set of measures for the preparation and submission of standardised declarations reflecting the financial results of an enterprise’s activities and the implementation of tax liabilities for a certain period. These declarations are submitted to the tax authorities within strictly established deadlines.
Tax reporting to the Tax and Customs Department: Our team of specialists is committed to maximising efficiency and simplifying the data collection and tax reporting process, using advanced technological solutions.
Income Tax Returns (ITRs): Companies that make taxable payments to their employees are required to file TCJA declarations, which include data on income and social tax, contributions to unemployment insurance and mandatory funded pensions.
Value Added Tax (VAT) returns: Registered VAT payers must submit regular returns (KMDs) containing information on turnover and imports, including information on transactions taxed at zero or reduced rates.
Internal turnover reports in the European Community: Companies supplying goods or services to partners in other EU countries must file internal turnover reports (UA declaration).
Specialised tax procedures (MOSS, OSS, IOSS): We provide assistance in preparing and filing returns under specialised tax regimes for electronic services (MOSS), remote sales of goods within the EU (OSS) and imports of goods from outside the EU (IOSS).
Checking and adjusting tax returns: Our qualified accountants ensure the accuracy of tax returns by performing a thorough review and adjustment to avoid errors that could result in penalties or other financial penalties.
Special cases of taxation: The preparation of declarations for non-residents or employees performing work abroad is also part of our range of services, taking into account all the necessary tax nuances.
We provide a full range of tax planning and reporting services, giving our clients professional support in navigating the complex Estonian tax legislation system, allowing them to focus on developing and expanding their business.
Definition and objectives of an audit: An audit of financial statements is a process of detailed examination and analysis of a company’s financial statements conducted by a specialised audit firm or an independent chartered auditor. The main purpose of the audit is to ensure the accuracy, transparency and reliability of the information on the financial position and performance of the company submitted to the Commercial Register and the Tax and Customs Board.
Scope of audit: The most frequent audit is the annual financial report of organisations. In the process of audit a thorough analysis of financial and accounting documentation is carried out, as well as an assessment of the business processes of the company. As a result of the audit, a conclusion is formed on the state of financial and economic indicators of the company.
Criteria for the need for an audit:
Audit organisation and support: Our company has considerable experience in organising and supporting audits for companies in various sectors of the economy. We provide comprehensive services ranging from preliminary consultations and assessment of your company’s financial position, to adjustment of accounting principles and support at all stages of the audit.
An effective audit not only helps to maintain financial transparency and trust among investors and regulators, but also identifies potential risks and opportunities to optimise operations, which is key to a company’s sustainability and success in the market.
The importance of human resources management: Effective human resources management is a key aspect of successful business operations, which includes regulating labour relations between employer and employee, ensuring that the rights and obligations of both parties are respected. Accurate maintenance and archiving of labour records contributes to the legal protection of the company and its employees.
A range of HR services: We offer a wide range of services for organisations of all sizes:
Advantages of outsourcing personnel accounting: Outsourcing HR services allows companies to reduce the risks associated with non-compliance with labour laws and ensure that all necessary calculations and tax deductions are accurate and timely. It also helps to optimise internal resources and focus on the development of core business areas.
We are committed to ensuring that every aspect of HR management is carried out with the highest level of professionalism and accuracy, ensuring full compliance with legislative requirements and the best possible management of your organisation’s human resources.
Day-to-day accounting and financial monitoring: Our accounting system ensures continuous maintenance of accounts and cash flow control, which provides up-to-date, objective and comparable information on the company’s financial position and performance. This is the basis for making informed management decisions.
Access to online accounting: Our accounting software is available online in English and Estonian, allowing you to manage your company’s finances regardless of your location. This is ideal for international teams and remote working.
Creating and sending invoices: The software makes it easy to create and send invoices. You can easily create invoices, personalise them according to your business needs and send them to clients directly or through your accountant.
Real-time overview of financial performance: Get information on accounts receivable, outstanding invoices and performance over the last 6 months. All data is presented in clear graphs, making analyses quick and efficient.
Sending expense documents via mobile app: Simply take a picture of your expense documents and send them to your accountant via our mobile app. It’s convenient and time-saving.
Use of electronic invoices (e-invoices): Our system supports e-invoicing, simplifying the invoicing and payment processes.
Fixed monthly cost: We offer fixed rates based on your company’s workload and needs. This makes budgeting easier and provides financial stability.
These services help to not only simplify accounting, but also make it more efficient by providing comprehensive tools to manage your company’s finances.
Daily record keeping and processing of documents:
Reporting:
Counselling Services:
These services are aimed at optimising business processes, improving financial transparency and simplifying document management, ultimately helping to increase efficiency and reduce the company’s operational risks.
Payroll: Accurate and timely calculation of payroll, including all relevant taxes and contributions.
Personalised approach: Each customer receives a tailor-made offer that is precisely tailored to their needs and business specifics, allowing them to make the best use of the services provided and guarantee their high quality.
These services are aimed at ensuring full financial transparency, efficient tax planning and strengthening the financial stability of the company, contributing to its sustainable development and growth.
In Estonia, as in many other countries, accounting plays a key role in business management. All legal entities and self-employed persons registered in Estonia are required to keep accounting records. This requirement not only guarantees compliance with the law, but also ensures the transparency of the business, which is important for its owners, investors, creditors and state authorities.
Accounting Objectives:
Accounting standards: Estonian legislation allows a choice between two main accounting standards:
The choice of standard depends on many factors, including a company’s size, area of operations, and international relationships. Companies that actively engage with foreign partners or plan to enter international markets may prefer IFRS to increase the transparency of their financial statements. However, many local companies choose the Estonian standard because of its compliance with local legislative requirements and easier integration with the national tax system.
Effective bookkeeping requires knowledge and understanding of relevant laws and standards, as well as regular updates in line with changes in legislation and the business environment. Accounting errors can lead to financial losses, fines or even legal consequences, making accurate and up-to-date accounting records critical for any business.
Fair and objective reflection of the financial position In Estonia, reports must accurately reflect the financial position, results of operations and cash flows of the company. The reports must be up-to-date, comparable and understandable for all stakeholders.
Documentation of business transactions Each business transaction must be confirmed by primary documents, the content and form of which allow a third party to verify the reliability of these transactions.
Registration of economic transactions All economic transactions should be recorded in the accounting registers within a reasonable time after they have taken place to ensure the accuracy and timeliness of accounting records.
Preparation and submission of annual report Every company is required to prepare and submit an annual report to the business register within six months after the end of the financial year.
Retention of accounting records Accounting records must be retained for the statutory periods.
Opening Balance Sheet Before starting business operations, an opening balance sheet must be prepared to show the company’s assets, liabilities and equity.
Internal accounting procedures Companies that are not micro-enterprises should develop internal accounting procedures that describe all aspects of accounting policy, from documenting transactions to reporting.
Income statement formats Companies can choose between two income statement formats: by nature of expense or by functional classification. The choice of format should provide the most complete view of the company’s financial performance.
Accrual and cash accounting In Estonia, accrual accounting is generally accepted, but self-employed persons may keep accounts on a cash basis. Accrual accounting requires that transactions are recognised when they occur, regardless of actual cash flows.
These requirements ensure transparency and compliance with international standards in accounting, which is critical for internal and external confidence in companies’ financial statements.
Our organisation provides a full range of accounting and tax services to meet the needs of small and medium-sized businesses in Estonia. Your services are tailored to different industries, making them in demand by a wide range of clients, including trading and construction companies, cafes and online shops, as well as IT and cryptocurrency companies.
An overview of the services offered:
1. Monthly bookkeeping service:
2. Annual Report:
3. Tax Accounting:
4. Registration Services:
5. Audit Services:
6. Accounting Recovery:
7. Support of tax audits:
Advantages of co-operation with your company:
Your approach to accounting services helps clients not only to comply with legal requirements, but also to optimise their financial and management processes. In-depth knowledge of local and EU legislation ensures high accuracy in accounting and taxation, which is critical for effective management and business development.
This comprehensive accounting service allows your clients to focus on their core business, relying on the professionalism and expertise of your team.
Accounting in Estonia plays a critical role in ensuring the transparency of a company’s financial position by providing management and government authorities with up-to-date information on economic performance and cash flows. Let us consider the key aspects of accounting, tax reporting and management accounting, as well as the main requirements and practical approaches to accounting in Estonia.
Differences between accounting, tax reporting and management accounting
Accounting:
Tax reporting:
Management Accounting:
Simplifying accounting for your company
Additional accounting services
These aspects emphasise the importance of an integrated approach to accounting and tax reporting that not only ensures compliance with legislation but also supports the sustainable development of the 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.
Yes. In this case, the price will depend on the number of transactions for the relevant financial period. Please contact us for a quote.
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.
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.
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.
Yes, even if there was no business activity.
The information that must be provided in the annual report depends directly on the size of the company.
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).
Purchase and sales invoices must include the following information:
Bank statements are allowed in PDF and XML formats.
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.
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.
You will receive an access to enter our electronic accounting environment by email, where all information about your business is stored.
Our Accountants use the following software: SimpleBooks, e-arveldaja, and 1C Company.
+372 5492 3720