[vc_row][vc_column][vc_column_text]Value Added Tax (VAT), levied on goods and services sold in the course of business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. Value added tax is paid by the final consumer.
The VAT payer undertakes:
To add VAT to the price of the sale of goods or the provision of services in Estonia.
To keep records of value added tax.
To calculate and pay the VAT amount.
To store documents related to transactions and issue invoices as required.
Rates
The general VAT rate is 20% of the taxable value of goods or services.
A tax rate of 9% applies to certain goods and services including accommodation services, medicine, books, periodicals, health and hygiene products (determined by the Ministry of Social Affairs), and medical equipment for the disabled.
The 0% VAT rate applies to a range of goods, including exported goods, and consulting services provided to VAT payers in another EU Member State, as well as for ships and aircraft used in international traffic. The 0% VAT rate is also applied to services provided outside Estonia, as well as to a number of services related to water and air transport and the carriage of goods.
Requirements
First and foremost, сompanies are obliged to register a VAT number in a case when sales in Estonia exceed 40,000 EUR from the beginning of the calendar year. If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
Please note that since exceeding the threshold of 40,000 EUR, you have three working days to register your company as taxable. Hence, the Estonian Tax and Customs Board will treat your company as taxable from the moment of reaching the threshold.
It is also possible to apply for VAT before the threshold value is reached. In that case, if you feel that your company is likely to reach the threshold of 40,000 EUR, it is wise to start the process beforehand.
When VAT is registered, as a VAT payer, you must pay it to the Estonian Tax and Customs Board and submit monthly VAT returns. It refers to the months during which there was nothing to declare.
As we already mentioned, you can voluntarily register your company for VAT if you don’t exceed 40,000 EUR of annual sales. You need to prove to the Estonian Tax and Customs Board that you intend to start and run your business in Estonia. Usually, the authority asks for your business plan.
Authorities may also refuse VAT registration if your company has no visible activity located in Estonia. The consideration of your application usually takes up to 5 days. Once approved, you will receive your company’s VAT number. The Estonian VAT number starts with a prefix EE which is followed by nine digits: EE123456789.
[vc_row][vc_column][vc_column_text]Income tax is divided into income tax on natural persons and income tax on enterprises (income tax on a legal person is also paid for permanent employment of non-residents and all employers providing unique benefits). In addition to paying the income tax on the enterprise, you are also obliged to withhold the employee’s payments and pay the income tax to the Tax and Customs Department as an employer.
Income of legal persons
The peculiarity of the income tax on enterprises in Estonia is that only distributed profits are taxed. If the profit is reinvested in the enterprise, it is tax-free. You must pay income tax on distributed profits, off-business income and benefits, on gifts, donations, admissions and special benefits provided to the employee. In addition, income tax is also levied on reducing an enterprise’s capital, purchasing shares or shares, and the payment of a liquidation dividend over monetary and non-monetary contributions to the enterprise’s capital.
Rates
The income tax rate for private person earnings— 20%.
The income tax rate of a legal entity applied to dividends of profits is 20/80. The income tax rate of a legal entity, which is applied to a regularly distributed profit dividend, is 14/86, and income tax is withheld at a rate of 7 per cent in addition to dividends paid to an individual.
The amount of income tax-free depends on the income received (up to EUR 500 per month and up to EUR 6,000 per year).
If payment is made in one month:
up to 1,200 euros, then tax-free income is 500 euros
between 1,200 euros and 2,100 euros, then tax-free income is applied in the amount calculated according to the formula 500 – 500 – 900 (1,200)
over 2100 euros, then the tax-free income is zero.
Individual entrepreneurs
If you conduct business as an individual entrepreneur, you must pay income tax on income from business activities, from which business expenses are deducted. The income tax rate for individual entrepreneurs is 20 per cent. The tax period is a calendar year; as an individual entrepreneur, you must declare income once a year. The tax return must be filed by 30 April of the year following the tax period.
If you have received taxable income for the previous period, you must pay the advance income tax by 15 September and 15 December. The advance payment is 25 per cent of the income tax calculated on business income in the previous tax period.
Income of employees
Personal income is also taxed. The person making the payments must withhold and pay income tax on the employees’ gross salary, additional fees, bonuses, holidays, and other benefits that are considered to be waged.
The personal income tax rate for 2021 is 20 per cent. A single, non-taxable income of €6,000 per year or €500 per month is applied to all earnings. The additional non-taxable income from pensions and compensation for industrial accidents is lost.
If the employee has submitted to the person making the payment (employer) a declaration of the application of the tax-exempt income, you may deduct the permissible tax-free income for the calendar month before calculating the withholding income tax.
In addition to the income tax, it is necessary to deduct from the income of the employee the payments for compulsory cumulative pension and payments for unemployment insurance. It is also necessary to pay a social tax on the gross salary of the employee.
[vc_row][vc_column][vc_column_text el_class=”padding”]Value Added Tax – VAT, levied on goods and services sold in business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. The final consumer pays Value-added tax.
Companies are obliged to register a VAT number 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.
If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
Obligations
As a sales taxpayer, you must:
When selling a good or providing a service, add a sales tax to the sales price
Keep a record of turnover tax
Calculate and pay the sales tax
Keep the documents relating to the transactions and issue the appropriate invoices
From the taxable turnover, you can deduct the turnover tax (turnover input tax) paid on the purchase of a good or service used for the purposes of the taxable turnover.
Rates
According to the Estonian regulations, the total rate of turnover tax is 20 per cent of the taxable value of the good or service.
For some goods and services, a tax rate of 9 per cent is applied, for example, in the case of books and workbooks used for teaching, periodicals, accommodation services and medicines noted by the Ministry of Social Affairs, Sanitary and hygienic products and medical equipment for personal use by persons with disabilities.
Some goods are subject to a 0% turnover tax, including exported goods, consultancy services rendered to a taxpayer from another EU Member State, and water and air transport used for international flights.
In the case of services, the 0% tax rate applies, for example, to services provided outside Estonia, various services related to water and air transport, and freight services. Various social goods and services are not taxed, such as postal services, insurance, health care and social services. You will find exhaustive information about the characteristics of the turnover tax rates and exemptions from this tax in the Sales Tax Act.
Declaration
The period for VAT taxation is a calendar month. You can file a value-added tax return and pay VAT to the Tax and Customs Board by the 20th of the month following the taxation period. The declaration can be submitted electronically at the e-Tax and Customs Board (e-MTA) if you have been a VAT payer for at least 12 months or by contacting the regional tax centre of the Tax and Customs Board.
VAT for FIE
As an individual entrepreneur, you must pay turnover tax if you are registered as a sales tax liability. As in commercial associations, the obligation to register arises if turnover exceeds 40,000 euros per year.
For you, as an individual entrepreneur, the turnover tax rates are the same as for business associations. If you, as an individual entrepreneur, keep cash accounting, you have the right to keep turnover tax records also on a cash basis, but this should be notified to the Tax Office Customs department when registering as taxable sales tax.
VAT refund
A VAT refund to a taxpayer in another EU Member State is carried out on the same grounds as a VAT refund in Estonia.
Claims for reimbursement must be submitted electronically through the tax authority of the country where the entrepreneur is located, which, in turn, sends an application to the Estonian tax authority.
VAT paid by a taxpayer of another Member State in Estonia when importing or purchasing goods or receiving services used for the purpose of doing business in the country of location of this person shall be refunded to the taxpayer of another Member State on the basis of an application by the taxpayer and in accordance with the procedure established by a regulation of the person responsible for this area minister if:
In the country where the taxable person is located, the taxable person has the right to deduct the provisional value-added tax paid on the import or purchase of goods or the receipt of services under the same conditions from the calculated value-added tax.
In accordance with this Law, Estonian taxpayers have the right to deduct the provisional value-added tax paid on the import or purchase of goods or the receipt of services under the same conditions from their calculated value-added tax.
The amount of value-added tax to be refunded is at least 50 EUR per calendar year, or at least 400 EUR if the application is submitted for a period shorter than a calendar year but covering at least three months.
Not allowed to refund:
VAT is related to the activities which are tax-exempt without the right of deduction.
VAT expenses that are limited in the member state of reimbursement.
Professionals from LKS Consult OÜ assist in registering VAT. Our assistance will include the following:
Preparation of the application based on information provided by the client.
Filing the application to the Estonian Tax and Customs Board in the presence of the applicant or digitally for e-Residency cardholders.
Assistance in answering additional questions from the Estonian Tax and Customs Board.
[vc_row][vc_column][vc_column_text]Bookkeeping is an integral part of doing business on behalf of an Estonian company, which is to keep records and obtain an overview of the company’s economic performance and financial state.
Accounting is an important part of the day-to-day activities of all persons obliged to keep accounting. Its purpose is to maintain a daily record and constantly obtain an objective picture of their economic performance and financial situation.
According to the Estonian accounting act, the person obliged to keep an accounting: as a legal entity under public law, a local self-government unit, every private or public legal entity registered in Estonia, an individual entrepreneur and a registered branch of a foreign business association.
Thus, 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.
The accounting service of the enterprise includes processing and organization of information on the cash flow of the organizations in accordance with the Estonian and EU legislation. Management, accounting and tax registers are established at the customer’s request. Сomplete reporting is done to the Tax Department, the Business Register, the Statistics Department and other related institutions.
Non-VAT companies
It is essential to clarify that depending on turnover and policy, some companies register VAT while others do not. Hence, there are two different paths to follow depending on the company’s VAT status.
Companies with no monthly payments, purchases, invoices and VAT numbers can do accounts once a year before submitting an annual report. In that way, we deal with yearly based accounting.
In this regard, it is significant to consider that companies with no VAT must still collect all source documents and put them in order before submitting an annual report at the end of the year.
VAT companies
VAT or value-added tax is a broadly based consumption tax that not every company must register. VAT is required when the turnover threshold reaches 40,000 EUR. Therefore, there are two different paths to follow depending on the company’s VAT status.
A company with a VAT registered must submit tax returns every month.
It applies even if no transactions are done.
Basic requirements
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 company’s financial situation, performance, and cash flows.
All accounting documents must be kept in the archive for at least 7 years.
Basic components
Balance sheet
First, you should prepare an opening balance sheet that lists your company’s assets, liabilities, and share capital before you start an economic activity.
Annual report
Another mandatory requirement for every company in Estonia is the submission of an annual report.
The annual report’s mandatory components include the management report on the company’s activities, the balance sheet, the company’s profit and loss statement, and the company’s capital statement.
You should complete all accounting procedures before drawing up the annual report.
Bookkeeping charts
Estonian companies can choose between two types of income statement schemes. Chart 1 of the income statement shows that business expenses are divided by the nature of expenses (for example, material costs, labour costs, depreciation deductions). This way 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, labour 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.
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). Still, a company charter or other document that regulates its activities may also set a different fiscal year according to the accounting entity’s operating cycle. In exceptional cases, the financial year may be shorter or longer than 12 months but not longer than 18 months.
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 development directions in the next financial year.
Suppose at the end of the financial year the company’s capital does not comply with the requirements of the Commercial Code (that is, it is negative). In that case, the management report should describe the actions taken to ensure the stability of the enterprise in the future if such has not yet been taken.
Audit
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. A legal audit allows you to protect your business in time — to detect, minimize or completely neutralize potential risks that financial, reputational, competitive and other losses may entail.
[vc_row][vc_column][vc_column_text]On 1 July, Estonian Tax and Customs Department launches an innovative Impulss system to fill and process import declarations.
The need for a new system arises from the rules that come into force on 1 July, according to which all assumptions from third countries should be declared.
“It is important for the department that our info systems support an increase in the volume of declared parcels. Considering the trends of foreign trade and the expectations of entrepreneurs regarding the fast movement and customs clearance of goods, we have developed Impulss”, informed the head of the Customs Development Department, Ursula Riyma.
The new information system works in three languages. “Impulss will allow companies to file large-scale customs declarations and reuse data previously submitted to customs information systems. An important change is also that it will be possible to file a customs declaration in Impulss before the arrival of the goods,” explained Riema. Impulss is primarily intended for enterprises and customs agencies importing goods from outside the European Union. Individuals will be able to use the system in the event of the declaration of parcels worth more than 1,000 euros, goods with a preferential rate of turnover tax or requiring a special permit.
Well, it is required by the law. When doing business in Estonia, an entrepreneur undertakes to comply with local accounting standards. The company also needs to maintain accounting records so that creditors and business partners can be confident in the company’s financial position and accurate tax calculations.
What companies need to submit accounting reports?
All active companies and foreign branches registered in Estonia must submit reports. The accountability of every Estonian company must comply with government regulations.
What is an annual report in Estonia?
Annual reports are intended to give shareholders and other interested people information about the company’s activities and finances. The annual report’s mandatory components include the management report on the company’s activities, the balance sheet, the company’s profit and loss statement, and the company’s capital statement.
Does every company need to submit an annual report?
Yes. Each company registered in Estonia must submit an annual report. Even companies with no activity during the financial year.
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.
Does my company need a VAT number?
The obligation to register the VAT number with the company arises when the volume of sales in Estonia exceeds 40,000 EUR from the beginning of the calendar year. A company can also apply for VAT registration before this threshold is reached.
Do I need to register a company taxable if the turnover is less than EUR 40,000?
No. If the company’s turnover in Estonia has not exceeded 40,000 EUR, registration as a VAT payer is voluntary. A company can apply for VAT registration before the designated threshold is reached.
Total assets at the reporting date – 2,000,000 EUR
Personnel of the company – 50 people
Or, if at least one of the following indicators is exceeded:
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
Do I have to pay taxes for employees outside Estonia?
No, you don’t. 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.
The price of accounting depends on VAT availability. The cost can also vary depending on the amount of the processed documents, employees, and other company’s responsibilities.[/vc_column_text][/vc_column][/vc_row]
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 every company.
Balance sheet
Every Estonian company must prepare a starting balance sheet that lists the company’s assets, liabilities, and share capital before starting an economic activity.
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). Still, a company charter or other document that regulates its activities may also set a different fiscal year following the accounting entity’s operating cycle.
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 development directions in the next financial year.
Annual report
The annual report is mandatory for every company registered and operating in Estonia and must comply with government regulations. The annual report consists of an annual accounting report and a report on the activities of the company.
Audit
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.
It is important to remember that a certified audit report does not relieve the Management Board from liability for the accounting report’s content.
[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=”%7B%22default%22%3A%7B%22margin-top%22%3A%2220px%22%7D%7D”]The specialists of LKS Consult OÜ will be happy to assist you with accounting services for your Estonian company.[/vc_column_text][/vc_column][/vc_row]
If you are planning to start a business in Estonia, you need to pay attention to the accountancy of your company as all companies and branches of foreign companies operating in Estonia are subject to accounting. Below is an overview of what accounting representing in Estonia.
Accounting is an integral part of doing business on behalf of an Estonian company. Its purpose is to keep records and obtain an overview of the company’s economic performance and financial state. 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 company’s financial situation, performance, and cash flows.
All accounting documents must be kept in the archive for at least 7 years.
OPENING BALANCE SHEET
First, you should prepare an opening balance sheet that lists your company’s assets, liabilities, and share capital 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 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, labour costs, depreciation deductions). This way 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, labour 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 economic activity dynamics. However, if it turns out that the chart’s current choice 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 (following 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 firm transactions in Estonia – accrual and cash accounting. Accounting in Estonian companies is on an accrual basis, but sole proprietors (FIEs) can 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.
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). Still, a company charter or other document that regulates its activities may also set a different fiscal year according to the accounting entity’s operating cycle. In exceptional cases, the financial year may be shorter or longer than 12 months but not longer than 18 months.
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 development directions 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 has 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 and the methodology (formulas) for their calculation.
ANNUAL REPORT
Another mandatory requirement for every company in Estonia is the submission of an annual report.
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 an 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 an 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
The 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
An independent appraiser carries out the audit, that is, a certified auditor or an audit firm. The Board of the company appoints an auditor, determines the number of auditors, payment terms, and the deadline of full powers. The appointment of an auditor requires their written consent. Before the audit, it is necessary to conclude a contract with a natural person included in Estonia’s list of certified auditors.
Liability of the parties
The certified auditor must 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 accounting report’s content.
Within six months after the end of the financial year, each company registered in Estonia shall submit an annual report to the Commercial Register. Annual reports are intended to give shareholders and other interested people information about the company’s activities and finances. The annual report shall be drawn up in Estonian and Estonia’s official currency (Euro).
Annual reporting is mandatory for all companies registered in Estonia, even for companies with no activities during the financial year. A company shall submit the annual report within six months after the end of the company’s financial year. Thus, if your financial year ends on December 31, you must submit the report no later than June 30 of the next year.
You should complete all accounting procedures before drawing up the annual report.
The annual report’s mandatory components include the management report on the company’s activities, the balance sheet, the company’s profit and loss statement, and the company’s capital statement.
STAGES OF PREPARATION OF THE AN ANNUAL REPORT
Preparation of annual accounts
Preparation of a report on the activities of the enterprise
Approval of the annual report
WHAT TO INCLUDE
Filing of the annual report includes the following steps:
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.
What must be included in the report depending on the company scale:
Micro-enterprise
According to the Accounting Law, micro-and small-scale enterprises can prepare an abridged annual report consisting 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. It 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.
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
LKS Consult OÜ provides assistance in drawing up an annual report for non-operating companies and preparing an annual report for operating companies, as well as other accounting services.
Value Added Tax (VAT), levied on goods and services sold in the course of business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. Value added tax is paid by the final consumer.
Income tax is divided into income tax on natural persons and income tax on enterprises (income tax on a legal person is also paid for permanent employment of non-residents and all employers providing unique benefits). In addition to paying the income tax on the enterprise, you are also obliged to withhold the employee’s payments and pay the income tax to the Tax and Customs Department as an employer.
Value Added Tax – VAT, levied on goods and services sold in business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. The final consumer pays Value-added tax.
Bookkeeping is an integral part of doing business on behalf of an Estonian company, which is to keep records and obtain an overview of the company’s economic performance and financial state.
On 1 July, Estonian Tax and Customs Department launches an innovative Impulss system to fill and process import declarations.
Within six months after the end of the financial year, each company registered in Estonia shall submit an annual report to the