Annual report in Estonia: 10 questions from e-Residents and SME owners
As is common throughout the world, Estonia requires companies to file an annual report. By doing this, the government asks ‘How your business is going?’
The annual report is your answer, in a defined and structured way, an overview of the business performance during the last year of operation. ‘We’re doing well, here are the figures’ reports the company.
The submission of the annual report for legal entities is mandatory by law. Every year, we help e-residents to prepare and submit hundreds of such reports. This article gathers information on the most frequent questions about this report for small businesses in Estonia.
Who Prepares Annual Report
Let’s get this straight — you will unlikely make the annual report with your own hands. In most cases, it’s done by a professional accountant. Since small companies or solopreneurs don’t have accountants on the staff, they usually seek either freelance accountants or back-office service providers.
There are weighty reasons to call upon the service of a professional:
Language skills. Under the Estonian Commercial Code, the annual report must be prepared in Estonian. And yes, along with key figures there are in the report some written parts in which Estonian accountants routinely do better than Google translate.
Time-saving. Proper accounting, even through the convenience of the Estonian system, requires a thorough knowledge of the subject.
What takes you days to learn the requirements to filling, to sort out documents, to bridge discrepancies, etc., that takes hours for the qualified accountant.
Insurance against mistakes. The mistakes you, accidentally or not, make in the annual report are considered an offense. Professional accountants and business service providers who are permitted to act on your behalf share your responsibility and alleviate the burden.
Is there Anything Else I Need to Know About Annual Reports
Even though you’re supposed to delegate the annual report preparation to an accounting service provider, you have to learn basic things. It’s good to know the deadline for filing the annual report to engage an accountant in advance.
You need to know what should be done from your side since you provide primary documents to an accountant. You need to understand what you sign, that is to ‘read’ component parts of the report. Then you will be able to use the report then for your own due diligence, presentations for investors, etc.
When Annual Report Should Be Filled
The deadline for submission of the annual report in Estonia is 6 months after the end of the financial year. The financial year in Estonia matches the calendar year, thus the document is due on June, 30th.
As long as you may face some problems in the process of preparation like missing documents or discrepancies between real cash flow and invoices, we highly recommend not postponing it till the very last days of June.
If you incorporated your company in Estonia in the second half of the year, i.e. after June, 30th, then you’re permitted to file the annual report the following year, which includes that period.
An example: Your Estonian company was formed on 01/09/2022. So, you may not submit the annual report that’s due on June, 30th of 2023. Instead, you can file the report in 2024 and put there your activity in the whole of 2023 plus 4 months of 2022.
Or, you may submit the first annual report for the short period of September-December of 2022 till the end of June 2023, and from the next year submit ‘normal’ annual reports. It usually depends on the level of business activity.
NB! Collecting the necessary documentation and data 1 year and 4 months back will be certainly trickier than 4 months back.
Enty will file the reports on behalf of your company. All you have to do is upload the documents.
Does my Company Need an External Audit
No, most likely you don’t need an external audit for an annual report. On Enty, we focus on accounting for small companies, and 100% of our clients have never needed an audit inspection.
There are thresholds for an audit defined in the law, however, small businesses are usually far from exceeding sales income € 1,600,000 or the number of 24+ employees.
What Is Required From Me
You have to provide the accountant with the primary documents and information in certain formats required for this purpose. A list of documents is as follows:
Bank statements
Here you need to download the separate statements on all the accounts, currency accounts, and fintech providers accounts (Wise, Revolut, etc.) that are connected to the business. Set the period from 01.01.2022 to 31.12.2023 before downloading.
Supporting documents on the receipt and expenditures
You need to check whether all the incoming and outcoming payments are justified by documents. It goes usually about the invoices since it’s the most common and convenient type of document.
Management report
You provide some clarifications about your business, then an accountant puts it in writing. For small businesses, it’s a standard and templated text. You merely answer questions like ‘when your company is established’, ‘what is it engaged in’, ‘do you comply with Estonian laws’, etc.
How to Streamline My Accounting
With Enty, accounting is easy as it can be. First, you will have a call with a professional accountant that will answer your questions and will help choose the accounting solution that suits your company.
After that, you will need to upload the documents (we’ll remind you to do that) and our accountant prepares and files the report on the behalf of your company.
Outside of that, Enty helps companies solve more routine tasks by automation of services. We offer a single subscription and single Control Panel to orchestrate 7+ essential back-office tasks processes.
Issue invoices, create contracts, complete other corporate tasks and keep all your company data in one place with Enty.
What Is the Work of the Accountant
Once again, a professional accountant in Estonia is the link you cannot throw out of the annual reporting. S/he specifies a list of primary documents for you, flags up the discrepancies, and helps you to fix them.
How to correctly replace a missing document? What reasoned that cost? What if I used my private account at that time? Will I be able to pay a dividend? This is when you’d like to count on a piece of professional advice.
Then an accountant assembles the figures and facts under the required form of the annual report and asks you to sign it.
How Do I submit the Annual Report
Well, you can sign and submit a prepared annual report with your Digital ID card if you opened a company in Estonia via e-Residency. Log in to the e-Business Register and proceed to ‘Submission of a report’.
If you incorporated a company via a notary (likely with one of the service providers), then your service provider or licensed Estonian accountant will submit the report on your behalf.
I’ve Submitted my Annual Report, What’s Next
Congrats! Now you can distribute dividends. Or, you can retain profits in the business. Thanks to Estonian laws, profits reinvested back in your business won't be a subject to taxation. But the main thing is that annual report for the period is behind you and now you can choose what to do next!
