Accounting: Monthly and Annual Reports, Rules and Regulations

Accounting: Monthly and Annual Reports, Rules and Regulations
Correct accounting is vital for any business as it might evaluate the company's financial performance. In Estonia, all companies must file an accounting report on their activities to tax reporting agencies once a year and monthly if a company obtains a VAT number.

Reporting Requirements in Estonia

Basic accounting rules and processes in Estonia are regulated by The Accounting Act. Accounting for taxes is regulated by other laws and acts.

In practice, there are 4 different types of reporting:

  • Annual Reports: must be submitted by all Estonian companies
  • VAT Returns (monthly reports): must be submitted by VAT-liable companies
  • OSS/IOSS declarations: must be submitted by participants of OSS/IOSS schemes
  • TSD declarations: must be submitted by companies that have hired employees

Annual Reports

According to the Accounting Act, an accounting entity must prepare an annual report for the fiscal year at the end of each financial year (January, 1 — December, 31). If your company was incorporated after June, 30th, the report for the first 6 months will be included in the next year’s report.

The annual report should be filed at the Commercial Register within six months after the end of the financial year and consists of:
  1. Balance sheet
  2. Income statement
  3. Management report (for small companies)

Please notice that all companies must submit the annual report, even if there was no activity during the financial year.

VAT Returns (Monthly Reports)

The accounting process is a bit different for companies that obtain a VAT number. The taxable period is one month, and VAT returns must be submitted to the tax authority (even for the months when there could be nothing to declare) by the 20th day of the month following the taxable period.

In a VAT return (or ‘declaration’), a taxable person (business) gives the tax authorities in the EU country where they are registered information about:
  • their taxable (taxed/exempt) transactions;
  • the VAT they have charged their customers (output tax) and been charged by their suppliers (input tax);
  • the amount of VAT payable (or refundable).

Basically, VAT Return calculates how much VAT a company should pay or be reimbursed.

VAT tax returns can be filed using the e-Tax/e-Customs online environment: VAT declarations on form KMD and an Annex KMD INF listing all sales and purchase invoices with domestic counterparties exceeding EUR 1,000 in one month must be declared on form KMD INF. Supplies of services to VAT-registered customers of other EU Member States must also be declared in the monthly EC sales list due by the 20th of the following month.

In order to file a VAT Return, a company must collect bank statements for all accounts, incoming and outgoing invoices, as they serve as a basis for the declaration itself and must be listed in the annex. Outside of that, companies are obliged to store all invoices electronically for the next 7 years.

Correct submission of VAT returns is highly important as penalties for non-compliance are quite severe. Failure or delay of VAT return submission/payments will result in a maximum penalty of €2,000.

Submission of incorrect VAT return will result in a maximum penalty of €3,200. Deliberate inaccuracies will cost your company a maximum of €32,000. Alongside, there is an interest charged on late payment of VAT due at 0.06% per day.

OSS/IOSS declarations

OSS Scheme

A taxable person who makes use of the OSS special scheme required to submit the OSS VAT return electronically for each tax period. The tax period of the OSS special scheme is quarterly and submitted by the last day of the month following the quarter.

Deadlines for the submission of the OSS VAT return:
  • Q1 (1 January to 31 March) – 30 April
  • Q2 (1 April to 30 June) – 31 July
  • Q3 (1 July to 30 September) – 31 October
  • Q4 (1 October to 31 December) – 31 January of the following year

The tax returns of special schemes can be submitted only if a valid application for the use of the special scheme has been submitted to a tax authority. The records of all eligible sales facilitated by OSS must be kept for 10 years.

Each VAT return is assigned a unique reference number that can be used for the payment of the tax, in which case the claim will be paid immediately after the receipt of the money into the prepayment account. You can also use the reference number of the prepayment account, and then the payment will be made automatically after the payment deadline has expired.

Information to be included in the OSS VAT return

  • identification of the taxable person implementing the special scheme;
  • Member States in which the goods covered by the special scheme were sold or the services covered by the special scheme were provided
  • tax rates per Member States
  • the taxable value of goods transferred from Estonia to another Member State
  • the taxable value of goods transferred from another Member State
  • the taxable value of the services provided and the amount of VAT due on those services in euro per Member State
  • the taxable value of goods and services and the total amount of VAT due on them in euro per Member State
  • total amount of VAT due in euro.

IOSS Scheme

The ‘Import One Stop Shop’ (IOSS), is also an electronic portal, which lets you declare your sales from goods that were imported to the end consumer from outside of Europe or the European Free Trade Association. It is important to note that the IOSS arrangement can only be used for goods costing up to €150.

A company that uses the IOSS scheme can include the VAT rate in their e-shop prices, so it will already be paid at the point of sale. This will make the buying process more convenient to the customer since they don‘t have to deal with paying the VAT when receiving the goods.

The IOSS scheme declarations are done monthly at the end of each month (the date isn’t specified) and you are obliged to keep the accounting documents for 10 year.

TSD declarations

Declaration of income and social tax, unemployment insurance premiums and contributions to mandatory funded pension (form TSD) must be submitted by the 10th day of the month following the month the payment was made. TSD declaration displays data according to the paid compensations; for example, the September TSD, which is added in October, displays information about actual compensations paid in September (payments from bank or cash must be added to the September compensations). This type of declaration must be submitted by each company that has employees.

The declaration includes a summary form and annexes. Annex will include the exact calculation of social tax. We recommend to check out EMTA website to find out instructions on the exact calculation.

If a person has been hired with an employment contract, but was not paid a salary for the month of the declaration, it is possible to click on ‘Create an entry for social tax minimum obligation’ when preparing an entry. In this case, the person working based on an employment contract is also added to the declaration and the minimum amount of social tax is calculated for that person.

How Accounting Works on Enty

All accounting subscriptions on Enty are designed to minimize efforts of our clients and let them focus on their business. The main basis for our approach is simple — you upload reporting documents, we take care of reporting. That’s it but we want to explain the process a tiny bit more.

  • Purchase a subscription with Enty
  • Book a call with an accountant (each accounting package includes 1 consultation per chosen period)
  • Prepare your questions to our accountant and send them to us before the call
  • Get on the call with an accountant
  • Grant access to your Private Client's page on the Tax and Customs website. We have prepared a separate guide on the process, in order to avoid confusion, you can check it out here.
  • Upload accounting documents to Enty
  • Our accountant might request additional information or documents from you in order to file the report
  • The accountant will file the report and you will be able to check it out in your profile on Enty

And that's it, you won't need to do anything else. We will file the report for you and will notify you as soon as everything is done.
Helpful Resources:
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