1. Basics of Accounting in Estonia

1.1 Regulation and Accounting Standards for SMEs

Estonia has a well-defined framework ensuring companies maintain proper accounts and transparency. The accounting environment for SMEs in Estonia is regulated by national law and standards (Estonian GAAP) aligned with international norms. The Accounting Act and EASB guidelines tell you what and how to report, while the Tax Board and Business Register enforce when to report. As an entrepreneur, following these standards and keeping good records will keep your Estonian company in good standing.

Key points on regulation and standards: 

Accounting Standards for SMEs in Estonia

Most small and medium-sized companies in Estonia use Estonian GAAP, known as the Estonian financial reporting standard or “good accounting practice.” Estonian GAAP is built on IFRS for SMEs principles (International Financial Reporting Standards for small and medium entities) with some modifications to simplify it. IFRS as adopted by the EU is permitted for companies whose owners prefer international standards, but for a typical SME it’s usually not mandatory. In fact, using local GAAP is recommended for most SMEs because it’s more straightforward and tailored to Estonian requirements. Only certain regulated industries (like banks or insurance companies) must use full IFRS by law.

Minimum Documentation Requirements 

Every company must maintain proper bookkeeping records and supporting documents. This means recording all business transactions (sales, purchases, payments, etc.) in a double-entry accounting system (accrual basis), and preserving source documents such as invoices, receipts, contracts, bank statements, and expense reports. By law, key accounting source documents and financial reports must be kept for at least 7 years after the end of the financial year​. This retention ensures that in case of an audit or any review, you can produce the necessary documents. In practice, many companies use digital accounting software or services (like Enty) to store these records securely, but you should always ensure backups since auditors or authorities may request to see originals.

1.2 Annual Report

All Estonian companies – even the smallest OÜ (Ltd) – must prepare and submit an Annual Report for each financial year. The annual report is a public document that summarizes your company’s financial performance and activities over the year. Here’s what SME owners need to know:

Content of the Annual Report in Estonia

A standard annual report usually contains:

Annual Accounts (Financial Statements)
Typically includes:

• Balance Sheet

• Income Statement

• Notes/Annexes
  
  

  (For larger companies):

  - Cash Flow Statement

  - Statement of Changes in Equity
  
  

Activity Report (Management Report)

Simplified Reporting for Small Companies and Micro-Enterprises

Small companies and micro-enterprises benefit from reduced reporting requirements:

Micro-enterprises can submit an abridged annual report:

• Only need to provide:

  Simplified Balance Sheet
  Simplified Income Statement (with notes)
  
  

• Management report can be skipped

This makes the process easier and less time-consuming for very small businesses.

Definition of a Micro-Enterprise in Estonia:

A company qualifies as a micro-enterprise if it meets all the following criteria:

• Assets do not exceed €175,000

• Annual revenue does not exceed €50,000

• Liabilities do not exceed equity

• Has a single owner-board member

Annual Report Deadline 

The annual report must be filed within six months after the end of your company’s financial year.

• For most companies (using the calendar year), the deadline is June 30—since their fiscal year ends on December 31.

• If your company’s financial year is different (for example, you’ve chosen a non-calendar 12-month period), your deadline is six months after your specific year-end date.

Tips:

• Don’t leave it until the last minute! June is the busiest month for submissions in Estonia, so the system can get overloaded.

• Submitting your report earlier can help you avoid technical issues and the risk of late fines.

Submission Process

How to submit  annual report in Estonia

Annual reports are submitted electronically through the e-Business Register portal, which you can access with your Estonian ID card or e-Residency card. The report itself is prepared in an XBRL (XML-based) format—either by filling out the online form or uploading your data directly.

Who signs and submits the report?

• The company’s management board is responsible for approving and signing the annual report.
  
  

• At least one board member must sign the report digitally.
  
  

• If you’re a solo founder/board member:
  Simply sign the report using your Estonian ID card or e-Residency card.
  
  

• If there are multiple board members:
  Usually, all must sign unless your articles of association state that a single board member can represent the company (in which case, one signature is enough). The portal will guide you through the signing process.

What if a required signer doesn’t have Estonian e-ID?

You have two options:

• Print and sign on paper: The board member signs a physical copy, and you attach a scanned signature page to the electronic submission.

• Use a notary: You can have the report submitted via a notary, which is helpful for anyone without digital access (but this option may be less convenient and involve extra fees).

The portal provides step-by-step instructions to ensure you complete the process correctly.

Enty’s Role: If you use Enty, preparing and filing the annual report can be streamlined. Enty provides a step-by-step workflow where your accounting data (transactions, invoices, etc.) throughout the year are compiled into the required annual report format. You simply review the pre-filled statements and Enty can file the report on your behalf via integration with the e-Business Register (with your authorization)​. This saves time, especially for e-resident entrepreneurs handling things remotely. (For detailed guidance, see Enty’s guide on filing annual accounting reports.)

Key tip: Always double-check that all transactions of the year are recorded before finalizing the report. Once your report is complete, approved, and signed by the board, submit it on time. After submission, the annual report becomes public record (available for anyone to view on the Business Register). A timely, accurate annual report not only fulfills legal requirements but also helps demonstrate your company’s transparency and reliability to partners.

1.3 VAT Declarations

If your Estonian company is registered for Value Added Tax (VAT), you will need to file regular VAT declarations. Let’s break down the requirements:

VAT Registration

When it comes to VAT, first of all, you should check if you need to register for VAT. By general rule, you are required to register for VAT in Estonia if your taxable turnover exceeds €40,000 in a calendar year. If your sales subject to Estonian VAT go over this threshold, you must apply for VAT payer status. You can also choose to register voluntarily before reaching the threshold.

After registration:

• You must charge VAT on your sales.

• The current standard VAT rate is 22%, but it will increase to 24% from July 1, 2025.

• You can also reclaim VAT on your business purchases.

How to register:
VAT registration is managed by the Estonian Tax and Customs Board (EMTA). Once your application is approved, you’ll receive a VAT number for your business.

Frequency and Deadlines 

Reporting period:
The default VAT reporting period in Estonia is monthly. There is no option for quarterly domestic VAT returns.

Filing deadlines:
You must submit your VAT return (Käibedeklaratsioon or form KMD) for each month by the 20th day of the following month.

Example: your January VAT return is due by February 20. If the 20th falls on a weekend or public holiday, the deadline usually moves to the next business day.

Required forms:
KMD (VAT return): The main form you must submit every month.
KMD INF (appendix): This is an additional report that lists sales and purchase totals with each business partner (for invoices over €1,000).

Special arrangements:
The monthly reporting rule applies to almost all businesses. Exceptions—such as an extended reporting period—are rare and require special approval.

Additional reporting for EU trade

If you sell goods or services to other EU countries, you may also need to file:
- An EU Sales List (form INF) by the 20th of the following month.
- An Intrastat report by the 14th of the following month, but only if you exceed certain trade volume thresholds.

These additional reports apply mainly to companies engaged in cross-border trade within the EU. For most domestic businesses, monthly KMD and KMD INF filings are the core requirements.

Submission and Format

 VAT returns are submitted to the Tax Board through the electronic tax system e-MTA (e-Tax). It’s most convenient to do it online: you can fill the form manually on e-MTA or upload an XML/CSV file exported from your accounting software. 

The e-MTA portal is in English and Estonian, and submission is paperless — your authentication with ID-card/e-Residency card acts as a signature. Typically, the board member or an accountant with power of attorney can submit the return. Many companies grant their accountant or a service provider (like Enty’s accountants) access rights to e-MTA to handle this on their behalf. 

Enty’s platform, for instance, can automatically prepare the VAT declaration from the invoices and expenses you’ve entered, ensuring all required fields (like sales by VAT rate, purchases, etc.) are calculated. You would then simply review and Enty can file it electronically for you via the integration or provide the file to upload.

VAT Payment

Along with filing the return, any VAT payable must be paid by the 20th as well. The e-MTA system will show the amount due, and you can pay via bank transfer to the Tax Board’s account using your reference number. If your purchases exceeded sales in a month (resulting in a refundable VAT credit), you would declare a negative amount and the state can refund it or carry it forward (usually the Tax Board might offset it against future liabilities or pay it out on request, typically within 30 days if everything is in order).

By staying on top of VAT filings – i.e., keeping sales and purchase records each month and submitting by the 20th – you ensure your company remains compliant. Missing a VAT return or payment can lead to interest on tax owed (0.06% per day for late payments) and risk your tax compliance rating. Fortunately, with digital systems like e-MTA and accounting tools, VAT reporting can be done relatively quickly once your bookkeeping for the month is complete.

1.4 Payroll Process

If your Estonian company has employees or board members receiving salaries, you need to handle payroll accounting and tax reporting. Estonia’s system is straightforward but has specific deadlines for declaring and paying labor taxes. Here’s what to do:

Registration of Employees 

When you hire an employee in Estonia, you must register them in the employment register (Töötamise register) no later than their first working day. This is done through the e-MTA portal by entering their personal details and employment details. (If you use Enty or another service, they can assist with this registration as well.) Don’t forget to deregister the person within 10 days after they leave your company.

Payroll Calculation

Each month, you will calculate gross wages and then compute the applicable taxes. In Estonia, payroll taxes include:

• Income tax (20% flat in 2025, applied to taxable income after personal allowances)

• Social tax (33% of gross, paid by the employer)

• Unemployment insurance (1.6% employee + 0.8% employer) – these rates may change slightly; they are set by law

• Mandatory pension fund (2% employee, if the employee is enrolled in the II pillar pension, generally born 1983 or later, as noted in Estonian law)

These taxes are generally withheld or added on top of salary. 

Example: if an employee’s gross salary is €1,000, the employer will withhold the employee’s income tax and contributions (the employee gets net ~€800-900 depending on their exemptions), and the employer will pay an additional ~33% social tax on top. The total cost of that €1,000 gross to the company is about €1,338 including all taxes in this example. (You don’t need to memorize these rates here – payroll software or Enty’s system will calculate them for you automatically.)

Monthly Tax Declaration (Form TSD)

All these salary-related taxes are reported and paid via a combined monthly declaration called Form TSD. The TSD (Declaration of Income and Social Tax, Unemployment Insurance and Pension Contributions) must be submitted by the 10th of the month following the month of payment. For instance, for salaries paid in January, the TSD must be filed by February 10th. By the same date, the taxes must be paid to the Tax Board. You can submit the TSD through e-MTA (online form or XML upload similar to VAT). 

Quick tip: if you have only a few employees, you can even use a simplified form on paper (up to 5 entries), but since you’ll likely use e-MTA, it’s all digital. As with VAT, the person filing can be a board member or an authorized accountant. Many entrepreneurs choose to have an accountant or payroll service handle the TSD filing – for example, Enty’s accountants can auto-generate the TSD based on payroll entries and submit it on your behalf once you approve the numbers, making the process nearly hands-free.

Payslips and Record-Keeping

By law, you should provide employees with a payslip each payday (virtually all Estonian companies do this electronically via email or a portal). Ensure you keep payroll records, as they are part of accounting records that must be retained (7-year rule applies here too). The Tax Board can conduct audits or inquiries, so having a clear record of gross pay, tax withheld, and net pay for each worker each month is important​.. Enty and other payroll systems will store this info for you.

Monthly Payroll Process in Estonia: At a Glance

Each month, the payroll process involves a few key steps:

1. Register any new employees

2. Calculate salaries and payroll taxes

3. Pay out net salaries to employees by the agreed payday

4. Submit Form TSD and pay all related taxes by the 10th of the following month

Important:
Meeting the 10th-of-the-month deadline for submitting Form TSD and paying taxes is essential. Late submissions can result in penalties—and mishandled taxes can lead to unhappy employees.

To avoid issues, it’s best to set up a consistent routine or use an automated payroll service to ensure everything is processed accurately and on time.

1.5 Consequences of Non-Submission

Failing to comply with the reporting deadlines mentioned above can lead to serious consequences for your company and even personal liability for its directors. Estonia is very digital and efficient in compliance monitoring – so assume that a missed deadline will be noticed. Here’s what to expect if you delay or fail to submit required reports:

Consequences of missing the Annual Report deadline in Estonia

If you don’t submit your annual report by the deadline (typically June 30), the Commercial Register can impose a fine of up to €3,200 on your company—and, under rules effective since 2023, this fine can be issued immediately after the deadline without any prior warning.

• The registrar can issue repeated fines until the report is filed, so the longer the delay, the more the penalties can add up.

• Fines can be imposed both on the company and on the responsible management board member.

Beyond financial penalties, if you continue to ignore your annual reporting obligations:

• The authorities may start compulsory dissolution proceedings, which could result in your company being removed from the Business Register (effectively liquidated) due to non-compliance.

• This step is usually taken only if the report is overdue for a significant amount of time and the company ignores multiple reminders.
  
  

Important:

• There’s no exemption for inactive companies—you must file a report even if there were no transactions during the year (a so-called “nil report”).

• In short, don’t ignore the annual report deadline. The consequences include not only fines but also the risk of losing your business entirely.

Let Enty handle it for you. Preparing and submitting annual reports can be stressful and time-consuming. Enty can manage all your reporting requirements, ensuring everything is filed correctly and on time. It’s always better to trust the professionals and avoid unnecessary risks.

Late VAT Declaration

If you miss the 20th-of-the-month deadline for filing your VAT return, the Estonian Tax and Customs Board (EMTA) will mark your account as overdue.

Interest on late VAT payments:
If you owe VAT and pay late, you’ll be charged interest at a rate of 0.06% per day on the outstanding amount (which adds up to about 22% annually). Even a short delay can quickly become expensive.

Penalties:
There is no formal “penalty fee” for simply submitting a late return if you don’t owe any VAT. However, if you consistently fail to file, the Tax Board may contact you and, in more serious cases, impose a fine under the Taxation Act.

Additional consequences:
Your company’s tax behavior rating (an internal score EMTA uses) could be affected. Poor ratings may result in increased audits or closer scrutiny. Repeated or extreme non-compliance could lead to the tax authority freezing VAT refunds or, in severe cases involving deliberate tax evasion, even criminal proceedings.

What to do if you miss the deadline:
If you realize you’ve missed the VAT filing deadline, submit your return as soon as possible. The e-MTA portal will still accept late returns and automatically calculate any interest due.

Bottom line:
While an honest mistake usually just leads to financial consequences (interest and possibly a statutory penalty), it’s always best to file promptly. Staying on top of deadlines helps you avoid costly interest, fines, and unwanted attention from the authorities.

Consequences of Late Payroll (TSD) Declarations in Estonia

Missing the TSD payroll tax filing deadline (the 10th of each month) can have serious consequences:

Interest Charges:
Like VAT, any unpaid payroll taxes will accrue interest at 0.06% per day. Since payroll taxes are often substantial, even a short delay can become expensive.

Impact on Employees:
If the company fails to declare payroll taxes, employees’ personal tax records may not show their income and tax payments correctly. This can create problems for them when filing their annual tax returns.

Fines and Legal Liability:

• The Tax Board can impose fines for failure to withhold or pay taxes as required—these fines can reach several thousand euros, depending on the situation.

• Persistent or severe non-compliance can expose board members to personal liability under Estonian law. 

• Knowingly failing to pay over taxes withheld from employees may be considered misappropriation, which is a serious offense.

In summary:
The consequences of late payroll reporting range from costly interest and fines to legal risks—including personal liability for board members. Always prioritize payroll tax obligations: they not only affect your company but also your employees’ welfare and legal standing.

“Registry Blocking” in Estonia

This term refers to how non-compliance can freeze your business activities. For instance, the Business Register will not register changes for your company (like changes in shareholders or board) if annual reports are overdue. Banks in Estonia also often check the register, and an overdue report can harm your credibility or even cause banks to restrict your account. If the situation escalates to dissolution, the company essentially gets removed (which is an extreme form of “blocking” – you lose the right to operate). There’s no direct concept of a “registry code block” short of those measures, but practically, an entity not in good standing can’t expand or sometimes even continue normal operations.

Criminal Liability

Simply late-filing a report is generally not a criminal matter – it’s administrative. However, under the Penal Code and other laws, certain accounting-related violations can be criminal. For example, if a board member intentionally fails to keep accounting records or tampers with them to hide assets or avoid taxes, that can lead to criminal charges. Also, providing false information in your annual report or tax declarations (fraudulent data) is a criminal offense. These are rare and worst-case scenarios, usually involving willful misconduct or fraud. As a straightforward entrepreneur who might just be a bit late, you shouldn’t fear criminal charges – focus on correcting the lapse promptly.

In summary, non-submission or late submission is taken seriously in Estonia. The system is designed to encourage timely compliance (with automatic fines and interest). If you find yourself behind, act quickly: submit the required report or declaration as soon as possible, even if late, to mitigate penalties. And if you ever face issues, consider reaching out to a legal advisor or a service like Enty, which can communicate with authorities and help get your compliance back on track.

1.6 Statistical Reporting Obligations for SMEs

For most small and medium-sized enterprises (SMEs) in Estonia, statistical reporting is minimal beyond regular tax filings.

Annual Report:
The main requirement for all companies is submitting the annual report. This report provides the financial data Statistics Estonia uses for national statistics. For the majority of small businesses, filing the annual report on time fully meets their statistical obligations.

Intrastat Reporting:
Intrastat reports are only required if your company sells physical goods to other EU countries and your annual dispatches exceed €350,000 (as of 2025).

• If you exceed this threshold, you’ll need to submit monthly Intrastat declarations through the eSTAT portal, detailing the type, value, and destination of goods sold.

• Starting from 2025, import reporting is no longer required—only dispatches (exports) matter for Intrastat.

Enty can assist you in preparing and submitting eSTAT forms, so you can trust professionals to handle the process accurately and save you time.

Other Statistical Surveys:
Additional surveys—covering areas like employment, wages, or specific sectors—generally apply only to larger companies or those randomly selected by Statistics Estonia.

• For example, companies with more than 20–50 employees might be asked to submit quarterly financial or workforce surveys.

• If your company is selected, you’ll receive a notification via eSTAT, and participation is mandatory.

1.7 Glossary of Estonian Accounting and Tax Terms

Below are the terms that should demystify many phrases you’ll see in Estonian accounting forms or guides. Being familiar with them will help you navigate tax filing and reporting in Estonia more confidently.

• Käibedeklaratsioon (KMD) – Monthly VAT return for VAT-registered companies. Must be filed if annual taxable turnover exceeds €40,000. Due by the 20th each month.

• KMD INF – Annex to the VAT return listing invoice details of transactions over €1,000 between Estonian VAT-payers. Submitted with KMD monthly.

• Maksu- ja Tolliamet (MTA) – Estonian Tax and Customs Board. Manages all tax filings, VAT, payroll taxes, and corporate tax.

• e-MTA – Online portal for submitting tax returns (KMD, TSD, etc.) and managing tax accounts. Accessible with Estonian e-ID or Smart-ID.

• TSD (Tulu- ja sotsiaalmaksu deklaratsioon) – Monthly payroll declaration reporting salaries, income tax (20%), and social tax (33%). Due by the 10th of the next month.

• Tulumaks – Estonian income tax. Withheld at 20% from employee salaries and paid monthly via TSD.

• Sotsiaalmaks – Social security tax paid by employers at 33% of gross salary. Covers health insurance and pensions.

• Juhatuse liige – Member of the management board (company director). Responsible for company compliance, filings, and legal representation.

• Majandusaasta aruanne – Annual report submitted to the Commercial Register summarizing the company’s financial year. Due within 6 months after year-end.

• RIK (Registrite ja Infosüsteemide Keskus) – Centre managing Estonia’s Commercial Register and the e-Business Register portal where companies submit reports.

• KMKR number – VAT registration number (format: EE123456789). Required on invoices once VAT-registered.

1.8 FAQ - Basics of Accounting in Estonia

Finally, here are some frequently asked questions from foreign entrepreneurs about accounting in Estonia, along with easy-to-understand answers:

• Q: My Estonian company had no activity or revenue this year. Do I still need to submit an annual report?
  A: Yes. Every company must file an annual report, even if it had zero transactions. In case of no activity, you would submit a “zero” annual report (sometimes called a nil report) with just the bare minimum statements. The requirement applies regardless of activity. Not filing it can lead to fines or your company being removed from the register, as discussed above.
  
  

• Q: Can I file my annual report in English?
  A: The official annual report must be prepared and submitted in Estonian (the forms on the e-Business Register are in Estonian). You may attach an English translation for your own stakeholders, but the Estonian version is the legally required one. Many foreign founders get help from local accountants or services to handle the Estonian report. The e-reporting system has an English interface to guide you, but the final output is in Estonian format. (Tip: Enty’s service can produce the report in Estonian for you, so you don’t have to worry about the language.)
  
  

• Q: Do I have to follow Estonian GAAP, or can I use IFRS for my bookkeeping?
  A: Estonian GAAP is the default standard and is sufficient for SMEs. You can opt to use IFRS (International Financial Reporting Standards) as adopted by the EU, but it’s typically used by large or internationally-owned companies. Estonian GAAP is very close to IFRS for SMEs and is much simpler to apply for a small business. If you do choose IFRS, you must apply all its rules and disclosures which can be a lot of work. In practice, stick to GAAP unless you have a specific reason; your annual report can be compiled under GAAP and will be accepted by authorities. (Note: Some companies that plan a global expansion or are subsidiaries of foreign IFRS-reporting parents might use IFRS. But you’d likely know if that applies to you.)
  
  

• Q: My company is very small (micro). Do I really need to hire an accountant, or can I do bookkeeping myself?
  A: Technically, you can do it yourself if you’re familiar with accounting principles and the e-services. Estonia’s systems (e-Business Register, e-MTA) are user-friendly. For a micro-enterprise (see criteria in 1.2), accounting might involve just recording a few transactions per month. However, be aware of compliance details: correct bookkeeping entries, tax calculations, and submission formats. If you’re not comfortable, using a professional accountant or a platform like Enty can save you time and ensure accuracy. They will prepare the required reports while you focus on business. In short, it’s possible to DIY, but consider the value of your time and the risk of mistakes.
  
  

• Q: Does my small OÜ need an auditor?
  A: No, not unless you grow substantially. Audit requirements kick in only when companies reach medium size (see thresholds in section 1.6). If your sales, assets, and employee count are all well below the limits, you don’t need an audit or review – just the standard annual report. Many private limited companies with just a few people never need an audit in their lifetime. If you approach the threshold, your accountant should alert you. You can also voluntarily get an audit if you want (for example, some startups do one for investor confidence), but it’s not mandatory for typical small businesses.
  
  

• Q: If my filing deadline falls on a weekend or holiday, what happens?
  A: If an official deadline (be it annual report, VAT, or TSD) falls on a non-working day, the deadline usually moves to the next working day. For example, in 2024 the annual report deadline of June 30 fell on a Sunday, so submitting on Monday, July 1, 2024 was still considered on time​rask.ee. The systems typically take this into account automatically. However, it’s best not to rely on that and aim for earlier, to avoid any confusion.
  
  

• Q: What are the penalties if I make a mistake in the reports (not late, but incorrect info)?
  A: If you accidentally submit incorrect numbers (e.g., forget to include an invoice or mis-categorize something), you should correct it as soon as possible. For VAT returns, you can file a corrected return; for TSD, you can submit an amended declaration. The Tax Board is usually lenient on genuine corrections – you won’t be fined for an honest mistake if you proactively fix it. For the annual report, if you discover an error after submission, you may have to submit a revised report or correct it in next year’s comparative figures. Minor accounting errors are usually not penalized; the purpose of audits and reviews (if they happen) is to catch and correct those. However, deliberate misreporting or fraud is treated harshly. Always aim for accuracy, but don’t panic if you realize you made a small mistake – just amend it and keep documentation of the correction.
  
  

• Q: Where can I find official information or get help on Estonian accounting?
  A: Great question! Key resources include:
  
  

  • The Estonian Tax and Customs Board (EMTA) website, which has English guides for VAT, income tax, etc., and a self-service portal.

  • The e-Residency Knowledge Base, which has articles on accounting and taxation for e-residents (much of the info applies to any foreign entrepreneur, not just e-residents).

  • The Estonian Business Register website for annual report instructions and even sample reports.

  • Professional service providers (like Enty, 1Office, Xolo, etc.) often publish free blog articles and FAQs on these topics (much like this guide!). They are very useful for practical explanations and updates on law changes.

  • If you need personalized advice, you can reach out to Estonian accounting firms or consultants; many specialize in helping foreign founders and offer initial consultations.