Financial reporting and auditing of companies in Estonia: instructions

Estonia has long established itself as one of the most convenient jurisdictions for doing business in Europe – the digitalisation of government services, a simple taxation system, and transparent rules of the game attract entrepreneurs worldwide. However, even in this technologically advanced country, doing business requires compliance with certain obligations, particularly in financial reporting and auditing.

In this article, we will look at how and when companies in Estonia must submit financial statements. In those cases, an audit is mandatory, and the deadlines that need to be considered and the penalties that are threatened in case of non-compliance. This will be useful both for current owners of Estonian companies and those who are just planning to enter the market of this country.

Financial reporting obligations for companies in Estonia

All legal entities registered in Estonia must submit annual financial statements to the Commercial Register (Äriregister). This rule applies to local enterprises and companies managed by foreign owners, including e-residents. Reporting is done online through the e-Business Register system.

Important: Even if a company did not carry out any business activities during the reporting period, it is still required to file an annual report with the Commercial Register. A zero report is filed in this case, confirming the absence of income, expenses, and commercial transactions.

Who should submit reports:

• OÜ (osaühing) is the most popular form of company among entrepreneurs, including e-residents;
• AS (aktsiaselts) — joint-stock companies;
• Branches of foreign companies in Estonia;
• Other legal entities registered in the country.

What do financial statements include?

Reporting is prepared in Estonian using Estonian Accounting Standards (EAS) and IFRS, depending on the size of the company and its international operations. A typical set of reporting includes:

• Balance (Statement of Financial Position);
• Income Statement;
• Statement of changes in equity;
• Cash flow statement;
• Business activity report;
• Explanatory note to the financial statements.

There are simplified requirements for preparing and submitting reports for micro and small enterprises. In particular, micro enterprises (turnover up to 50,000 EUR, balance sheet less than 175,000 EUR) submit an abbreviated annual report: balance sheet, profit and loss statement, up to 4 annexes. An activity report is optional.

Small enterprises (turnover up to 8 million EUR, balance sheet up to 4 million EUR, up to 50 employees) submit a shortened report: balance sheet, profit and loss statement, activity report and up to 10 annexes.

Deadline for submitting annual reports in Estonia

Companies must file their annual financial statements no later than 6 months after the end of the fiscal year. For most companies, the fiscal year lasts 12 months and coincides with the calendar year, starting on January 1 and ending on December 31. For example, if the fiscal year coincides with the calendar year, the deadline for filing reports is June 30 of the following year.

Liability for violation of reporting deadlines in Estonia

Failure to submit a financial report on time entails several sanctions under the Estonian Commercial Register Act.

1. Penalty warning: In most cases, the Commercial Register sends a notice with an additional 30-day period to correct the situation. There will be no consequences if the report is submitted within this period.
2. Penalty for the company: If the reporting requirement is not met even after the deadline extension, a fine of up to 3,200 EUR may be imposed. Important: even after paying the fine, the report must still be submitted.
3. Fines for officials: The law also allows for fines to be imposed on company executives, including board members, if they fail to ensure timely reporting.
4. Warning of possible exclusion: If the company ignores the requirements even after penalties, the Register may warn of potential exclusion from the Commercial Register. The procedure begins approximately 6 months after the end of the reporting period.
5. Forced deregistration: In case of systematic disregard of the requirements, the Commercial Register has the right to forcibly deregister a company, even without the consent of its owners.

Company audit in Estonia: when is it mandatory?

In Estonia, not all companies are required to undergo an audit. The mandatory audit or review of financial statements depends on the size of the company and its economic performance. The law provides for two types of audits: a full audit and a review (review audit).

Mandatory audit criteria in Estonia

An audit becomes mandatory if a company exceeds at least two of the following indicators:

• Assets at the end of the financial year: 2.5 million EUR
• Net sales: 5 million EUR
• Average number of employees: 50 or more

Review criteria:

A review of financial statements (not a full audit) is required if two of the following criteria are exceeded:

• Assets at the end of the financial year: 1 million EUR
• Net sales: 2 million EUR
• Average number of employees: 24 or more

Important: An audit is not required if a company exceeds the thresholds for only one year. An audit or review becomes mandatory if the indicators are exceeded for two consecutive years.

A company can also initiate a voluntary audit on its own, for example, to increase the confidence of investors or partners, at the request of banks or other financial institutions, or for reporting in another country.

Static report on Estonian companies

In many countries, the submission of a statistical report by a company is mandatory. Statistical reporting can also be submitted in Estonia, but not by all companies, but only by those selectively invited to do so by Statistics Estonia (Statistikaamet). If your company is selected to participate in a statistical survey, you will receive an official notification via an electronic system. Accordingly, submission of statistical reporting in Estonia is mandatory only if a request is received.

Suppose a company invited to participate in statistical accounting does not submit a report or provides inaccurate data. In that case, Statistics Estonia has the right to take the following measures:

• A department representative may issue an official order requiring a report or correction of data.
• Failure to comply with the order may result in a fine of up to 2,000 EUR imposed on the company or the responsible person.

VAT reporting (Käibemaks) in Estonia

Estonia’s Value Added Tax (VAT) applies to most goods and services. Accordingly, companies registered as VAT payers must regularly submit reports to the Tax and Customs Board (Maksu- ja Tolliamet).

Who must register as a VAT payer?

• A company must register as a VAT payer if its turnover exceeds 40,000 EUR during a calendar year.
• Voluntary registration is also possible, even if the turnover is lower. This is often beneficial for companies cooperating with other VAT payers or engaging in foreign economic activities.

Basic VAT rates:

• Standard rate: 22%
• Reduced rate: 9% (e.g. for books, medical supplies)
• 0% rate: for exports, services to foreign customers, transit operations

Frequency of VAT reporting

VAT returns are usually filed monthly, regardless of turnover. Companies with a VAT number must file the following forms:

• KMD is a basic VAT declaration;
• KMD INF is an appendix to the declaration detailing transactions with other VAT payers in Estonia.

The submission deadline is no later than the 20th of the month following the reporting period.

Important: A zero declaration is still filed if there were no VAT transactions during the month. Late filing or non-payment of tax may result in fines and penalties.

Thus, financial reporting and auditing are essential responsibilities faced by every company registered in Estonia, regardless of size or activity. Meeting deadlines, submitting reports correctly, and understanding VAT and auditing requirements help avoid fines and maintain a good reputation for the company.

To ensure compliance with legislation and avoid reporting errors, we recommend working with proven accountants who are well-versed in the specifics of the Estonian system.

If you need reliable support, Bcorp provides professional accounting support services in Estonia, including preparing annual financial statements, tax reporting, VAT support, and audit organisation.