One of the key specializations of our company within the provision of accounting services is the preparation of annual reports. Our team possesses extensive experience and professional knowledge in this area, enabling us to efficiently handle any tasks related to financial reporting. Our approach to each client is individualized, ensuring not only the precise compliance of the reports with all standards and requirements but also their maximum informativeness and usefulness for the business.
In this article, we will focus on issues related to the preparation and submission of annual reports, discuss key aspects, and offer you useful recommendations.
WHAT IS AN ANNUAL REPORT?
What does the annual financial report consist of?
Preparing and filing the report for the business year is mandatory for all legal entities and enterprises that are registered and operating in Estonia. The annual report is submitted to the Commercial Register, and all information in the report becomes public – everyone has the right to access the financial statements of any enterprise.
The main purpose of introducing the obligation to prepare and submit financial statements to the Commercial Register annually is to provide objective and reliable information on the financial position and the results of the company’s business activities to governmental authorities and other interested parties.
The annual report must strictly adhere to established rules and standards, presenting a complete and accurate financial picture of the organization.
It is important that it reflects the real financial position, results of operations, and changes in the financial stability of the company for the reporting period, while ensuring transparency and reliability of the information provided to shareholders, investors, and regulatory authorities.
The company’s reporting must necessarily include the following items:
Balance sheet
The balance sheet provides information about the company’s financial position, including its assets, liabilities, and equity, as of the last day of the financial year (31 December by default).
Income statement
The income statement lists the income and expenses of the enterprise within the reporting period (year), reflecting the economic indicators of the company, including income, expenses, profit or loss.
Cash flow statement
The cash flow statement reflects the cash flows of the enterprise for the reporting period, including cash receipts and cash equivalents and disbursements, as well as payments made by the company during its business activities, grouped according to their purpose as cash flow from operating activities, investing activities and financing activities.
Statement of changes in equity
The statement of changes in equity reflects movements and transformations in the company’s equity that occurred during the reporting period, including contributions to the authorised capital of the company or payments made to the company’s participants, profit or loss as well as other significant circumstances and data that affected the size of the company’s equity.
Additional information
Depending on the specifics of the commercial activities of the enterprise, the annual financial report must include certain additional information. As a minimum, the following annexes should be attached to the annual report:
a) report on the activities of the enterprise – a description of the company’s activities and its plans as well as of other significant circumstances that are relevant in the context of the annual report;
b) explanation as to the financial reporting standard applied in the preparation of the annual report;
c) accounting principles used to prepare the annual report;
d) explanations and clarifications on significant items and articles, changes in the main statement and during the reporting period.
In compiling annual reports, standards based on the International Financial Reporting Standards (IFRS), adapted to local regulatory requirements, are used. These standards aim to ensure transparency, comparability, and reliability of financial information presented by companies across various sectors of the economy.
ZERO BALANCE
Is it necessary to submit an annual report if no activity was carried out?
The obligation to prepare and file annual financial statements applies to all companies, regardless of whether the company was economically active during the financial year or was idle for any reason.
In case of a complete absence of any economic activity of the legal entity (there is not a single accounting transaction in the bank or the cash register), it is necessary to prepare and submit a zero balance report to the Commercial Register.
DEADLINES FOR SUBMISSION OF ANNUAL REPORTS
By what date should the annual report be submitted?
The annual report must be prepared, approved and submitted to the Commercial Register within half a year (6 months) after the end of the business year. Thus, if the business year of the enterprise is equal to the calendar year (from 1 January to 31 December), the deadline for filing the annual financial report will be 30 June.
What happens if you don’t submit your annual report on time?
If the annual report is not filed by the due date, the Commercial Register is entitled to impose penalties on the company. As a rule, for the first warning, the Commercial Register gives the enterprise an additional term (typically 30 days) to submit the annual report. Further, if the company ignores the indicated order, it may be fined up to EUR 3200 (typically EUR 200-300). Finally, if neither orders nor penalties have any effect, the Commercial Register can initiate compulsory liquidation proceedings against the company.
Recently, the Commercial Register has started to pay particular attention to businesses that do not fulfil their obligation to file financial statements with the governmental authorities. Thus, the number of orders and fines issued by the Commercial Register has increased tenfold. Thereby, we strongly advise you not to delay preparing and submitting your annual statements and fulfil all obligations on time.
HOW TO SUBMIT AN ANNUAL REPORT?
What methods can be used to submit an annual report to the Commercial Register?
By default, the annual report is submitted to governmental authorities in electronic form through the online portal of the Commercial Register. To provide the accountant with access to the online environment, used for filling out the forms and preparing the annual report for filing and subsequent signing of the financial statements, the general manager of the company (member of the management board) must have a valid electronic signature (ID-card, Mobile-ID or e-Residency).
As an exception, if all general managers of a company are non-residents who do not have an Estonian personal identification code and the right to electronic signature, they can sign the annual reports by hand and submit a scanned copy of the signed report to the Commercial Register. In this case, the accountant will pre-fill out all the necessary forms, generate a standardised report form and provide the Commercial Register with a scanned copy of the annual report signed by the general manager of the company independently on his own behalf.
DO YOU NEED HELP?
Get a quote for preparing an annual report today!
If you need help preparing and filing an annual report for your enterprise, feel free to contact our accountants. To assess the work to be completed and prepare a quotation, we will need a brief description of the activity of your enterprise, as well as statements of all transactions from the bank and cash register, if any.
Usually, it takes our accountants one week to prepare and check the annual report. In this case, the cost of accounting services starts from EUR 150.
Annual report in Estonia | Frequently Asked Questions (FAQ)
Below, you will find a list of frequently asked questions in terms of preparation and submission of the annual report in Estonia, which are encountered by our consultants during their work. Familiarization with these materials may be relevant for you.
- What is the annual report of an Estonian company?
The annual report is an official document containing information on the financial indicators and activity of the company for the business year.
- Where is the annual report submitted?
In Estonia, the annual report is submitted to the Estonian Business Register.
- What are the terms of the annual report submission?
The annual report should be submitted within 6 months after the expiration of the financial year of the company. In most cases, when the financial year of the enterprise matches the calendar year, the report should be submitted not later than on June 30 of the next year.
- Should the company submit the annual report, if it did not conduct any economic activity?
Yes. Even the companies which did not conduct any economic activity during the year should submit the annual report upon the general conditions. In this case, the report will be reflecting the absence of financial transactions and activity, which is also important for the Business Register.
- What data should be included in the annual report?
The annual report should contain the information on the financial indicators of the company, such as: (1) the balance sheet; (2) the profit and loss statement; (3) the cash flow statement; (4) the annexes clarifying the financial data and (5) the auditor’s report (if the audit is obligatory).
- How to submit the annual report?
The annual report is submitted via the e-portal of the Business Register. To get access to the portal, you will need an Estonian electronic signature (an ID card, an e-Residency or a Mobile-ID). If you do not have the electronic signature, you may use the services of a local accountant in order to submit the financial report.
- What will happen if I do not submit the annual report on time?
If the annual report is not submitted on time, the Business Register may impose a fine, the amount of which is going to depend on the company type, seriousness of the breach, previous behavior and other circumstances. If the penalty measures do not have any effect, the compulsory liquidation of the company with its further exclusion from the Business Register may be initiated.
- Is the performance of audit of the annual report of an Estonian company obligatory?
The company should perform an audit if it meets at least two of the following three criteria: (1) the book value of its assets exceeds 2 million EUR; (2) its annual turnover exceeds 4 million EUR; or (3) the average number of its employees exceeds 50 people.
- Where can I find the information on the submitted annual reports of other companies?
The information on the submitted annual reports of other companies is available on the website of the Estonian Business Register, where you may search by the company name or registration number. You will be able to look through all the financial reports of the company you are interested in in the PDF format, as well as the key financial indicators of the enterprise.
- What happens after the submission of the annual report?
After the submission of the annual report, the Business Register verifies the submitted documents and introduces the corresponding information to the register. If any mistakes or inaccuracies are found in the documents, you may need to provide additional clarifications or introduce corrections to the existing financial reports of the company.
- May I correct the annual report after its being submitted?
Yes. If you find any mistakes or inaccuracies in the financial report after its being submitted, you may submit a corrected version of the document. It is highly recommended to do it as soon as possible to avoid any punitive measures or questions from the controlling authorities.
- May the annual report be submitted in English?
No. All the documents submitted to the Estonian Business Register should be in Estonian. If your financial report is initially drawn up in English or any other foreign language, you will need to have it translated it into Estonian before submitting it.
- Which consequences may occur as a result of provision of false information in the annual report?
The provision of false information in the annual report is a direct violation of the legislation of the Republic of Estonia and may lead to penalties, administrative and (in some cases) criminal sanctions. Besides, this may negatively influence the reputation of the company and lead to problems with tax authorities and other controlling organizations.
- Should the annual report be posted on the website of the company?
The legislation of Estonia does not require posting the annual report on the website of the company. However, some companies do it voluntarily in order to ensure translucency and provision of information to prospective investors, customers and partners.
- May I change the financial year of the company?
According to the legislation of Estonia, companies may change their financial years by taking the corresponding resolution of the founders and further introduction of changes to the Business Register. However, the change of the financial year may influence the terms of submission of the annual report of the company.
- What should I do if I have any questions in terms of preparation and submission of the annual report?
If you have any questions in terms of preparation and submission of the annual report, you may seek assistance from professional accountants and financial consultants.
- May my company be liquidated because of untimely submission of the annual report?
In case of multiple failures to meet the requirements in terms of annual report submission, the Business Register may initiate the procedure of liquidation and removal of the company. However, this usually happens only after a long period of failures to meet the requirements and the company being warned about possible consequences many times. If you submit the financial report late, but regularly remedy your violations and cooperate with the Business Register, the probability of liquidation significantly reduces.
- How to introduce changes to the annual report after its being submitted?
If you find any mistakes or inaccuracies in the already submitted annual report, you should submit a corrected report to the Business Register; you will need to fulfill and submit the documents similar to those submitted initially, having clarified that this is a corrected version of the report.
- May the Business Register provide assistance or consultations in terms of annual report preparation?
The Business Register provides the general information and instructions in terms of preparation and submission of the annual reports on its website. However, the Business Register does not provide individual consultations on the financial report preparation. In case of any questions or problems, we recommend you to turn to the professional consultants, accountants or lawyers specializing in corporate and tax legislation of Estonia.
- Who is responsible for submission of the annual report?
The Board Members (Directors) of the company are responsible for correct and timely submission of the annual report.
