Preparing and filing the report for the business year (annual report) 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.
What does the annual accounting report consist of?
The annual report must comply with the established rules and standards, and include the following items:
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).
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.
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:
- 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;
- explanation as to the financial reporting standard applied in the preparation of the annual report;
- accounting principles used to prepare the annual report;
- explanations and clarifications on significant items and articles, changes in the main statement and during the reporting period.
The obligation to prepare and file annual financial statements (annual report) 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 filing annual financial statements
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.
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 do I file my annual report?
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 to prepare an annual report?
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. You can learn more about other accounting services on our webpage.