Annual report for Estonian companies

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:

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:

  • 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.

Zero balance

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.

Contact person in Estonia

In early 2018, amendments to the Commercial Code came into force in Estonia. According to them, all foreign companies are obliged to appoint a local contact person to whom official documents and notices addressed to the enterprise can be delivered.

The need for a contact person arose from the fact that Estonia has become rather popular for company registration by non-residents, and the number of Estonian companies set up by foreigners has exceeded several tens of thousands. As the actual connection of such companies with Estonia may be minimal, it is necessary to provide a steady channel of communication and transmission of notices, declarations of intent and other relevant correspondence between the governing bodies, managers of foreign companies, state authorities, counterparties and/ or potential creditors of the company.

Thus, according to Section 631 of the Commercial Code of the Republic of Estonia:

  1. An undertaking may designate a person to whom the procedural documents of the undertaking and the declarations of intent addressed to the undertaking (hereinafter contact person) may be delivered in Estonia. Upon delivery of a procedural document or declaration of intent to the contact person, the respective procedural document or declaration of will is deemed to have been delivered also to the undertaking.
  2. If the management board of a commercial partnership or a body substituting therefor is located in a foreign country, the company must appoint a contact person specified in subsection 1 of this section. In such case, only a notary, advocate, law office, sworn auditor, tax representative of a non-resident or a provider of trust and company services may be designated as a contact person. The address of the contact person shall be considered the address of the company in such case.

The purpose of introducing the concept of a contact person is to fully legitimise the situation when a company registered in Estonia is fully managed from abroad, and all the management bodies of a legal entity are located in a foreign country.

The powers of a contact person

A contact person is in one way or another a representative of the company and their details are included on the company’s registration card. However, the representative function of the contact person is solely passive – the contact person is only authorised to accept official documents addressed to the undertaking. A contact person does not hold any rights to take legally significant actions on behalf of the company.

However, it should be noted that under the current legislation, delivery of any notices or documentation to the contact person is equivalent in nature to the delivery of these materials to the management board or general managers of the company. Moreover, upon the appointment of a contact person, their contact details become part of the official contact details of the company, and the address of the contact person becomes the official address of the foreign company.

Can you start a company without a contact person?

When non-residents register a company, the presence of a contact person is a condition at the notary stage as well as when registering a company in the Estonian Commercial Register. If it is revealed that a company failed to appoint a contact person, the Commercial Register will grant a term for eliminating the deficiency, and the company will not be registered until the appointment of a contact person.

If the company is found to have an obligation to appoint a contact person, but this obligation has been ignored for any reason, or the previously appointed contact person has resigned, the Commercial Register is entitled to establish a term for the company for the elimination of the deficiency; in case of failure to comply with this requirement, the Commercial Register is entitled to fine the company or initiate proceedings for the forced liquidation of the legal entity.

Who can be a contact person?

The law stipulates that not everyone is entitled to become a contact person in foreign companies. The purpose of narrowing the pool of potential candidates for contact persons is to grant this right to representatives of only such professions that are by default subject to increased requirements for qualifications and due diligence and who look unambiguously trustworthy persons in the legislators’ and public eyes.

Thus, according to current legislation, notaries, lawyers, sworn auditors or providers of trust and company services may serve as contact persons.

Order a contact person service in Estonia

Our company is registered as a contact person in the Estonian Commercial Registry and holds a state licence no. FIU000144, issued by the Estonian Financial Intelligence Unit (FIU), thus we are legally authorised to offer contact person services to our clients.

The cost of the contact person service is €150 per year

You can find more information about the provision of representative services and virtual office services in Estonia on the thematic page of our website. If you would like to order contact person services, please contact our specialists by phone, e-mail or by filling out the relevant form on our website.

A company in Europe – why Estonia?

Do you want to start a business and register a company in Europe? We recommend that you consider opening your company in Estonia since it has many assets and stands out among other European Union countries.

At the end of 2021, there were 241,181 companies registered in Estonia out of which 24,779 (about 10%) were established last year. Given the size of Estonia’s population (1.3 million inhabitants), these figures clearly demonstrate that Estonia is a popular destination for foreign businesses to minimise jurisdictional and other risks as well as to optimise taxes.

Here are the 10 key reasons why you should set up your business and register a company in Estonia:

  1. In Estonia, there is no tax on retained earnings at all. This means that the profits of any Estonian company are exempt from corporate income tax until they decide to pay dividends and the accumulated profits are distributed among the company’s participants. This allows companies registered in Estonia to accumulate profits freely and invest funds without paying corporate taxes.
  2. Estonia ranked 1st on the International Tax Competitiveness Index thanks to its extremely straightforward and transparent tax system. The process of calculating, declaring, and paying taxes is easy, convenient, and as automated as possible. All legislative acts and tax regulations are written in simple and clear language, you can find all the necessary information on the website of the Estonian Tax and Customs Board, and the tax administration employees are always friendly and ready to help you.
  3. Estonia has the most favourable business climate – it is not for nothing that Estonia holds leading positions in various international rankings: 7th place in the Index of Economic Freedom and 18th place in the Ease of Doing Business Index.
  4. Unlike many other European countries, there is no need to contribute authorised capital when registering a company in Estonia, which makes the process of starting a business straightforward and unbureaucratic.
  5. Estonia has been a member of the European Union and the European Union Customs Union since 2004, which means that all customs duties and restrictions on trade activities throughout the EU are abolished.
  6. An e-Residency programme was put in place for foreigners in Estonia in 2014, allowing non-residents to obtain an electronic signature accepted in Estonia and other European countries. The e-Residency and electronic signature enable non-residents to use various online services, including the electronic Business Register through which you can register a company quickly and conveniently and carry out further management of the enterprise.
  7. You can instantly and effortlessly open accounts for your Estonian company in electronic payment systems such as Wise, Paysera or Revolut, which will facilitate entering international markets.
  8. Even though official paperwork in Estonia is conducted in Estonian, you can always contact and communicate with government authorities in Russian or English.
  9. The registration process in Estonia is as efficient, transparent and unbureaucratic as possible. In just a few days, you can register a company in-person, remotely by the power of attorney or online using e-Residency.
  10. To establish a business in the Republic of Estonia, you don’t have to involve local residents in its structure. The founders and general managers may be 100% non-residents of Estonia.

This is by no means a complete list of advantages in choosing Estonia for setting up your business in the European Union. You will find more information about the procedure and conditions for establishing an enterprise in Estonia on the thematic page of our website.

If you are interested in registering a company in Estonia, or if you have any questions, feel free to contact our specialists by phone, e-mail or by filling out the appropriate form on our website.

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