Accounting

When conducting business in Estonia, you must comply with the Estonian accounting and reporting requirements. Proper accounting ensures transparency for business partners and creditors and enables the correct calculation and reporting of taxes. 

Accounting framwork

There are three main sources governing accounting in Estonia: 

• the Accounting Act of the Republic of Estonia;
• Estonia’s Good Accounting Practices;
• the guidelines issued by the Accounting Standards  Board of the Republic of Estonia.

Financial statements must be prepared using either the Estonian financial reporting standard (local GAAP) or IFRS as adopted by the EU. 

For most small or medium-sized companies, local GAAP is usually recommended, as it is simpler and specifically designed for Estonian reporting requirements. 

Annual report obligation

All Estonian companies, including newly established and dormant companies, must submit an annual report. 

• The financial year in Estonia is 12 months long and usually coincides with the calendar year,  starting on 1 January and ending on 31 December.
•  It is possible to register a different12-month financial year.

In general, an annual report consists of:

• annual accounts (balance sheet, income statement, cash flow statement, and statement of changes in equity, plus annexes), and
• a management report.

Micro-enterprise reporting

Many companies established by e-residents may qualify as micro-enterprises in their first years, depending on their financial indicators. 

A company qualifies as a micro-enterprise if at least two of the following criteria are met at the reporting date: 

• total assets do not exceed EUR 450,000;
• annual revenue does not exceed EUR 900,000;
• average number of employees up to 10. 

In this case, an abridged annual report may be prepared. 

Only the balance sheet and income statement (with up to three annexes) are required. 

Compiling a management report is not necessary. 

Submission deadline and channel

The annual report must be submitted to the e-Business Register within six months after the end of the financial year. 

You can file your annual report through the e-Business Register in XBRL format.

Preservation of accounting documents

Companies are required to preserve accounting source documents and financial statements. 

These include, for example:

• invoices;
• accounting ledgers and journals;
• contracts and other relevant business documents, which may be necessary for the purposes of a potential audit or reconstruction of transactions. 

As a general rule, the relevant accounting documents must be preserved for at least 7 years after the end of the financial year. There are slight variations with documents relating to long-term rights/obligations, where the 7-year preservation rule starts after the expiration of the document.

If your company is VAT-registered, invoices must be preserved in a way that ensures the original format and content of the invoice remain available. For example, electronic invoices must remain electronically accessible. 

Audit and review thresholds

Certain quantitative thresholds determine when a statutory review or audit of the annual accounts becomes mandatory. 

When the thresholds are met, a review or audit is a legal obligation, not an optional service. A company may choose to have an audit instead of a review, but not vice versa. 

While smaller companies may not reach these thresholds immediately, it is advisable to be aware of them early to avoid unexpected compliance obligations as your company grows.