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 framework

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. 

Accounting for virtual asset service providers

Crypto businesses in Estonia may have additional accounting, reporting and audit requirements depending on the services they provide and how they operate.

If your company provides crypto-asset services, you need to keep accurate records of your business and crypto transactions. This includes keeping company assets separate from customer assets or balances, recording income such as commissions from crypto transactions, and recording transaction-related fees and other business costs.

Your accounting requirements also depend on your activities. For example, a company that only buys and sells crypto assets for itself may have different requirements from a company that provides crypto-asset services to customers. If your company is VAT-registered or has employees, you may also have regular monthly reporting and tax obligations. Regardless of these circumstances, Estonian companies must prepare and submit an annual report.

Records you may need to keep:

• sales and purchase invoices
• receipts and invoices for business expenses, such as travel
• bank statements
• employment contracts and salary payment information, if you have employees
• loan and other relevant agreements
• detailed records of wallet transactions, including the date, crypto asset, amount, value in euros, transaction description, fees and balance

Some crypto-asset service providers are subject to additional audit requirements. Finding an auditor can also be challenging because not all auditors have the expertise or are willing to work with crypto businesses. If your company needs an audit, start looking for a suitable auditor early and make sure they can work with your type of crypto-asset activity.

Because crypto-asset regulation and tax rules can change, check the current requirements that apply to your specific activities and seek professional accounting or legal advice where necessary.

Audit and review thresholds

An audit or review is an independent check of your company’s financial statements. A qualified auditor reviews your financial information and supporting documents to make sure your annual report gives a reliable picture of your company’s financial position and follows the relevant accounting rules.

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.