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20.04.2023 16:16
Accounting in Estonia Antworten

Most foreign businessmen running an Estonian company find the Estonian accounting rules and tax system very easy to understand. Accounting and bureaucracy costs are generally rather low in Estonia.

Accounting rules in Estonia do not differ much from those in other EU countries, but there are a number of details that need to be taken into account.

Although the corporate income tax levied on company profits is 0% (20% tax is levied on profit distribution), there are some costs that are not eligible as business expenses. All of the company's expenses must be shown to be related to the company's business at some level. If the corporate bank card is used to pay for expenses and an invoice is not presented to show that the expenses are related to a transaction, those expenses are subject to corporation tax. All expenses must be supported by source documents.

Accounting requirements
The Accounting Act regulates basic accounting functions in all business entities registered in Estonia. This law does not regulate the accounting for taxes regulated by other laws and regulations. The law is essentially drafted in accordance with International Accounting Standards.

Almost all Estonian companies can choose to prepare their consolidated and annual accounts according to International Financial Reporting Standards (IFRS) or according to Estonian Accounting Standards (“Estonian GAAP”). Companies and financial institutions are required to prepare their financial statements in accordance with IFRS. Estonian GAAP is prepared by the Estonian Accounting Standards Board.

The length of a financial year in Estonia is twelve months. At the end of each financial year, a company is required to prepare the annual report, which consists of the annual accounts and management report, accompanied by the auditor's report and the proposal for the distribution of profits for the financial year. The auditor's report does not have to be attached to the annual report if there is no audit obligation.

Annual reports must be submitted within six months of the close of the financial year. A penalty may be imposed for late filing of an annual report. There is no penalty for a short delay.

All annual reports must be filed with the register even if the company had no transactions during the financial year.

If the owner's equity falls below EUR 2500 or is less than 50% of the share capital, the owners must either restore the equity or dissolve the company. In order to avoid unnecessary waste of time, it is advisable to make sure that the share capital is sufficiently covered before filing the annual report.

If the company has employees, it is better to pay the salary at the beginning of the months following the month in which the salary was received, which is common in Estonia. There is not enough time for the tax return, since the wage tax is due no later than the 10th of the month following the salary payment.

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