The annual report must be submitted to the Commercial Register no later than six months after the end of the financial year. While companies have the flexibility to choose their financial year period, most of Estonian companies have opted for the period of January 1st to December 31st. Thus, 30th of June is the deadline to numerous companies in Estonia for the annual report submission.
According to Estonian Accounting Act companies are divided into different categories based on the indicators of the reporting day and the degree of public interest. Estonian financial reporting standards set varying requirements for the annual report to each group:
Micro undertakings are only required to prepare an abridged annual report that includes at least two main statements – balance sheet and income statement and notes. There is no need for a management report. Micro undertakings are defined as companies with total assets up to €175,000, liabilities not exceeding the owners’ equity, sales revenue up to €50,000, and only one shareholder who is also a member of the management board.
Small undertakings prepare an abridged annual report that includes at least two main statements – balance sheet and income statement and notes and a Management Report. Small undertakings are companies which are not classified as micro undertakings and only have one of the following indicators exceeding the conditions set: total assets of €4,000,000, sales revenue of €8,000,000 and average of 50 employees during the financial year 50.
Medium-sized and large undertakings must prepare a full set of annual report that includes all four main statements – balance sheet, income statement, cash flow statement, statement of changes in equity and notes, as well as a management report.
Annual report prepared in accordance with the Estonian Financial Reporting Standard (EFRS) are compiled in the E-Business Register environment using a standardized body of elements and link bases known as the annual report taxonomy. These reports can be easily generated by filling out predefined forms or by using accounting tools that interface with the Business Register environment to upload data directly.
For those preparing annual report based on International Financial Reporting Standards (IFRS), you need to use your own template, and the final report must be uploaded to E-Business Register in PDF format.
Annual Report must be signed by at least one member of the accounting entity’s Management Board, either digitally through the E-Business Register portal or via a wet signature on paper, which must then be scanned and uploaded to the portal for submission.
The annual report is available to the public and serves as a company’s business card, making it crucial to ensure that the information contained in the report is accurate and presented in a professional manner. It is imperative for every company to consider audit as an integral part of its control procedures, and in some instances, it is obligatory. An audited annual report plays a crucial role in establishing trust with customers and partners. Additionally, it provides valuable information for management and offers assurance to owners.
In Estonia, there are two forms of assurance services available for companies: audit and auditor review. The Estonian Auditors Activities Act § 91 (audit) and § 92 (review) define specific criterias such as total assets, revenue, and number of employees that determine whether these services are mandatory.
If your company falls under the mandatory audit or review category, you cannot submit your Annual Report to the Commercial Register without the Auditor Report. Hence, we strongly advise all individuals responsible for preparing annual reports to familiarize themselves with the conditions when audit or review becomes mandatory. As the majority of Estonian companies must submit their annual reports by the end of June, to minimize the occurrence of unfavorable outcomes in the month of June, it is recommended that you take proactive measures by confirming well ahead of time whether your annual report necessitates an auditor’s report or not. Check your previous year’s total assets, revenue, and number of employees at your earliest, to ensure that you have sufficient time to find an auditor if needed.
Failure to submit the Annual Report on time can result in fines being levied on the legal entity without prior warning. The potential fine is €3,200, which may be imposed repeatedly until the obligation is fulfilled. In addition, a fine may be imposed on a member of the legal entity’s Management Board or, in some cases, even on the shareholders. If the report is not submitted even after warnings and fines, the Business Register may delete the legal entity.
Starting from 2023, with the implementation of the Commercial Register Act, the Business Register will be more vigilant in ensuring the timely submission of Annual Reports to prevent companies that have failed to meet their reporting obligations from continuing to operate. Therefore, it is essential to prepare and submit the Annual Report on time.
Sources:
Commercial Register Act – https://www.riigiteataja.ee/en/eli/503012023001/consolide
Accounting Act – https://www.riigiteataja.ee/en/eli/523012023001/consolide
Auditors Activities Act – https://www.riigiteataja.ee/en/eli/525012023002/consolide