Estonian Annual Reporting: The dark truth

Making your Estonian annual report is mandatory for all companies registered in Estonia. However, according to Estonian statistics and the business registry data, many businesses will not submit this document on time. Comistar Estonia has handled clients’ accounting and company incorporation since 2013 and has seen real-life cases. This article will cover the dark truth you need to know about Estonian annual reports.

What is the current statics?

For 2021 only about 51% of private limited companies submitted it on time. 38% of companies have not submitted the 2020 annual reports, and about 25% have not submitted 2019 and older reports—source Statistics on annual reports of undertakings by the business registry. P.s. During the article wring time; there was some inconsistency with the statistics; the 2021 data was not entirely correct.

But what is the Annual report?

The Annual report is also commonly referred to as the “financial report“, “financial statement“, “Annual filling“, or “statutory accounts“.

The annual report is a report that is done yearly (annually). Estonian businesses are required to submit it to the Estonian Commercial Register. This document includes the company’s financial situation and performance over the past year. The report must be submitted within six months of the end of the financial year. The annual report is not a tax filing; it’s submitted to the business registry and not to the Estonian Tax and Customs Board. It does not have a direct tax implication.

What needs to be included in an Estonian annual report?

The annual report is a document where a company’s financial activities and results are recorded for 12 months for the fiscal year (It can be shorter but not longer than 18 months for the first report). This document must be prepared according to Estonian accounting standards, Estonian GAAP, or IFRS and submitted to the business registry.

It generally includes a Management report, a Balance sheet, a Profit and loss statement, and accounting annexes. And in some cases, cash flow movements.

What happens if you don’t submit an Estonian annual report?

If a company does not submit its annual report, this will be considered an offence.

Based on our experience, how the Estonian business registry acts as the following:

• If the annual report is due, the business registry will send out a notice of the upcoming filing; this is done about 15 days before the due date.
• If the annual report has not been submitted on time, then after 12 months or even more, the business registry will start sending out fine warnings. (This is from our current experience, and it can change in the future)
• The fine warnings generally have a 30-day or more time when the company can take action to avoid this, such as explaining why the report can’t be done or just submitting the report.
• If there is still no action by the company management after the fine warning, a fine will be issued; the usual range is from 200 – 500 EUR and can even be up to 32 000 EUR maximum.
• Cases wary, but we’ve seen that if the fine has not been paid, then the next step by the business registry is that they will send out a deletion warning. Generally, we’ve seen that the deletion warning is for six months, which means if after that the company still does not submit the report, it should be deleted.

What happens if a company had assets, bank accounts, real estate, or was involved in a court ruling? Will the company still be deleted?

In this case, if the registry knows that there are such assets or cases with the company, the company will remain in the registry with a forever deletion warning and could receive a fine each year. There are cases where a company has not filed annual reports for more than 20 years and is still in the registry. This is because the registry lacks resources, can’t officially send the documents to the relevant persons, or there is some other case involved with the company. In general, company deletion by the registry is a complex process.

What happens if the company was deleted and had assets?

There is a possibility to reanimate the company, but we have never seen this done. Not to mention the deletion by the registry is slow, and this happens very rarely. The main reason seems to be that the Estonian business registry has limited recourse. Each company deletion can have multiple nuances, limiting the deletion process and the time it takes to prepare the documentation by the relevant authority.

What about the shareholders and board members? What will happen to them?

There are talks about a new legation and new processes to motivate and force the companies and their related persons to act or make them accountable. We have heard about a limitation on opening a new company, getting help from the Estonian tax office, making the registry more transplanted, such as adding a rating type system to it, etc.

So there you have it – from our experience at Comistar Estonia. Estonian annual reports may seem like a hassle, but they are essential to keeping your business running smoothly. Make sure you submit yours, even if it’s late, to avoid fines, problems, or dissolved companies! For our accounting services, feel free to get in touch via email at hello@comistar.com or via our contact page.