In the Republic of Estonia, companies are required by law to prepare and submit an annual report, which consists of a management report and an annual financial report. This requirement arises from the Estonian Accounting Act, which applies to all legal entities registered in Estonia. The report must be submitted even if there has been no activity in the company.
Normally, the financial year of a company lasts for 12 months. The annual report must be prepared within six months after the end of the financial year and submitted to the Estonian Business Register. The annual report should include a balance sheet, income statement, cash flow statement, and statement of changes in equity.
The main purpose of the annual report is to provide transparency and accountability to all interested parties, including shareholders, investors, creditors, and the Tax and Customs Board. By submitting the report, the company shows goodwill to the state and financial institutions and removes the risk of being blacklisted for tax fraud and money laundering. It also helps companies make informed decisions about their operations, identify improvement opportunities, and compare their performance with industry competitors.
If the annual report is not submitted on time or not submitted at all, the registrar has the right to fine both the legal entity and all persons responsible for submitting the report under §71 of the Commercial Code. If the annual report is not submitted six months after the deadline set by law, the registrar initiates a supervisory procedure against the legal entity under §60 of the Commercial Code, §361 of the Non-profit Associations Act, or §341 of the Private Schools Act, which may result in the legal entity being struck off the register or dissolved.
The deadline for submitting the annual report is mostly 30th of June.
The annual report can be submitted to the Business Register, where it is publicly available to everyone. If exposure to accounting is minimal, it may be worthwhile to buy annual report preparation services if necessary from a professional accounting firm. This ensures that all costs and revenues are documented. Submitting the report can be quite time-consuming, often complicated, and nerve-wracking for entrepreneurs through the e-Business Register portal. However, for an experienced accountant, the process is understandable and logical, and the necessary procedures take significantly less time. The result is the assurance that all assets, liabilities, revenues, and costs are presented in accordance with laws and regulations.
Since the annual report is publicly available through the business register, it is important to understand that the company’s credibility and cooperation potential are often evaluated based on its documentation. The database is used by competitors, partners, suppliers, and other stakeholders interested in the company, who see the annual report as the company’s business card. If the report is not submitted on time or is incomplete, it can create an impression of an untrustworthy company. Therefore, it is important for a company’s accounting to be managed by a professional accountant and for the annual report to be correctly prepared.