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Accounting must accurately reflect the company’s financial position, business results, and cash flows.
Accounting
Accounting is an essential part of every company’s operations. Its purpose is to keep records of financial results and the overall financial position. Setting up accounting for a new company often raises many questions that require quick and precise answers. We are up to date with the law and help you comply with it, offering you reliable accounting support. Existing clients can also bring their accounting to us so that everything is managed conveniently in one place.
Virtuaalassistent OÜ offers:
Preparation of reports (balance sheet, income statement)
Accounts receivable and payable
Payroll calculation
Fixed asset accounting
Personal income tax calculation and reporting (by the 10th of the following month)
Social tax, unemployment insurance, and pension contributions calculation and reporting
VAT accounting and monthly reporting
Preparation of the annual report
It is wise to leave accounting in the hands of a professional. Preparing reports, submitting them on time, and keeping up with deadlines can otherwise turn into a nightmare alongside your core business. Accounting must follow the Accounting Act (RPS), the guidelines of the Accounting Standards Board (RTJ), and the Value Added Tax Act (KMS).
It is recommended that every company has internal accounting rules, depending on the scope and needs of the business. For larger companies and specific industries, this is required, but for micro-entities, a very simple version may be sufficient.
Who needs accounting?
Every legal entity is required to keep accounting records. Companies are divided into categories: micro-entity, small entity, medium-sized entity, and large entity. The reporting rules differ slightly depending on the size category.
Accounting for micro-entities
A micro-entity is the smallest company category under the Accounting Act in Estonia. This category was introduced on 1 January 2016 to simplify the operations and reporting of micro- and small businesses.
According to the law, a micro-entity is a private limited company that, as of the balance sheet date, meets the following conditions:
total assets up to €450,000;
liabilities not exceeding equity (equity = share capital + retained earnings from previous years);
net sales in the financial year up to €900,000.
In its annual report, a micro-entity may present only a balance sheet and an income statement, plus up to three notes. A cash flow statement and statement of changes in equity are not required. A management report is not mandatory if the company’s net assets comply with the law; if not, a management report must be added. Compared to small entities, the micro-entity’s balance sheet contains fewer line items, the income statement is the same, and the disclosures on accounting policies, labour costs, and related parties are shorter.
Accounting for small entities
A small entity is an Estonian company that is not a micro-entity and, as of the balance sheet date, does not exceed more than one of the following conditions:
total assets up to €7,500,000;
net sales up to €15,000,000;
average number of employees during the financial year 50.
A small entity does not have to present a management report if its net assets meet the legal requirements. If net assets fall below the required minimum, a management report must be included. The annual report of a small entity consists of a more detailed balance sheet and income statement than that of a micro-entity, plus additional notes.
Accounting for medium-sized entities
A medium-sized entity is a company that, as of the balance sheet date, may exceed only one of the following conditions:
total assets €25,000,000;
net sales €50,000,000;
average number of employees during the financial year 250.
Accounting for large entities
A large entity is a company that, as of the balance sheet date, exceeds at least two of the following conditions:
total assets €25,000,000;
net sales €50,000,000;
average number of employees during the financial year 250.
All companies must submit annual reports, even if they do not file monthly declarations or have no business activity at all. Annual reports are submitted through the Company Registration Portal. At the time of submission, net sales must also be reported by EMTAK (Estonian Classification of Economic Activities) codes.
The annual report must be submitted within six months after the end of the financial year. For most companies, the deadline is 30 June, but if the company’s financial year does not coincide with the calendar year, the deadline is six months after the financial year end. At least one management board member must digitally sign the report, a profit distribution (or loss coverage) proposal must be attached, and the report must then be filed electronically with the Commercial Register.
Accounting for non-VAT-registered companies
Accounting for companies that are not VAT registered does not require monthly VAT reporting and can therefore be somewhat simpler. This suits businesses with small turnover or activities involving VAT-exempt sales (listed in §16 of the VAT Act). However, all documents must still be kept according to the law.
If the company has employees, a monthly TSD declaration must be submitted to the Tax and Customs Board by the 10th of the following month (covering salaries, board member fees, etc.).
If the company has no employees, a TSD must still be submitted if there are board member fees, dividends, or other payments. If no payments are made, no TSD is required, only the annual report.
It is important to ensure that turnover does not exceed €40,000 in any 12-month period. Once this threshold is reached, VAT registration is mandatory. A company may also voluntarily register as a VAT payer earlier, which may sometimes be beneficial for tax optimisation. A non-VAT payer cannot reclaim input VAT on purchases.
Accounting for VAT-registered companies
Accounting for VAT-registered companies is more complex. In Estonia, four VAT rates are applied:
The standard rate is 24%, which applies to most goods and services.
13% applies to, for example, accommodation and certain printed matter.
9% applies to e-books, newspapers, and periodicals.
5% applies to some books.
0% applies to exports, intra-EU supplies, and international transport.
It is important to remember that 0% VAT and VAT exemption are not the same thing!
VAT should not be seen as the company’s own money that the state takes away. Rather, the state has entrusted businesses with the obligation to collect VAT from the final consumer. In return, businesses can reclaim input VAT paid on purchases.
There are many nuances to consider:
VAT cannot be reclaimed on expenses related to VAT-exempt sales.
However, if expenses are related to activities taxed at 13%, but purchases were made with 24% VAT, the company may reclaim more than it has to pay.
By the 20th of each month, VAT for the previous month must be calculated and a VAT return (KMD) submitted to the Tax and Customs Board. A TSD must also be filed monthly, whether or not the company has employees.
Struggling with accounting in Estonia?
We provide accounting services for private limited companies – both new and established (micro and small entities). By agreement with the accountant, additional services can also be ordered, either as one-time support or ongoing assistance.
If you have any questions, write to us at info@assistent.ee – we’ll be happy to help!