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News and Important Information on Audit and Accounting

Dear Entrepreneurs,
 
The new year can rightly be called a year of major tax changes. First and foremost, let’s highlight the stages of the VAT (käibemaks) increase:
 
From January 1:
— Accommodation services: 13%
— Periodicals: 9%
 
From July 1:
— The standard VAT rate will rise to 24%.
Basic Tax Rates Effective from January 1
 
Income tax – 22%
 
Social tax – 33%
 
Minimum social tax obligation – €270.60
 
Unemployment insurance for employees – 1.6%
 
Unemployment insurance for employers – 0.8%
 
Mandatory funded pension contribution – 2%, 4%, or 6%
 
Minimum wage – €886/month and €5.31/hour.
 
Tax-free income:
 
Up to €654/month (up to €7,848/year), depending on total income.
 
For pensioners: Up to €776/month (up to €9,312/year), regardless of total income.
 
The tax exemption is automatically applied first to pension income.
Mandatory Funded Pension Contributions
 
The contribution rate for the mandatory funded pension can be 2%, 4%, or 6%, based on the employee’s choice and a corresponding application submitted to the pension register.
If no application for a higher rate is submitted, the default contribution remains 2%.
 
Unemployment insurance contributions (1.6%) are no longer deducted from the employee’s salary once they retire; however, the employer must continue paying the 0.8% unemployment insurance contribution for the retired employee.
 
Tax Obligations for Payments to an Entrepreneurial Account
 
If a company purchases services from an individual and makes payments to their entrepreneurial account, it is required to pay corporate income tax at a rate of 22/78 or 28.2% of the payment amount.
 
Increased Tax-Free Compensation Limits
 
Health-related expenses – Up to €400 per year, with the option of a one-time payment.
 
Per diem allowances – €75/day for the first 15 days of a business trip and €40/day for subsequent days.
 
Use of a personal vehicle for work purposes – €0.50/km, but no more than €550/month.
 
Accommodation costs for employees living more than 50 km from work:
 
€500 in Tallinn and Tartu
 
€250 in other Estonian cities
 
Guest entertainment expenses – Up to €50/month.
 
Promotional gifts – Up to €21 (excluding VAT).
 
Souvenirs for participants in sports/youth camps – Up to €85 per person.
 
Security Tax in 2026
 
Starting in 2026, businesses will be required to pay a Security Tax at a rate of 2% of their annual profit.
The tax will be calculated based on the financial results of the fiscal year ending in 2025.
 
For more details on tax rates, please visit the Tax Department’s website.
 
If You have any questions, feel free to consult our specialists.
An audit of the annual financial report is mandatory if, as of the reporting date, at least two of the following three criteria are exceeded:
 
1. Turnover – €5,000,000
 
2. Balance sheet total – €2,500,000
 
3. Average number of employees – 50
 
OR
 
If at least one of the following criteria is exceeded:
 
1. Turnover – €15,000,000
 
2. Balance sheet total – €7,500,000
 
3. Average number of employees – 180
 
Is Your Company Required to Undergo an Audit?
 
An audit of the annual financial report is mandatory if, as of the reporting date, at least two of the following three criteria are exceeded:
 
1. Turnover – €5,000,000
 
2. Balance sheet total – €2,500,000
 
3. Average number of employees – 50
 
OR
 
If at least one of the following criteria is exceeded:
 
1. Turnover – €15,000,000
 
2. Balance sheet total – €7,500,000
 
3. Average number of employees – 180
 
Mandatory Audit and Review Requirements
 
An audit of the annual financial report is also mandatory for:
 
Public limited companies (AS) with two or more shareholders
 
State institutions
 
Local governments
 
This means that AS companies with two or more shareholders must undergo an audit regardless of financial indicators.
 
Mandatory Review Requirements
 
A financial review is required if at least two of the following three criteria are exceeded:
 
1. Turnover – €2,000,000
 
2. Balance sheet total – €1,000,000
 
3. Average number of employees – 24
 
OR
 
If at least one of the following criteria is exceeded:
 
1. Turnover – €6,000,000
 
2. Balance sheet total – €3,000,000
 
3. Average number of employees – 72

Dear Entrepreneurs,

In the daily challenges of running a business, accounting matters often take a back seat.

Many business owners try to simplify their interactions with “all this bureaucracy”, saving time and effort by neglecting proper documentation, relying on verbal agreements instead of formal contracts…

As a result, not only young entrepreneurs but also experienced business owners can fall into the traps of misconceptions and myths—which can sometimes come at a high cost.

Shall we talk about the most common mistakes?

1. “My company’s money is my money”

How often do we hear: “It’s my company, it belongs to me! Along with the money!”

No, the company’s money is the property of the legal entity.

Your personal money will only come into play when the company pays you:

Dividends

Salary

Reimbursement for expenses paid personally (such as business-related costs covered by your personal funds)

Non-taxable compensations, such as for health-related expenses (sports activities)

Other payments on which the company has paid taxes (special allowances, contributions from capital, etc.).

2. “The bank shows where the money went. Do I still need a receipt?”

It is essential to get a receipt/invoice and provide it to your accountant.

This includes purchases made online, for example, on AliExpress, paying for Meta/Facebook ads, or for other software products like Microsoft, Google, Adobe, AI, ChatGPT, and so on. Each purchase made with company funds must be documented with the corresponding primary document.

3. “Here’s the receipt! This is what the cashier gave me!”

Yes, the receipt is issued, it wasn’t lost, and you provided it to your accountant on time. But it doesn’t have the company name on it…

Or sometimes, the receipt is issued to a different legal entity – for example, you used a friend’s discount card. As a result, there’s no proof that this was an expense of your company.

Any expense document should be issued to the company (unless, of course, you want to pay for it with your personal funds). Yes, it’s easier and quicker to just grab the receipt from the cashier without putting the company name on it, especially when the line behind you is growing.

But during an audit, the Tax Department will ask you to remove such incorrectly issued expenses from your company’s declaration, and you’ll be required to return the tax amount.

By the way, this applies not only to store purchases through the cashier. Often, invoices from telecom providers (e.g., Zone, Elisa, Tele2) are correctly issued to the company, but the content of the bill shows a payment for something unrelated to the company, such as a personal TV package or a parking fee for a vehicle that has no connection to the business. These are personal expenses and not related to the company’s activity. The consequence – tax obligations.

4. “The employee doesn’t know much about taxes, and we agreed on a net salary”

This situation is quite understandable: it’s easier to transfer the same net amount to the employee each month, and the accountant can figure out the rest.

However, personal taxation often changes (e.g., income tax allowances, pension contributions, etc.), and agreements based on a net salary could result in surprising changes to the company’s expenses.

Comparison:

Net salary 1000 EUR – tax-free allowance 0 – the company’s salary expense for the employee is 1734.95 EUR.

Net salary 1000 EUR – tax-free allowance 654 EUR – the company’s salary expense for the employee is 1508.02 EUR.

As you can see, it’s worth spending a little time on the calculations and setting clear written agreements on the gross salary.

If you have any questions or doubts, feel free to contact our specialists!

Dear Entrepreneurs,
 
An invoice must include a range of mandatory information as stipulated by law, and it may also contain additional details depending on the transaction, client, and situation.
 
Mandatory Invoice Information:
 
Document and Participants’ Details:
 
– Seller’s Information (the entity issuing the invoice):
 
– Company/FIE name
 
– Company/FIE registration number
 
– Address (either registration or actual address)
 
– VAT/Turnover tax registration number (KMKR/VAT number)
 
Buyer’s Information (the entity to whom the invoice is issued):
 
– Company/FIE name
 
– Company/FIE registration number
 
– Address (either registration or actual address)
 
– VAT/Turnover tax registration number (KMKR/VAT number)
 
– Invoice Details (Continued):
 
– Document Name and Number – Arve nr.
 
– Invoice Issue Date – Arve kuupäev.
 
– Date of Goods Delivery/Service Provision or Date of Partial/Full Payment Receipt (if this date can be determined and differs from the invoice issue date) – Tähtaeg/Maksetähtaeg.
 
 
Transaction Details:
 
– Name/Description of Goods or Services.
 
 
– Numerical Details of the Transaction:
 
– Quantity of Goods or Volume of Services.
 
– Price of Goods or Services Excluding VAT.
 
– Discount Amount (if it is not included in the price).
 
– Amount Subject to VAT.
 
– VAT Rate (in %).
 
– Amount Not Subject to VAT.
 
– VAT Amount (even if it’s zero).
 
If the VAT amount is zero, reference should be made to the directive under which the zero VAT rate is allowed for this transaction.
 
– Total Amount to Pay.
 
Additional Notes:
 
NB! Since December 1, 2014, invoices will need to be declared in the INF attachment to the KMD for companies that have transactions totaling 1000 EUR or more within a month (this applies to both buyers and sellers).
 
Please ensure that all incoming and outgoing invoices that pass through your company contain the mandatory details, especially the company name, registration number, and VAT number.
 
NB! If the invoice is issued to a buyer in the EU, consult your accountant to ensure the invoice contains the correct markings for intra-EU transactions.
 
Additional Invoice Information:
 
While not required by law, the following details are essential for proper payment processing and communication with customers:
 
Banking details for payment.
 
Contact information of the issuer (phone number and/or email address).
 
Additional optional information on the invoice can include reference numbers (viitenumber), late fees (viivis), and other necessary details depending on the situation.
 
What is a Simplified Invoice?
 
A simplified invoice can be issued if the invoice amount does not exceed 160 EUR excluding VAT (for example, for passenger transport services or invoices printed from parking meters, automatic fuel dispensers, etc.).
 
Details of a Simplified Invoice:
 
Document Name and Number.
 
Invoice Issue Date.
 
Seller’s Name.
 
VAT Registration Number (KMKR/VAT).
 
Name/Description of Goods or Services.
 
Amount Subject to VAT (i.e., price without VAT).
 
Amount of VAT.
 
Total Amount to Pay.
 
The recipient of the simplified invoice must add their company name and VAT registration number on the invoice.
 
Credit Invoice
 
A credit invoice must include the same standard information as a regular invoice.
 
Special Features of a Credit Invoice:
 
The content of the credit invoice must include the invoice number that is being credited (if the invoice is fully credited).
 
If only part of the invoice is being credited, the content must specify which goods/services are being credited and the invoice number for the original charge.
 
In credit invoices, the amounts are recorded with a minus sign.
 
Prepayment Invoice
 
A prepayment invoice is issued like a regular invoice with the standard details.
 
Storage of Invoices
 
Like any primary document, invoices must be kept for 7 years.
 
You must issue an invoice to the buyer within seven days after one of the following events:
 
Full or partial payment is received.
 
The goods are sent to the buyer or the buyer is given access to the goods (e.g., offering to pick up the goods from the warehouse).
 
The service has started.
 
Invoices can be issued on paper or, with the buyer’s consent, in electronic form.
 
Regulations
 
The requirements for issuing invoices and maintaining accounting records are established by the Value Added Tax Act and the Accounting Act.
 
If you have doubts about how to issue invoices, feel free to consult with our accountants.
 
Dear Entrepreneurs,
 
With the changes to the Commercial Register Law, all entities related to legal persons periodically check the data of all companies.
 
Please be sure to closely monitor messages and requests.
 
Check your internet banking messages!
 
At the beginning of the year, banks send their clients information regarding the need to update their profile details. Do not miss the deadlines!
 
The company information you provide to the bank must match the registration data in the Commercial Register—be careful when updating your details. A bank has the right to close the current account of a client who violates the requirements and ignores the messages.
 
Keep an eye on notices in the Commercial Register portal.
 
The Commercial Register consistently monitors the current status of companies. It checks not only whether the data entered in the register aligns with the actual situation, but also annual reports and the company’s capital. If annual reports are not submitted, the Commercial Register has the right to impose a fine without warning (and on the Tax Department’s website, you may unexpectedly find an obligation to pay this fine).
 
If a company has been consistently reporting a loss over several years and has negative equity, the Commercial Register may initiate forced liquidation.
 
Your company may receive questions or notices from the Commercial Register not via email, but in the form of a message/order on the online portal at äriregister.ee.
 
From time to time, check this information (under the “Regulations” section) and respond promptly.
 
Make sure the email address for your company is correct: — On the government portal eesti.ee (ensure forwarding is enabled to the current company email); — In the registration data on the äriregister.ee portal; — In the bank(s); — On the Tax Department website (as well as the postal address and phone number on emta.ee).
 
Dear Entrepreneurs,
 
It is important for any business to know how reliable their partners are in transactions. If there is any uncertainty, in order to avoid problems and damages, the Tax and Customs Department recommends checking the partner’s data (all blue-colored links below are active links):
 
 
 
You can gather information by making requests to various information systems:
 
 
In the electronic environment of the TCD, you can also check information about your partner’s tax behavior:
 
 
Since November 2019, the Tax Department’s website offers an electronic service:
 
TAX BEHAVIOR ASSESSMENTS This service provides a summary of publicly available information regarding the partner’s taxes, saving you from having to make several requests at different places.
 
The tax behavior assessments contain public information on all entrepreneurs registered in Estonia: • Information about registration as a VAT-liable person; • Presence of tax arrears; • Issued business permits; • Issued customs permits; • Data for the last four quarters on paid taxes, number of employees, and turnover.
 
In addition to publicly available information about each company, there are also details protected by tax confidentiality that are only accessible to representatives of the company. Thanks to these assessments, entrepreneurs can view themselves from the perspective of a tax administrator. The company’s management decides with whom to share this information and for what period.
 
TAX DATA CERTIFICATE
 
The Tax Department also issues electronic tax certificates. You can create a certificate for your company for a specific period, for example, about employees and paid salaries, company turnover, and tax arrears, and immediately send it to your partner’s email address (e.g., to a bank) directly from the Tax Department’s system. If necessary, the certificate can have the TCD’s digital signature.
 
If you have any questions, our specialists are always ready to assist you!
Dear Entrepreneurs,
 
The Labour Inspectorate regularly checks the state of the working environment in enterprises. This is in accordance with the requirements of the “Occupational Health and Safety Act” and applies to all companies that have at least one employee.
 
If your company is selected for inspection by the Labour Inspectorate, they will check:
• Employment contracts of employees;
• Work time records (there should be no unlawful overtime);
• Salary calculations, travel compensations, and other payments;
• Employee surveys on workplace risks – this is a written survey where employees are asked how satisfied they are with working conditions, what risks they face, and what suggestions they have for improving the workplace;
• Risk analysis – this is an evaluation of the current situation and the condition of the working environment, as well as a plan to improve or correct the situation;
• Safety instructions for all tools and work processes (as well as appropriate labels, signs in premises, first aid kits, and availability of individual protective equipment for employees, etc.);
• Documents confirming employee training (i.e., that employees are familiar with internal regulations, fire safety, rules for using the workplace, tools, electrical appliances, and other equipment);
• Medical examination results for employees by a hygienist (every three years);
• Information on the person responsible for providing first aid on-site (with a certificate of relevant training);
• Information on the person responsible for workplace safety in the company (with a certificate of relevant training).
 
NB! If your company has fewer than 10 employees, only 1 person who has completed the relevant training and is present at the workplace is required. If there are more than 10 employees, at least one representative from the employer and one representative from the employees, both trained, must be present at the workplace.
 
Your next steps
First, you need to create a “Risk Analysis” document (Riskianalüüs) and upload it to the Labour Inspectorate portal under your company’s section.
For so-called office companies, this can be done using templates directly in the portal environment.
In companies where employees are exposed to chemical, technical, or other physical risks, the analysis should be more detailed and reflect specific production factors.
Based on the completed analysis, you need to create an action plan to reduce risks at the company.
You can create the risk analysis yourself (a detailed description is available via the link). Conduct an employee survey (to identify physical and psychological risks they face at their workplace) and check each workstation.
 
If you want to carry out a thorough risk assessment at your company, you should seek professional services to create a risk analysis from firms that specialize in this area — search for “riskianalüüsi koostamine” online.
Organize health checks for employees – for example, here:
 
 
 
 
Send selected employees for training
Necessary courses on occupational health and safety (Töötervishoiu- ja tööohutusalane väljaõpe), fire safety (Tuleohutuse koolitus), and first aid (Esmaabi) are offered by many companies – choose the most suitable ones for your company. For example, you can check out:
 
 
 
 
 
 
Check compliance of the workplace with Labour Inspectorate requirements
 
On the walls, there must be clear markings indicating the locations of the first aid kit, fire extinguisher, and evacuation exits, as well as information about the person responsible for providing first aid (esmaabiandja) and the specialist responsible for occupational safety (töökeskkonnaspetsialist).
All areas and equipment that may be associated with injury risks must be marked with appropriate signs/stickers – this is regulated by the legislative act:
 
“Ohumärguannete kasutamise nõuded töökohas” (the text contains pictures/examples and is sold in some workwear stores).
 
When determining what is necessary, consider the profile of your company, the set of equipment and tools, and the real risks your employees may face (not only risks related to various machinery, electricity, or falling from heights but also potential injuries such as slipping on wet surfaces or lifting heavy objects).
 
Conduct safety briefing and document it
Check and, if necessary, prepare/update instructions for using work tools, conducting work processes, and ensuring safety. These instructions must include employees’ signatures (indicating their acknowledgment) and are required for ALL tools and types of work related to your employees.
 
If your company engages in fieldwork, pay special attention to safety instructions for fieldwork (such as clothing, parking of work vehicles, marking of the work area, barriers and warning signs, use of tools/equipment, etc.).
 
Check and, if necessary, prepare/update the following mandatory documents:
 
Töökeskkonna struktruur – description of the team structure and list of responsibilities related to safety or first aid.
 
Decision of the management (or general assembly) regarding the appointment of representatives responsible for safety and first aid.
 
First aid instructions (esmaabijuhend/eesmaabi korraldus).
 
Employee training/instructions – list with signatures (Kontori juhendamiste kaart).
 
Employee questionnaires regarding the risks associated with their work.
 
Elektriohutuse nõuded (electrical fire safety) – fire safety requirements, including when working with electrical appliances.
 
Isikukaitsevahendite arvestus – selection and list of personal protective equipment.
 
 
We hope that everything is properly considered and documented in your company!
 
However, if you have any questions, feel free to reach out to our experts for consultation.
There are two options for closing a company:
 
1) Liquidation
 
The liquidation process typically takes 6-8 months. The cost of the service is 400 euros + tax + additional expenses. Payment is made in two parts:
 
200 euros at the start of the liquidation process;
 
200 euros upon completion, when the final declaration is submitted to the Commercial Register.
 
Stage 1 of Liquidation:
 
Preparation of the liquidation financial report as of the current date.
 
Decision by the owners regarding the liquidation and the appointment of a liquidator (instead of a board member).
 
Submission of the liquidation application and appointment of the liquidator to the Commercial Register.
 
Publication of the liquidation announcement in public records.
 
Expenses: State fees for the application and the publication.
 
Stage 2 of Liquidation:
 
After six months from the publication of the liquidation announcement, the final balance and decision on the distribution of assets are submitted.
 
Application to the Commercial Register and appointment of a person responsible for maintaining the company’s documents.
 
Between the stages, accounts with creditors/debtors are settled and the bank account is closed.
 
Taxes:
If there is accumulated profit in the company, a 25% income tax on the net amount must be paid when closing the company. After taxes are paid, the remaining funds are distributed to the owner.
 
2) Bankruptcy
 
Bankruptcy is applied when the company has debts (i.e., the company is insolvent). The process is longer, taking at least 8 months. The cost is the same as for liquidation. Bankruptcy proceeds through court hearings.

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