In Estonia, timely submission of annual accounts is a legal obligation for all legal persons. In recent years, the court registry department imposed automatic fines on companies that failed to meet this requirement after warnings were ignored or an additional deadline was passed. However, a recent Tartu District Court ruling can significantly alter this practice.
Background on Automatic Fines
Starting in 2022, the Business Register automatically fined companies that did not submit their annual accounts on time. These fines could be imposed repeatedly until compliance was achieved. The intent was to enforce financial disclosures to safeguard the transparency and compliance of Estonian legal persons, as the high number of unsubmitted annual accounts raised concerns about the fairness of the playing field and the lack of sanctions.
The Recent Court Ruling
On November 12, 2024, the Tartu District Court ruled that the registry department cannot impose fines automatically without judicial involvement. The court emphasized that, according to the law, fines must be issued at discretion, involving either a judge or an assistant judge, to ensure each case is reviewed individually. This ruling underscores the necessity for a fair assessment of each situation rather than automatically applying penalties.
Potential Implications for e-Resident Business Owners
This ruling will probably require the registry department to temporarily introduce a more balanced approach before the law changes to allow automatic fines to be issued. We have no information about the possibility of outstanding unpaid fines being cancelled or reimbursed, but we will keep you posted as the story progresses.
Companies now have the chance to present their circumstances before a fine is imposed, allowing for consideration of any extenuating factors and potentially to overturn issued fines. The ruling was related to a single company challenging fines issued as they claimed to have particular circumstances the registry department did not consider.
Despite the ruling, the legal requirement to submit annual accounts on time remains in effect. Non-compliance can still result in fines, but the process could involve assistant judges issuing manual fines.
Stay Informed with Unicount
At Unicount, we’re committed to updating our clients on legislative changes affecting e-residents and Estonian business owners. We’ll continue to monitor these proposed tax reforms and provide guidance on adapting to the new tax structure. If you have any questions about these upcoming changes or need help navigating Estonia’s regulatory environment, please get in touch with us.
To stay informed about these tax updates, ensure you’re signed up for our newsletter or check our blog for the latest insights.
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