June 30 was the deadline for submitting annual accounts (annual report) for all Estonian companies whose financial year ended on 31 December 2022. Approximately 290 000 companies had to submit their annual report in June, which is roughly 95% of Estonian companies. 162 689 companies submitted accounts by the 30 June deadline.
This means that only 56% of annual accounts were submitted on time. Let’s look more into this issue, including what the Estonian government said about this figure and its plans. You may want to read this if you are an Estonian company owner who did not manage to submit accounts on time.
Ministry of Justice comments
This is what the Estonian Ministry of Justice said in a comment. “Thank you to all those who have submitted accounts on time. It is a pleasure to note that compared to last year, the percentage has increased by 5%, but unfortunately, the overall percentage of accounts submitted by the deadline has remained the same from year to year. Nearly half of the companies do not submit annual accounts on time. We would like to remind you that the timely submission of accounts is a legal obligation for a legal entity. It is necessary to submit accounts even if no economic activities were conducted. It is not just a legal requirement, but timely and correctly submitted accounts are a necessary tool both for the entrepreneur for planning the company’s activities and for the state when making decisions regarding the economic environment,” said Margit Veskimäe, head of the court registers department of the Ministry of Justice.
Stricter monitoring and fines
The Ministry of Justice sees that the increase in accounts submitted on time may have been a result of the changes that came into force in February 2023 with the Business Register Act, which addressed the supervision issues of those legal entities that do not submit accounts on time. “Compared to the past, the court has the opportunity to initiate the supervision procedure more quickly. In addition to expanding the possibilities of fines, the process of deleting an uncompliant legal entity has also been accelerated and simplified.
How much the changes that came into effect this year will improve future reporting discipline can be assessed in the long-term perspective after the supervisory procedures,” added Veskimäe.
What happens when accounts are not submitted?
We have written more on the topic in our blog post “Why should you submit your accounts on time” last year. Ministry of Justice has said unofficially that no fines will be issued for the first 3 months. It is worth knowing that the Commercial Register Act in force since 1 February 2023 would let the court impose fines immediately and without a prior warning. Make sure that you receive those notifications sent to your company’s official email address. No paper documents are issued by the court.
§ 57. Imposing fine for failure to submit annual report
(1) Where a legal person has not submitted an annual report to the registrar within the time limit provided by law, the registrar may impose, without making a warning order, a fine specified in § 601 of the Code of Civil Procedure on the legal person repeatedly until the obligation to submit the annual report is fulfilled.
Among other things, before issuing the fine the court must consider how many times before the company’s annual accounts have not been submitted on time, the time that accounts are overdue and any other significant circumstances known to the court.
How to submit?
We have accounting services available to our virtual office clients and a free manual for dormant companies. Preparing annual accounts on time requires the company board to act earlier than June though. Make sure that you have accountant hired and documents submitted as early as possible. One of the busiest months in an accounting firm is in June. July is the traditional month for annual leaves for all Estonian office workers. We recommend starting the process of accounts preparation in April at the latest. Make sure you have documented all your expenses based on your business bank statement for the calendar year. All expenses need a source document or it will be treated as a director’s loan, dividend or fringe benefit.
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