First steps after opening a company in Estonia: accounting, reporting and basic business obligations

For many entrepreneurs, registering a company in Estonia marks the end of a complex process. The documents have been submitted, the company has been entered in the Commercial Register and the registration code has been received. In other words, the business has been formally established. However, from a legal and accounting perspective, this is merely the beginning. From the moment of registration, the company automatically becomes a participant in the Estonian tax and reporting system, with all the ensuing obligations, regardless of whether the business is ready to start trading or is still in the preparation stage.

The first few months after opening the company determine how smoothly and predictably it will operate in future. If you don’t set up a basic accounting structure, understand which reports are required and when they are due, and establish a system for handling documents, mistakes will start to pile up without you noticing. These mistakes often don’t show up right away, but a year later when you file your first annual report, change accountants or receive your first request from the tax authorities.

When do accounting obligations arise?

In Estonia, accounting obligations arise strictly from the date of the company’s registration, rather than from the commencement of sales or receipt of income. This is a fundamentally important point that is often overlooked by new OÜ owners. Legally, a company begins to exist as an economic entity immediately after being entered in the Commercial Register, and from that moment on, it is required to keep accounting records.

Even if the company is not conducting any activities, does not have a bank account, or is not carrying out any transactions, it must still have a correctly organised ‘zero’ accounting system. This means that the financial period must be closed correctly, the absence of transactions must be confirmed and the accounting structure maintained. The absence of accounting is considered a violation, not a neutral state.

Why appointing an accountant needs to be done immediately

One of the most common mistakes after setting up a company is putting off working with an accountant ‘until better times’. Entrepreneurs often reason that, as long as there is no turnover, an accountant is unnecessary. In practice, this approach leads to confusion in the company’s documents, missed deadlines, and a lack of understanding of its responsibilities after a few months.

An accountant is needed at the start, not so much to calculate taxes, but to set up the system. They can help determine which transactions are business transactions, which documents need to be collected, which taxes may arise in the future and which reports are mandatory, even in the absence of activity. This is particularly important for foreign company owners, since the Estonian system is formally simple, but has many nuances that are not obvious without practical experience.

Bank account and first financial transactions

After registering a company, the next logical step is to open a bank account or an account with a payment institution. Many entrepreneurs first encounter the fact that accounting begins earlier than expected at this stage. Even if the company is not yet trading, the account will almost always show the first transactions: service fees, debits for online services, transfers of start-up funds, or payment of registration costs.

From an accounting point of view, any movement of funds constitutes a business transaction, regardless of the amount. Even commissions of a few euros must be recorded in the accounts and confirmed by documents. Failing to record such transactions at the outset can lead to discrepancies that must then be explained retrospectively, often under pressure from deadlines and audits.

Here are some documents you need to start collecting from day one:

One of the key skills for running a successful business in Estonia is being disciplined when it comes to working with documents. From the company’s very first day, it is important to develop the habit of saving and structuring all documents related to its finances and obligations. This applies not only to traditional invoices and contracts, but also to electronic confirmations, bank statements, and online payments.

The absence of a document at the time of a transaction is rarely perceived as a problem. However, a year or two later, when filing reports or undergoing an audit, it can be difficult or even impossible to retrieve them. Competent document management from the outset is therefore not just bureaucracy, but protection for the company and its owners from future risks.

Initial tax reporting is minimal but mandatory

In the first few months after a company is established, tax reporting is usually limited to the bare minimum, but this minimum must still be complied with. If the company does not pay salaries or provide special benefits or dividends, then the TSD declaration is not submitted. However, this does not mean that the company is completely exempt from the tax system.

Particular attention should be paid to VAT. If a company is registered as a VAT payer, it must file a KMD return every month, even if its turnover is zero. Failure to submit a ‘zero’ return will almost certainly result in fines and automatic notifications. Errors at this stage are most often due to a lack of understanding of the rules rather than malicious intent.

The first annual report is the foundation of the company’s financial history

This report is a key document in the life of a new company. It must be submitted regardless of whether the company has been operating, and it is this report that provides the official financial overview of the company in state registers. For companies without operations, the report can be simplified, but it must still be completed correctly and submitted by the deadline.

Many entrepreneurs underestimate the importance of the first report, considering it a formality. In practice, however, errors or failure to submit the first annual report can lead to serious consequences, such as fines, management restrictions, and loss of trust from banks and partners.

VAT registration is a strategic decision, not a formality

The question of VAT registration often arises immediately after a company is established, especially if the entrepreneur is focused on the international market. However, VAT registration is a serious commitment involving regular reporting and monitoring, not just a tick in a box.

For some business models, VAT registration is necessary from day one; for others, it is premature and creates an unnecessary administrative burden. Ill-considered VAT registration at the outset often results in the company being required to submit reports despite having no real operations or understanding of the system.

The board is responsible from the first day of the company’s existence

From the moment of registration, the company’s management board is fully responsible for complying with all legal requirements. This responsibility cannot be postponed or waived due to a lack of activity. The management board is responsible for accounting, reporting, document storage, and interaction with government agencies.

Even if accounting is outsourced, the board remains responsible. This is particularly important for company owners who are not physically located in Estonia and who may not receive notifications promptly.

Common mistakes in the first months of a company’s operation

In practice, most of the problems faced by new companies can be traced back to recurring errors. These include not employing an accountant in the first year, disorganised document storage, believing that ‘if there is no activity, there is nothing to report’, VAT errors and missing annual reporting deadlines.

While these mistakes may not seem critical at the time, they almost always lead to additional costs, stress and the need to correct past periods, which is always more difficult and expensive than doing everything right the first time.

Opening a company in Estonia marks the beginning of a new stage with clearly defined responsibilities. The sooner an entrepreneur understands the importance of accounting and reporting, the fewer risks and surprises they will face in the future. Properly structured processes in the first few months allow the business to grow smoothly without constant fear of audits and fines.

Put simply, the first steps after opening a company determine its future. Accounting is not a formality in this process, but a key tool for sustainable and safe business development.