Guidance for the starting entrepreneur

Rights, duties and responsibilities of a board member

The board represents and manages the company. Management has rights and obligations to manage the company and be responsible for its operations.

Board member rights

Represent the company individually or jointly in all transactions. The board member has the right to conclude contracts, buy, sell, exchange, acquire or transfer the company’s property, etc.
Board members have the right to issue work-related orders to employees and intervene in all personnel management issues.

Board member obligations

The obligations of a board member are defined by various laws and from the contract between the company and the board member and from the company’s articles of association.
According to the general provisions of the Civil Code, a board member is obligated to perform duties arising from the law or the articles of association with due care and to be loyal to the legal entity.
The Commercial Code mandates that a board member of a private limited company must organize the company’s activities with the diligence of a proper entrepreneur.
Case law emphasizes that a board member must exercise diligence, possess adequate information for decision-making, and refrain from undertaking unreasonable risks on behalf of the company.
Board member failure to meet the standard of care expected in such a role may constitute a breach of duty and result in liability. Therefore, the board member is required to take all necessary actions to achieve optimal outcomes for the company.
The Tax Administration Act imposes additional responsibilities related to taxation, requiring board members to ensure timely and complete compliance with the company’s financial and non-financial obligations under tax laws.

The laws require that a board member maintains comprehensive awareness of the company’s financial operations and the management of financial assets. This obligation aims not only to safeguard the interests of shareholders and creditors but also to enable regulatory bodies to oversee the company’s financial activities, ensuring compliance with legal standards when necessary.

To facilitate regulatory oversight, the law mandates that board members oversee the organization of accounting and financial record-keeping. Delegating the management of financial operations and asset disposal to a third party through a civil contract contradicts the legislative intent. Such contracts don’t release board members from liability under the law.

Board member responsibilities

An individual who accepts election to the board must fully understand the potential consequences and limits of their actions. They must recognize that their decisions or lack thereof could result in liability. Serving as a board member involves more than a formal role.

Accounting and taxes

All legal entities and self-employed individuals registered in Estonia are obligated to maintain accounting records in accordance with the Accounting Act.

The responsibility for organizing the company’s accounting lies with a board member. The accounting can be managed personally, hiring an accountant or engaging an accounting service.

The fundamental requirement is to acquire current, significant, objective and comparable information about the company’s financial position, business performance and cash flows.

The board member is required to withhold and remit taxes promptly and submit tax declarations as prescribed by law.

Entrepreneur portal

The entrepreneur portal provides a platform for electronically submitting financial annual reports and documents to the business register.

Through the portal, applications for registering a new company, updating registry information, initiating liquidation and deregistering can be filed.

Furthermore, the entrepreneur portal offers the e-invoicer accounting software, designed to assist startups and small businesses in efficiently managing their accounting.

Access to the e-business register portal is available to all citizens. Login options include Estonian, Finnish, Latvian, and Belgian ID cards and Estonian, Lithuanian mobile IDs.

Record keeping and tax returns

As a VAT payer, you are required to follow the VAT payer’s obligations from the day of registration. This includes:

Maintain proper documentation, records, and issue invoices that meet regulatory requirements.
Submit an income and social tax declaration (form TSD), including mandatory accumulated pension payments and industrial insurance contributions, via e-MTA by the 10th of each month.
Pay taxes and contributions based on the submitted TSD by the 10th of each month.
Apply VAT to the taxable value of goods or services transferred.
As a VAT payer, you have the right to deduct input VAT from your VAT liability on goods and services purchased for taxable turnover within the same tax period. Input VAT cannot be deducted if goods and services were acquired for tax-free turnover or if no business activity occurred.
Calculate the VAT payable amount.
Submit a VAT return (form KMD) and its supplement (form KMD INF) by the 20th of each month. Invoice data issued to and received from legal entities, self-employed individuals, and state or municipal institutions should be included in the appendix of the turnover declaration if the total amount of the invoice, excluding VAT, reaches at least 1,000 euros per transaction partner during the taxation period.
If you sell goods or provide specific services to VAT payers in other European Union countries, you must submit an intra-Community turnover report (form VD) by the 20th of each month.

Submission of declarations

The VAT taxation period is a calendar month.

If the number of calendar days of the first taxation period is less than 15 (for example, if you have been registered as a VAT payer since the 18th) , then the turnover of the first period can be declared together with the turnover of the next taxation period by submitting one VAT return for two taxation periods.

If the due date for fulfilling the obligation falls on a public holiday or other day off, the first working day following the day off is considered to be the due date (TsÜS § 136 (8)).

The Tax and Customs Board informs all new VAT payers by e-mail within 6 months after registration of the deadlines for submission of declarations KMD (turnover declaration) and TSD (income and social tax, mandatory accumulated pension payment and unemployment insurance contribution declaration).

Electronic declaration

All declarations can be submitted electronically through e-MTA s.

Information about the e-MTA user account can be found on the website “Granting and Termination of Access Rights.”.

Submission of declarations on paper

Submission of the VAT return (KMD) and its supplement (KMD INF) on paper is allowed only for persons who have been liable for VAT for less than 12 months and do not reflect more than 5 invoices on the supplement of the VAT return.
Persons who have been liable for VAT for more than 12 months and/or reflect more than 5 invoices on the VAT return supplement may submit the VAT return and its supplement on paper only on the basis of a motivated request submitted to the Tax and Customs Board.
Submission of the TSD declaration on paper is allowed only if up to 5 lines are filled in on Appendix 1 of the TSD, i.e. up to 5 payees are declared.

Business partner background check

In order to reduce business and tax risks, it is always wise to thoroughly check the background of the other party and the circumstances of the transaction before the transaction.

A taxable person who became aware of the real circumstances of the transaction (indicative of tax fraud), but who nevertheless participates in a transaction that may commit tax fraud, may, according to current case law, be suspected of participating in tax fraud.

NB! If in doubt, we recommend abandoning such a transaction and consider finding a more reliable transaction party.

When you start working with new partners, it is useful to check that they have paid all taxes to the state.

INQUIRIES

You can check the VAT number of the business partner from the queries:

Estonian VAT registration (KMKR) number search and
Verification of the European Union VAT registration number.

With the debt inquiry you can check whether a person has a tax debt or not.
Various databases offering credit information services can be found on the Internet, where you can get useful information about the transaction party: for example Inforegister (business networks, credit assessments, media monitoring), CREDITINFO EESTI (payment default register, credit assessment).
In the e-business register information system, you can make inquiries about the current and historical data of legal entities.
The European Business Register provides official information about European companies (paid service).

Registration of employment

The employment register is a register that gathers information related to employment, which is kept by the Tax and Customs Board. The data contained in the employment register is the basis for determining the social guarantees associated with employment (health insurance, unemployment insurance benefits, etc.).

Obligation to register employment

All natural and legal persons offering employment are obliged to register their employment. The person offering work (employer) is an Estonian resident or non-resident legal entity, Estonian state authority or local government authority, natural person or self-employed person who enters into an agreement on the basis of employment or appoints the person (employee) performing the work to a position.
The employment of all natural persons for which a tax liability arises in Estonia must be registered in the employment register, regardless of the form and duration of the contract. All natural persons who work on the basis of an employment contract or provide services on the basis of another contract under the law of obligations (e.g. agency, employment, agency, etc.) must be entered in the register.
As an exception, working on a voluntary basis, without payment in a company or for a sole proprietor, must be entered in the employment register.

Registration as a VAT payer

A person liable for VAT is a person engaged in business (natural person, legal person, resident, non-resident), including a legal person under public law, or a state, municipality or city institution, which is registered or obliged to register as a taxable person (KMS § 19 ). A person liable for tax in a foreign country or another member state is a person, including a pool of assets without the status of a legal entity or an association of persons, who is considered liable for VAT according to the laws of the respective country.

Taxation of goods and services, vehicles

Comprehensive overview on the pages Taxation of goods and Taxation of services.

You can find advice on buying a new or used vehicle and information on vehicle-related tax accounting and tax obligations on the page: When you buy a new or used vehicle.

Special provisions for taxation

A comprehensive overview on the pages Special provisions and taxation of immovable property and special rules for e-commerce and services .

Subsidies for a start-up entrepreneur

Start-up support

The start-up support measure is implemented by the State Support Center (RTK) and county development centers , whose employees advise applicants and recipients of support in the preparation and implementation of the project. The purpose of the start-up grant is to help start-up entrepreneurs with little business experience and high growth potential. The start-up grant can be used to purchase fixed assets, carry out marketing activities, purchase and develop application software and finance work force costs.

Support from European Union structural funds

When looking for financing opportunities, it would definitely be worth looking into the support measures offered by the European Union (EU) structural funds and local governments, e.g. start-up aid for investments in fixed assets, training grants for staff training.

The EU structural funds support the following areas: education, work market, research and development, entrepreneurship, information society, administrative capacity, environmental protection, energy management, transport, regional and local development, health care and welfare.

In finding grants for your projects, you will be helped by the county development centers , which offer free consulting services regarding their basic services. From the development centers, you can get information about financing options for projects, both in terms of structural fund measures and, if necessary, other possible sources of support, as well as about private sector consultants and their services.

Start-up loan

Small and medium-sized companies that are starting up and have been operating for up to three years can apply for a start- up loan, which is 75% guaranteed by the national foundation KredEx. Compared to a standard loan, the advantage of a start-up loan is that the entrepreneur can risk less with his personal assets.

A start-up loan is especially helpful for companies that are just starting their business, because it is difficult for them to get a bank loan due to their short credit history. The loan must be taken through a bank, the amount of interest determined by the bank is estimated to be 7%. You can contact the bank, EAS and KredEx to get a start-up loan.