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On 31 December 2021, the provisions of the Commercial Code and the Accounting Act entered into force, which somewhat amended the accounting of branches of a foreign company and the filing of annual reports. The amendments have entered into force in such a way that they apply to the financial year following the amendments, i.e. the financial year starting on or after 1 January 2022. Therefore, these provisions will become relevant for the most part in the coming year, when the deadline for filing the annual reports for the current financial year starts.
The following significant changes have been made to the annual report to be submitted to the Commercial Register:
1) the annual report of a foreign company may be submitted in one of the official languages of the European Union (previously the report had to be submitted in Estonian);
2) in a situation where a foreign company is not obliged to prepare or disclose its annual report, an annual report on the branch itself must be prepared and submitted. In accordance with the amendment to the Accounting Act, the annual report of this branch will be prepared in a similar way to the annual report of an Estonian company;
3) the branch’s own report will be signed and submitted by the head of the branch;
4) the annual report of a foreign company do not have to be submitted by a branch of a company in a country that is a contracting party to the European Economic Area, if the annual accounts of that foreign company are available through the European Union’s Business Registers Interconnection System.
As a result, there are a number of updates to bear in mind in good time when closing the branch’s financial year. It is also worth noting that these amendments apply only to the report to be submitted to the Commercial Register and do not relate to the reporting of the branch to the Estonian Tax and Customs Board, which is governed by tax legislation.
