Reporting of branches of foreign companies
- Accounting and reporting for branches
- Submission of the annual report
- Tax reporting
- Sector-dependent reporting
- Submission of data to Statistics Estonia
- Reports to the Health Insurance Fund of Estonia
- Registration of employees
A branch of a foreign company does not constitute a legal entity and the foreign company is liable for the activities and obligations of the branch. However, relatively similar rules are applicable for the reporting of branches compared to other forms of companies under Estonian law, except in the submission of the annual report.
As a manager of a branch, your responsibilities include the management of the accounting of the branch in accordance with the requirements of the Accounting Act. As a representative of a branch, you must submit the following:
- An annual report to the Estonian Tax and Customs Board annually.
- An annual report of the foreign company to the commercial register annually (except companies from countries of the Agreement on the European Economic Area if according to the national law of its country of residence it is not required to disclose its annual report).
- Tax reports depending on the taxes payable by the branch.
- Reports depending on the sector if the branch is operating in a sector with special requirements.
- Reports to Statistics Estonia if the branch is included in the sample of statistical observations.
- Official entries to the Health Insurance Fund of Estonia if the branch employs people on whom they pay social tax.
The annual reports and the accounting policies applied in the accounting of foreign companies must be in compliance with the international financial reporting standards as adopted by the European Commission pursuant to the procedure for the application of international accounting standards enacted by Regulation (EC) number 1606/2002 of the European Parliament and of the Council. Companies that are from countries of the Agreement on the European Economic Area or from member states of the Organisation for Economic Cooperation and Development (OECD) are not subjected to this requirement.
Pursuant to the Income Tax Act (§ 55 (2)), a branch must submit to the Estonian Tax and Customs Board a signed copy of its annual report within six months after the end of the financial year. An annual report can be submitted to the Estonian Tax and Customs Board in the following ways:
- In a digitally signed format to the email address of their regional service centre: email@example.com, firstname.lastname@example.org, email@example.com, firstname.lastname@example.org;
- By handing in the annual report in person or by sending it via post to the address of their regional service centre.
As a manager of a branch, you must submit to the commercial register within one month after the approval of the annual report or seven months after the end of the financial year an audited and approved annual report of the foreign company. Companies that are from countries of the Agreement on the European Economic Area are not subjected to this requirement if according to the national law of its country of residence it is not required to disclose its annual report. The annual report must be submitted to the commercial register electronically in the Company Registration Portal in PDF format as a scanned version of the paper-based report and it must contain all of the necessary signatures. For reporting periods starting before 1 January 2009, an annual report may be submitted to the commercial register on paper together with all of the necessary documents, for instance via post. An annual report may also be submitted to the commercial register through a notary. A signed annual report should be handed to the notary either on paper or on electronic media. In that case the notary will submit the annual report to the commercial register on your behalf. Notary fees are payable for the service.
If a branch pays business-related taxes to the Estonian state, you must also file a tax return for the relevant type of tax. For instance, if the annual turnover of a branch exceeds 16,000 euros and the branch is registered as a VAT payer, you must file a value added tax return to the Estonian Tax and Customs Board by the 20th day of each month. Taxes also subject to reporting requirements include income tax, social tax, unemployment insurance tax, excise duty and environmental charges. The Estonian Tax and Customs Board has established specific dates when the reports are due.
If special requirements apply to the sector of a branch or it is associated with an additional tax burden (for example a provider of medical services, vendor of goods subject to excise duties, etc.), you must submit additional reports.
You can check whether your company or organisation must submit data to Statistics Estonia, on the website of Statistics Estonia from the section “Submit data – Obligation to submit data“. You can submit data by using the eSTAT data submission platform. If you do not have an ID-card or an option to use online banking, you can apply for password-based data submission rights from Statistics Estonia by filing an application on the Statistics Estonia website as follows: click on the link “View other authentication options – Register as a user”.
In case of incapacity for work, a certificate of incapacity for work must be submitted to the Health Insurance Fund for applying for benefits.
As an employer, a branch is subject to the requirement to register its contracted employees in the employment register.