How to Read the Balance Sheet and Income Statement of an Estonian OÜ

This article is based on the Estonian Accounting Act (Raamatupidamise seadus), the guidelines of the Estonian Accounting Standards Board (RTJ), the Commercial Code (ÄS) and the 2026 rates of the Estonian Tax and Customs Board (EMTA). All examples and figures are for illustration only.

Short answer: the essentials in 60 seconds

Most founders open the annual report once a year, find the “profit” line at the bottom and close the file. This is the most expensive habit in running an Estonian company: these two statements tell you how much money you are entitled to take out, whether the company is at risk of compulsory deletion from the register, and whether you are financing your clients out of your own pocket.

What matters for 2026:

• The balance sheet (bilanss) and the income statement (kasumiaruanne) answer different questions. The balance sheet is a snapshot on a specific date: what the company owns, what it owes and what is left for the owner. The income statement is a film of a period: how much was earned and how much was spent.
• There is only one bridge between them. The “Aruandeaasta kasum” line on the balance sheet equals the bottom line of the income statement. If they do not match, the report has been put together incorrectly.
• For most OÜs the “Tulumaks” line is zero. This is a feature of the Estonian corporate tax system that confuses anyone used to reading reports from other countries: tax arises not on profit, but on its distribution. Profit before tax is almost always equal to the profit for the year.
• Profit and cash are two different numbers. A company can report a profit of €23,000 and still be unable to pay dividends. The gap is created by receivables, inventory, depreciation and capital expenditure.
• Distributable profit is not “what we earned this year”. It is retained earnings from previous years plus the profit for the reporting year, after covering prior-period losses, and only on the basis of an approved annual report.
• The most important line on the balance sheet is “Omakapital kokku”. If net assets fall below half of the share capital, the management board must convene a meeting of shareholders. If the shareholders take no action, a court may order the compulsory dissolution of the company, and it will be deleted from the Commercial Register even if it is still trading.
• The report is filed only in XBRL format via the e-Business Register, within 6 months of the end of the financial year. For a calendar year, that is 30 June.
• Late filing is expensive. Fines start at around €200 and can reach €3,200 per breach, and they are imposed both on the company and on each management board member personally. After about three months of delay, the register may start proceedings to delete the company.

Below you will find a line-by-line breakdown of both statements, a comparison across nine parameters, three real-life scenarios with full figures, a “seven numbers in five minutes” checklist and a glossary of Estonian terms, without which an XBRL report is impossible to read.

Three statements, not two

Articles on this topic usually cover the balance sheet and the income statement. In practice, the owner needs a third document, and it is the one most often left unread.

Bilanss (balance sheet). The position on a date: assets on the left, liabilities and equity on the right. It always balances, because every asset is financed by something — either other people’s money (liabilities) or yours (equity).

Kasumiaruanne (income statement). The result for a period: revenue minus expenses. It shows whether the business model works.

Kasumi jaotamise ettepanek (profit allocation proposal). This is the part of the report that states exactly how much the management board proposes to distribute and how much to retain. The shareholders’ decision on dividends is based on it. If you are planning a payout, this is the page to read first, not the bottom line of the income statement.

A fourth document that not every company has. A micro-enterprise does not prepare a cash flow statement (rahavoogude aruanne) or a statement of changes in equity (omakapitali muutuste aruanne). If your report does not contain them, this is not an oversight by your accountant but a permitted simplification. Even so, you will still need to track cash flow for yourself: it is what answers the question of where the money for dividends will come from.

What the report includes depending on company size. The category is determined by three indicators, at least two of which must be met:

A micro-enterprise files an abbreviated report: balance sheet, income statement, notes and the profit allocation proposal. Since 2024, a micro-enterprise has been exempt from preparing a management report (tegevusaruanne), provided its equity has not fallen below the level required by law. A small enterprise always prepares a management report. For more on what the report contains and how it is filed, see our guide to the annual report in Estonia.

Review thresholds are a separate matter: a review engagement (ülevaatus) is required when at least two of three conditions are met (revenue €2 million, assets €1 million, 24 employees); an audit is required at revenue of €5 million, assets of €2.5 million or 50 employees.

Key difference #1: a date versus a period

This is the difference from which all the others follow, and it is worth understanding before you read any figures.

The balance sheet knows nothing about time. It has no concept of “for the year”. There is only “as at 31 December”. €18,000 in the bank is the balance on one particular morning. A day later it could be €4,000 if salaries and taxes have gone out. That is why you cannot judge trends from a balance sheet unless you compare two dates.

The income statement knows nothing about a moment. Revenue of €120,000 for the year does not tell you when the money came in, or whether it came in at all. An issued invoice is recognised as revenue when the service is provided, not when it is paid.

The practical takeaway. The two numbers owners most often confuse:

• “I made a profit of €23,000” — that is the income statement, a period.
• “I have €18,000 in the bank” — that is the balance sheet, a date.

There is no direct link between them, and trying to derive the second from the first is the source of most cash gaps in companies in their first years.

Key difference #2: profit is not cash

The second parameter, which determines whether you can pay yourself anything at all.

The gap between profit and the balance in the company’s bank account is created by six things, and all of them are visible on the balance sheet:

Nõuded ostjate vastu (trade receivables). You did the work, issued an invoice and recorded the revenue. There is no money. There is profit. If receivables grow faster than revenue, you are lending to your clients out of your own working capital.

Varud (inventory). Cash has turned into goods in the warehouse. This does not show up in the income statement at all: the expense arises only when the goods are sold. For an online shop, this is the biggest cash drain.

Võlad tarnijatele (trade payables). The opposite effect: the expense has been recorded, but the money is still with you. This is free financing, but it will run out.

Põhivarade kulum (depreciation). An expense in the income statement that does not correspond to any movement of cash. A €2,400 computer reduces profit in three annual instalments, while the money went out once.

Capital expenditure. The mirror image: the money for equipment went out in full, but profit fell only by the depreciation charge. Profit looks good while the bank account empties.

Taxes and dividends. Tax on distributed profit (22/78) is paid in cash in the month following the payout. For €10,000 of net dividends, you need to have €12,820.51 ready.

How to check yourself with one question. Profit for the year is €23,000, but the bank balance grew by only €4,000. Where are the other €19,000? The answer can always be found on the balance sheet: in receivables, in inventory, in new equipment or in repaid debts. If there is no answer, there is an error in the books.

The Estonian specific: why the “Tulumaks” line is empty

This is where the report of an Estonian OÜ differs from that of a company in almost any other country, and where articles translated from other languages mislead readers.

In the Estonian income statement, the “Tulumaks” line sits in the same place as everywhere else: between profit before tax and profit for the year. But for an OÜ that has not distributed profit, it is zero, because Estonia has no tax on profit as such. There is a tax on profit distribution at a rate of 22/78, and it arises when dividends are declared. How the rate works is explained in a separate article on corporate tax in Estonia in 2026.

This has three practical consequences:

1. Kasum enne tulumaksustamist ≈ Aruandeaasta kasum. For most OÜs these two lines are the same. If they differ, dividends or other payments treated as distributions were declared during the year.
2. Compare margins with foreign companies carefully. An Estonian net margin of 19% and a German net margin of 19% are different things: in the second case, corporate income tax has already been deducted.
3. The tax burden is invisible in the income statement until you take money out. Accumulated retained earnings of €29,500 on the balance sheet mean a deferred liability: on full distribution, about €6,490 will go in tax. This amount does not appear on the balance sheet, and you have to plan for it yourself.

Payroll taxes, board member fees and social tax are not shown on this line: they are included in staff costs (tööjõukulud) or general and administrative expenses. A full list of what an Estonian company pays and when is collected in our overview of taxes for companies in Estonia. How taxes on fringe benefits (erisoodustus) are reflected in your report is worth checking with your accountant, because their placement depends on the accounting policy.

How to read the balance sheet: line by line

The Estonian balance sheet consists of two parts that must balance: AKTIVA (assets) and PASSIVA (liabilities and equity).

Käibevara (current assets)

Everything that should turn into cash within a year.

• Raha ja pangakontod — cash. The first thing to look at. A useful benchmark: how many months of normal expenses this balance covers.
• Nõuded ostjate vastu — amounts owed by customers. Compare with revenue: if revenue grew by 20% and receivables by 60%, the problem is not sales but collecting payments.
• Muud nõuded ja ettemaksed — other receivables and prepayments, including tax overpayments and prepaid subscriptions.
• Varud — inventory. For services this line is usually empty; for trading it is the main item.

Põhivara (non-current assets)

Everything that serves longer than a year: equipment, vehicles, intangible assets, long-term investments. Shown at carrying amount, i.e. net of accumulated depreciation.

Lühiajalised kohustised (current liabilities)

Everything that must be paid within a year.

• Võlad tarnijatele — amounts owed to suppliers.
• Maksuvõlad — tax liabilities. This line deserves special attention: tax arrears are visible in public data and affect relationships with banks, partners and payment providers. If the company is VAT-registered, VAT payable also sits here — when VAT registration becomes mandatory is covered separately.
• Võlad töövõtjatele — salaries accrued but not yet paid, including the holiday pay provision.
• Laenukohustised — the portion of loans and borrowings due within a year.
• Ettemaksed ostjatelt — advance payments received. This is a liability, not revenue, until the service has been provided.

Pikaajalised kohustised (non-current liabilities)

Loans and borrowings with a term of more than a year. This is also usually where a shareholder loan sits. A separate reminder: a loan to a shareholder (the opposite direction) with a repayment term of more than 48 months falls under the presumption of a hidden profit distribution, and the company will have to prove that the loan is genuine. Loans to related parties are declared quarterly in Part IV of form INF 14. If you have such transactions regularly, it is worth discussing them in advance as part of tax consulting.

Omakapital (equity)

The most important part of the balance sheet for the owner.

• Osakapital — share capital. Since February 2023 there is no minimum amount: a company can be registered with share capital of €0.01. What this looks like in practice is described in our walkthrough of the OÜ registration process in Estonia.
• Ülekurss — share premium paid above nominal value when a contribution is made.
• Kohustuslik reservkapital — mandatory reserve capital. No longer compulsory for an OÜ: it is formed only if the articles of association provide for it.
• Eelmiste perioodide jaotamata kasum (kahjum) — retained earnings or accumulated losses from previous years.
• Aruandeaasta kasum (kahjum) — the result for the reporting year. This is the line that equals the bottom line of the income statement.
• Omakapital kokku — total equity. If it is negative, the company has formally used up not only its own money but other people’s as well.

The net assets rule. An OÜ’s equity must be at least half of its share capital. With share capital of €0.01 the threshold is symbolic, but the mechanism still applies: if net assets fall below the required level, the management board must convene a meeting of shareholders and put the question of remedial measures to them. If the shareholders do not make a decision, a court may order the compulsory dissolution of the company, and it will be deleted from the register even if it is still trading.

How to read the income statement: two formats

Estonian law allows two income statement formats, and the choice between them changes what you will see. The format is set in the accounting policy and should not be changed from year to year without good reason.

Format 1: expenses by nature

Order of lines:

1. Müügitulu — revenue from sales
2. Muud äritulud — other operating income
3. Changes in inventories of finished goods, capitalised costs, gains from biological assets
4. Kaubad, toore, materjal ja teenused — goods, raw materials, supplies and services
5. Mitmesugused tegevuskulud — miscellaneous operating expenses (rent, telecoms, software, services)
6. Tööjõukulud — staff costs, including social tax
7. Põhivarade kulum ja väärtuse langus — depreciation and impairment
8. Muud ärikulud — other operating expenses
9. Kokku ärikasum (-kahjum) — operating profit
10. Finance income and costs, including interest
11. Kasum (kahjum) enne tulumaksustamist — profit before tax
12. Tulumaks — income tax
13. Aruandeaasta kasum (kahjum) — profit for the year

What this format shows. You can see how much staff cost and how much depreciation takes. It suits services, consulting and SaaS or IT companies, i.e. businesses where people are the main expense.

Format 2: expenses by function

Order of lines:

1. Müügitulu — revenue from sales
2. Müüdud toodangu (kaupade, teenuste) kulu — cost of sales
3. Brutokasum (-kahjum) — gross profit
4. Turustuskulud — distribution and marketing costs
5. Üldhalduskulud — general and administrative expenses
6. Muud äritulud / Muud ärikulud — other income and expenses
7. Kokku ärikasum — operating profit
8. Financial items
9. Kasum enne tulumaksustamist
10. Tulumaks
11. Aruandeaasta kasum

What this format shows. A gross profit line appears, so you can see your mark-up. For e-commerce and dropshipping this is critical: without it you cannot tell whether you are making money on your products or simply churning turnover.

Which one to choose. If you sell goods, format 2 is almost a must. If you sell your time, format 1 is more informative. If your accountant chose format 1 for an online shop, ask them to redo it: without gross profit, you cannot manage your product range.

Comparison across nine parameters

Calculations: three scenarios with full figures

All examples are simplified, amounts are rounded, 2026 rates apply.

Scenario A: a consulting OÜ in its third year

Income statement (format 2), for the year:

Balance sheet as at 31.12:

What these two tables tell you:

And here is the key conclusion, which does not follow from the bottom line of the income statement. Distributable profit is €29,500. To distribute it in full, €29,500 in cash would have to leave the company: €23,010 to the shareholder and €6,490 in tax. There is €18,000 in the bank, and all €18,000 of it is already “promised” to current liabilities. Free cash is zero.

A distribution will be possible once clients pay (€26,000 of receivables). A sensible payout here is about €15,000 of distributable profit, i.e. €11,700 net and €3,300 in tax — and only after the money comes in, keeping a buffer for next quarter’s taxes.

The company is healthy. But “a profit of €23,000” and “I can take out €23,000” are two different statements.

Scenario B: an online shop that is profitable on paper

Income statement (format 2), for the year:

Balance sheet as at 31.12:

Diagnostics:

What is happening here. The shop is profitable: €9,000 for the year. Yet almost the entire value of the company sits in the warehouse. Inventory turns over in 178 days, meaning stock sits for almost six months. Excluding inventory, there are 19 cents of quick assets for every euro of short-term debt.

Suppliers need €61,000, the tax authority €9,000 and the bank €20,000 within the year. There is only one source: selling the stock. Any two-month dip in sales turns into insolvency.

Dividends are out of the question here, despite the profit in the report. Sensible steps: clear out slow-moving lines, negotiate longer payment terms with suppliers, and cut purchasing to the actual rate of sales.

A separate note on margin: a gross profit of 35% with €54,000 spent on advertising means that more than half of the mark-up goes on acquiring customers. This figure is only visible in format 2. In format 1 it would not appear at all.

Two points an online shop should check alongside the report: the cost of accepting payments (easy to underestimate if you look only at the percentage — see our article on merchant accounts for online shops in Estonia) and correct VAT on sales to other EU countries through the OSS and IOSS schemes.

Scenario C: negative equity

Balance sheet as at 31.12:

What this means legally. The share capital is €2,500, so the required minimum of net assets is half of that, i.e. €1,250. Actual net assets are minus €27,000. The management board must convene a meeting of shareholders and put the question of remedial measures to them. If no decision is taken and the situation is not remedied, a court may order the compulsory dissolution of the company.

What is usually done. The law does not prescribe a single option; it requires an active decision. In practice, owners choose from the following:

• increasing the share capital by a cash contribution;
• converting the shareholder loan into equity by set-off of the claim (a non-monetary contribution);
• creating a voluntary reserve from a shareholder contribution;
• the shareholder waiving their claim against the company;
• a merger, division or conversion;
• filing for bankruptcy if the situation cannot be fixed.

Each of these routes is formalised through shareholder resolutions and changes in the register, so it is worth going through it with a lawyer specialising in Estonian corporate law.

Note the structure. Here the €30,000 shareholder loan is a liability, not equity. That is exactly why equity is negative even though the owner put money into the company. Converting this loan into equity solves the net assets problem with a single resolution and requires no new money. It is the most common way out of this situation — and the one most often overlooked.

Seven numbers in five minutes: an owner’s checklist

If you open the report once a year and are short on time, look at these lines in this order:

1. Omakapital kokku. Is it positive? Is it at least half of the share capital? This is the survival check; everything else comes later.
2. Raha. Divide it by average monthly expenses. You get your runway in months. Less than two is a warning sign.
3. Käibevara versus Lühiajalised kohustised. The first should be larger than the second. If not, your obligations are closer than the sources to cover them.
4. Maksuvõlad. Should be close to zero or explained by current accruals. Tax arrears are publicly visible.
5. Distributable profit. The sum of the “Eelmiste perioodide jaotamata kasum” and “Aruandeaasta kasum” lines. This is the ceiling for dividends, not a guarantee that the cash is there.
6. Müügitulu and Ärikasum compared with last year. The report contains both columns. Revenue is growing but operating profit is not? You are growing at a loss.
7. Nõuded ostjate vastu versus revenue. Work out the ratio: receivables / revenue × 365 gives the average collection period in days. If it grows year on year, your money is staying with your clients for longer and longer.

Each point takes less than a minute. That is enough to tell whether you need a conversation with your accountant.

Reconciliation: how to check that the report is put together correctly

Three checks that anyone reading a report makes, and that are worth making before you sign.

Check 1: the balance sheet balances. AKTIVA KOKKU = PASSIVA KOKKU. If not, there is no point reading further.

Check 2: the bridge between the statements. The “Aruandeaasta kasum” line in the equity section of the balance sheet equals the bottom line of the income statement. This is the only direct link between the two documents.

Check 3: movement in equity. Equity at the end of the year should be made up as follows:

Equity at the beginning of the year

• profit for the reporting year − profit distributed and tax on it
• contributions to capital = Equity at the end of the year

If the formula does not reconcile, something else happened during the year: a prior-period adjustment, a revaluation, a correction of an error. This is not necessarily bad, but you should know exactly what it was.

A separate note: if you are an e-resident living outside Estonia

There are a few points here that local articles do not cover, because for residents they are obvious.

The report is in Estonian, in XBRL format. Since 2022 the report has been filed through the e-Business Register in XBRL only; PDF and Word are not accepted. This means you will not get a nice document you can simply read: you will see a structured form with line names in Estonian. The glossary below is a working tool, not a reference section.

You sign what you read. The annual report is signed by the management board. Responsibility for its accuracy lies with you, not with the accountant, and in the event of late filing a fine is imposed on each management board member personally as well. Signing requires a valid e-resident digital identity: if your card has expired, you will not be able to sign the report on time.

Deadlines are not tied to your country. Six months after the end of the financial year; for a calendar year, 30 June. The register does not send reminders the way an accountant does.

Dividends cannot be paid without an approved report. For an owner living abroad who takes profit as dividends, the annual report is not a formality but the condition for accessing their own money.

The tax side is calculated in two jurisdictions. The Estonian report shows retained earnings and your Estonian tax (24/76 at the standard rate). What part of this ends up in your personal tax return in your country of tax residence, the Estonian report does not say.

Practical takeaway: if you read the report for 10 minutes once a year, at least set up a quarterly income statement and balances report from your accountant. The annual report in June describes the situation as it was six months earlier, and there is nothing left to fix based on it. The full set of obligations for a non-resident owner is collected on our page of services for Estonian e-residents.

Reporting and deadlines

If you want to see these figures every month rather than once a year, this is covered by monthly accounting: an up-to-date balance sheet and income statement, rather than a June reconstruction from last December’s documents.

About e-invoices. Since 1 July 2025, a company registered in the Commercial Register as an e-invoice recipient has the right to require suppliers to send invoices in a structured format compliant with the EN 16931 standard. A full transition to mandatory B2B e-invoicing is being discussed from 2027. This matters for reading your accounts for one reason: the more documents arrive in structured form, the fewer discrepancies there are between your books and your counterparties’ books, and the fewer surprises in the notes to the report.

Common mistakes when reading the report

Looking only at the bottom line. “Aruandeaasta kasum” tells you nothing about solvency, the structure of assets or how much you can take out.

Confusing profit with cash. The most expensive mistake on this topic. Profit is an entry; cash is a balance.

Treating a shareholder loan as part of equity. It sits in liabilities and does not solve the net assets problem until it is converted.

Planning dividends based on the year’s profit. The ceiling is distributable profit, taking into account prior periods and the net assets rule, and the source is cash, which may not be there.

Forgetting about tax when planning a payout. €10,000 of net dividends at the standard rate means a cash outflow of €13,157.89 (including tax at 24/76).

Ignoring the Maksuvõlad line. Tax arrears are visible in public data and affect banks, partners and payment providers.

Using format 1 in trading. Without a gross profit line, you are not managing your mark-up.

Comparing margins with foreign companies directly. Corporate income tax is not deducted in the Estonian report, because there is none.

Reading the report once, in June. By then, the period it describes ended six months ago.

Hiring an accountant who does not explain the figures. If you ask “why is profit 23,000 when there is 18,000 in the bank” and do not get a clear answer, the problem is not your financial literacy. The selection criteria are collected in our article on how to choose an accountant in Estonia.

Mini-glossary: Estonian terms in the report

Bilanss — balance sheet. Kasumiaruanne — income statement. Majandusaasta aruanne — the annual report as a whole. Tegevusaruanne — management report; micro-enterprises have been exempt since 2024 if equity is not below the required level. Lisad — notes to the financial statements. Kasumi jaotamise ettepanek — profit allocation proposal.

Aktiva / Passiva — assets / liabilities and equity. Käibevara — current assets. Põhivara — non-current assets. Raha ja pangakontod — cash and cash equivalents. Nõuded ostjate vastu — trade receivables. Ettemaksed — prepayments. Varud — inventory.

Kohustised — liabilities. Lühiajalised / Pikaajalised kohustised — current / non-current liabilities. Võlad tarnijatele — trade payables. Maksuvõlad — tax liabilities. Võlad töövõtjatele — amounts owed to employees. Laenukohustised — borrowings. Ettemaksed ostjatelt — advance payments received.

Omakapital — equity. Osakapital — share capital. Ülekurss — share premium. Kohustuslik reservkapital — mandatory reserve capital (not compulsory for an OÜ). Eelmiste perioodide jaotamata kasum (kahjum) — retained earnings (accumulated losses) of prior periods. Aruandeaasta kasum (kahjum) — profit (loss) for the reporting year. Netovara — net assets.

Müügitulu — revenue from sales. Müüdud toodangu kulu — cost of sales. Brutokasum — gross profit. Turustuskulud — distribution costs. Üldhalduskulud — general and administrative expenses. Tööjõukulud — staff costs. Mitmesugused tegevuskulud — miscellaneous operating expenses. Põhivarade kulum — depreciation of fixed assets. Ärikasum — operating profit. Kasum enne tulumaksustamist — profit before tax. Tulumaks — income tax.

24/76 — the formula for tax on distributed profit (standard rate 24%). KMD — VAT return, due by the 20th. TSD — income and social tax return, due by the 10th. XBRL — the mandatory format for filing the annual report. Kontaktisik — a licensed contact person, mandatory for companies whose management board is located outside Estonia.

If you sign the annual report of your Estonian company

The annual report is the point where all of a company’s other obligations meet: up-to-date data in the Commercial Register, official letters received and not lost, EMTA and register deadlines met. A break in any link turns a routine filing into a problem: defaulter status in the public register, personal fines for the management board and, if things drag on, proceedings to delete the company. For a company with its management board abroad, Estonian law adds a mandatory condition: a legal address in Estonia and an appointed licensed contact person through whom state authorities officially serve documents on the company.

Legal Address in Estonia provides exactly this layer for e-residents and foreign owners of Estonian companies:

• a legal address in Tallinn and licensed contact person services, with digital confirmation of the appointment at registration;
• scanning and forwarding of official correspondence with notifications, and reminders of Commercial Register and EMTA deadlines;
• preparation and filing of the annual report, without which dividends cannot be paid;
• company registration in Estonia and changes in the e-Business Register, including via e-Residency;
• VAT number registration, including a business justification prepared for the stricter checks;
• accounting services and tax consulting together with trusted partners.

For a founder, this means one simple thing: the mandatory requirements of Estonian law are covered by a single local partner from day one, official mail is not lost, and deadlines do not slip by unnoticed. Services and pricing are available at legaladdressinestonia.com.