Year-end essentials

The new year will bring changes to tax legislation which will affect both companies and individuals. Below is an overview of the main tax changes that will enter into force in 2026, as well as changes already adopted and entered into force during 2025.

The reduced social tax for employees with decreased work ability is an accrual-based support measure in which the Unemployment Insurance Fund pays the employer’s social tax on behalf of an employee with decreased work ability, based on a one-time application. The allowance is calculated according to the monthly social tax rate applicable to the specific calculation period (month).

According to the guidelines of the Accounting Standards Board, every accounting entity must ensure that the information presented in the annual report is fair and reliable. This also includes confirmations issued by banks regarding account balances, loans, collateral, and other financial assets and liabilities.

Year-end is the time when the management of every company must ensure that the company’s equity complies with the minimum net asset requirements set out in the Commercial Code.

The Estonian Parliament has approved several amendments affecting employment relationships. Many of these will enter into force over the coming year and will alter the content of agreements related to work arrangements. This article provides an overview of the changes that will most significantly impact both employers and employees.

Every company must prepare and communicate the annual vacation schedule during the first quarter of the year. This is not just a formality – the purpose of the schedule is to ensure smooth work organisation and conscious, mutually considerate planning of employees’ vacation needs.

When closing a financial year, it can turn out that a company’s equity (net assets) does not meet the requirements set forth in legislation and so the equity must be brought into conformity with the law. Often auditors and lawyers receive queries about these topics, but their perspectives can sometimes vary.

Year-end means preparing financial statements, but many businesses overlook one critical aspect: whether the covenants of long-term loans are compliant with the indicators agreed with the bank as at the balance sheet date.

To ensure that your annual report is completed smoothly and on time, we have compiled the key steps and recommendations — what to prepare, when to act and which information your accountant will need.

As the end of the calendar year approaches, now is the perfect time to review employees’ remaining vacation balances. It’s important to remember that vacation days can only be used during the calendar year in which they are earned and the following calendar year.

The “tax hump” that has been in place for eight years will be abolished, and starting from 1 January 2026 a uniform basic tax exemption of €700 per month (€8,400 per year) will apply regardless of a person’s income level. For those of retirement age, a slightly higher exemption will continue to apply—€9,312 per year.

According to the registrar's statistics, 95% of companies registered in Estonia have chosen a financial year that runs from 1 January to 31 December. However, a company’s fiscal year should reflect the cycle of the company’s operating activity and year-end procedures should be conducted at a time when volumes of activity are lowest.

Stocktaking is far more than an accounting chore. When done thoughtfully, it becomes an effective tool for control, accuracy, and fraud prevention — and can be managed far more efficiently.