Interim financial statement and transition to the Estonian CIT – audit risk

August 25, 2025

Entrepreneurs deciding to change their form of taxation and opt for the so-called Estonian CIT are required to prepare an interim financial statement as of the day preceding entry into this regime. This statement (within 3 months from closing the books), although not a statutory annual report filed with the National Court Register (KRS), plays a key role in the effective transition to the Estonian CIT.

Financial statements – key risks

Issues related to the preparation of the interim financial statement were raised in detail in Parliamentary Interpellation No. 7087, which highlighted two main risks:

1) Lack of a signature on the interim statement may result in an ineffective choice of Estonian CIT

According to the Ministry of Finance’s response, signing the financial statement — both by the accountant and the head of the entity (or at least one member of a multi-member governing body) — is a formal and necessary element for the statement to be considered validly prepared. The legislator’s provision indicates that a signature is treated as confirmation of the completeness and accuracy of the document. In practice, this means that the absence of a signature may invalidate the effective choice of Estonian CIT, even if the statement was prepared on time.

2) Risk of losing Estonian CIT status despite acting in good faith

The author of the interpellation pointed out that thousands of companies may discover belatedly that they have not formally “entered” the Estonian CIT system due to incomplete formalities — even if they prepared the statement in line with the legislator’s intent. The consequence may be the need to correct settlements, pay additional tax and interest, and potentially face challenges to the entire period of lump-sum taxation. However, the Ministry of Finance has not provided any exceptions for taxpayers who historically prepared the financial statement but failed to sign it within the required deadline.

How does Estonian CIT affect financial statements and company settlements?

The interpellation highlights that this issue affects many entrepreneurs — a large number of taxpayers for whom losing the lump-sum taxation system could create serious financial and operational problems. The potential repercussions of retroactively depriving taxpayers of the right to settle under the Estonian CIT regime are difficult to estimate, also due to the significant workload that tax and accounting departments would face when having to adjust settlements from Estonian CIT back to the general taxation rules.

Tags Estonian CIT, Estoński CIT, financial statement, sprawozdanie finansowe