After setting up your Estonian company, one of the most important and challenging tasks is finding a suitable accounting firm or an accountant. It’s wise to hire an experienced accounting firm to manage your books and taxes in Estonia. The process of picking the right firm requires some preparation and knowhow. With many service providers in the Marketplace and internet, it may seem a difficult process, but it doesn’t have to be. With this article we help you to meet this challenge and give a few tips for the process.
Firstly, beware and note that accounting is not a licenced activity in Estonia, which means that anyone can advertise and provide the service. Make sure you do your due diligence and run background checks on your candidates to ensure reliability.
Secondly, you must decide whether you sign up with an accounting firm with numerous accountants on the payroll or hire an individual accountant.
Since we get numerous requests every week for accounting services, we have developed a thorough understanding on this hot topic. For various reasons, we are also handling transfers of customers from under other accounting firms and service providers to us. Here’s what you need to know and consider when hiring an accounting firm for your Estonian company.
- The most important quality that non-resident clients seek is a human touch and smooth communication. The human factor in accounting is a major factor. Prepare your questions and concerns and meet candidates online or in person. Describe your business, financial goals, and vision. Find out how they are wired. Choose two or three candidate firms and speak to them. How do you find them? Are you on the same page? How do you feel about them after the first meeting? Since you are entrusting this firm with your finances, you must ensure that you like them. Our decisions are emotional and be reminded that people do business with people they like.
- Comfort of communication. Specify communication channels and hours with your accountant. The days of using just phone calls and email for efficient communication are gone. If you use WhatsApp or Viber, make sure there is a match. If you have an urgent question, what is the time horizon you may expect the answer? In case you are a high-tech savvy Millennial, and your accountant is from Boomers generation, make sure she has some experience in communicating with Millennials. Make sure she speaks your language literally and metaphorically. You want to have some match in communication channels to feel comfortable. Does she answer your urgent questions on Saturdays when you sport your best creativity to work for your Estonia Co? Some of those requirements may sound weird, yet if you have a customer in Dubai or Singapore working in different hours or weekends, this is a real situation to cope with. As Estonian companies suit fine for a global market, we get requests and inquiries from all over the world.
- Do you need an accountant with definitive knowledge or experience in a given industry or a specific business? Find out if they have relevant experience.
For example, a few of our clients are using Estonia Co. for holding investment portfolios, and asset management. Estonia is one of the best jurisdictions in the world where to set up your asset management and investment holding company. Why Estonia? You can read a deep dive article on this here.
In those scenarios, assets under management are located abroad i.e., outside of Estonia. This is where international taxation and international tax planning kicks in. Your accountant must be fluent in international tax, know how to take advantage of foreign participation exemption rules, understand how foreign tax relief works and how to benefit from it, be aware of the advantages of foreign tax credit method. Why? It saves you money. Estonian corporate tax system provides a lot of planning opportunities. Make sure your accounting firm speaks the language of international tax planning. Choose an accountant who is proactive about money saving supporting to assist you save money, not just manage it.
A few of our clients hold private equity holdings in foreign subsidiaries using Estonia as a holding company jurisdiction. Accounts of the subsidiaries must be consolidated into the balance sheet of Estonian Holding Co. In most cases, such financial statements must be audited. In case Estonia is your holding jurisdiction for foreign subsidiaries, make sure your accountant has this experience.
- Do you need bookkeeping or tax planning services? Whilst accounting may seem a boring subject of crunching numbers, when it comes to international tax, it is nothing but boring. Estonian corporate tax system can be utilized for international trading, holding, investing, finance, royalties, or mergers. Make sure your accountant is proficient in relevant EU tax directives like the EU Parent Subsidiary Directive, Interest and Royalties Directive, VAT Directive, and Tax Merger Directive. Find out if your accountant knows how to benefit from Estonian international tax treaty network and understands treaty friendly shopping. The knowledge and experience in a fabulous world of international tax planning may save you tons of money. A professional accounting firm guides you in making wise choices while assuring tax and regulatory compliance.
- Find out what software they use. Is it user friendly and easily understandable? Does it have mobile application?
- In case you already use your own preferred accounting program, can it be matched with the accounting firm’s accounting software, if you insist. Are they flexible to do it? Is your accountant willing to learn and master your accounting software if need be?
- Using state of the art technology saves time and money. Find out what technology they use and how does it work for you. How does it make your life easier, and cooperation with your accountant more efficient? How does it save you money? For instance, can you upload accounting documents easily? Does the system enable you to raise invoices efficiently? Does it enable cloud sharing?
- Remote accounting is a must. With cloud accounting, you can work on your real-time data directly with your accountant from any location.
- Storage of data, and security. How is data protected?
- If your Estonia Co. has employees on a payroll, you need an accountant with this experience and accounting software supporting payroll accounting and tax compliance.
- Tax and regulatory compliance. You need a local professional who knows the ropes and keeps you out of trouble. Find out if your accounting firm has experience with Revenue Rulings and is fluent in communication with the local tax authorities.
- Make sure your accounting firm has a professional indemnity insurance.
- Professional associations. You may find it beneficial that your chosen accounting firm is a member of a professional association like Estonian Assembly of Accountants, International Tax Planning Association or some international federation or association of accountants.
- Find out if your Estonia Co. requires annual audit. If yes, make sure your accountant works with a reliable auditor or audit firm.
- Payment for accounting services. What methods of payments your accounting firm accepts and supports? Bank transfer, Stripe, PayPal? Find out the options and see if it meets your needs.
- Engagement letters and agreements. Make sure you have a written engagement letter or agreement in place with the chosen accounting firm.
- We save the best for the last: the fees. Less is more doesn’t work here. Like lawyers, accountants sell their time. The hourly rates vary. The more professional and experienced the accountant the higher the rate. However, a professional accountant using state of the art software and technology is highly efficient, which saves you time and money. When it comes to international tax planning, tax compliance and saving your hard-earned money, it is worthwhile to pay a little more and hire a top-notch professional to do the job. Along the road, you will see where that extra euro goes. It’s your money at stake here, don’t focus on fees only. We have seen this time and time again: choosing the cheapest service provider may turn into a very expensive experience.
Most accounting firms have fixed monthly, quarterly, or annual fees for non-resident customers. If your accounting exercise takes more time, this is charged extra on top of agreed periodic fees. Clients and their needs are different, so is the time spent on each client different. For example, we have a customer who pays more than EUR 20 000 annually for accounting because of complexity of and time spent on the exercise. Make a budget for your accounting fees and negotiate a deal on agreeable amount for both sides depending on specific requirements of your business.
Why InCorpora?
Accounting requires knowledge of local and international laws and regulations. This is a competence that we have curated over many years in business. InCorpora’s expert team has many years of combined experience — understanding the specifics, local and international laws, and regulations. Estonia has a wonderful and unique corporate tax system. We know how Estonia works best for you, and how it can be best utilized for efficient corporate structuring to your benefit.
We conclude the challenging topic with an amuzing Q&A.
Question: “How did the auditor propose to his girlfriend?”
Answer: “With an engagement letter.”
Make good choices. Team InCorpora.
