Profit distribution proposal and dividends in the Estonian annual report

27 June 20266 min readprofit distributiondividendsannual report

The profit distribution proposal is the board's proposal for how to distribute the year's profit — it is forward-looking, and by default the whole profit is added to retained earnings. It is not the same as dividends paid during the year. The proposal is required by Äriseadustik paragrahv 179.

Part of the guide: Filing the Estonian annual report

What is the profit distribution proposal?

This is the portal field where many people get stuck. The profit distribution proposal (kasumi jaotamise ettepanek) is the board's proposal to shareholders for what to do with the year's profit. It is required by the Commercial Code (Äriseadustik paragrahv 179).

Important: it is a forward-looking proposal, not a record of what was already done during the year. For a typical micro-enterprise, the whole profit is simply added to retained earnings from prior periods. So on the field you enter: the full amount to the retained earnings line.

How is it different from dividends paid?

This is the most common confusion.

Profit distribution proposal = what the board proposes to do with this year's profit. Default: leave it undistributed.
Dividends paid during the year = what you already paid out to shareholders during the year. These reduce equity on the balance sheet.

Do not mix them up. The proposal does not mean you have to pay dividends — most often the proposal is "add the profit to retained earnings" and no dividends are paid at all.

How are dividends taxed?

When dividends are paid to shareholders, the company pays income tax on them. From 2025 the rate is 22/78: for every 78 € of net dividend, the company pays 22 € of income tax (100 € gross in total).

A dividend is not an expense — it does not go in the income statement. A dividend reduces equity. The dividend income tax is recorded as a tax liability. This is why categorising owner payments correctly matters in the report.

What to enter — the typical case

A one-owner OÜ that paid no dividends:

profit distribution proposal: the full profit for the year → retained earnings from prior periods;
dividends: 0.

If dividends were paid, the gross amount (net payment plus the 22/78 income tax) is stated separately.

For a filled-in proposal, see the annual report example.

References

Äriseadustik (Commercial Code) — paragrahv 179 (profit distribution proposal, filing).
Raamatupidamise seadus (RPS / Accounting Act) — paragrahv 18 (equity on the balance sheet).

nosweat.finance defaults to not distributing profit as dividends (the proposal = leave undistributed) and separates any dividends paid during the year. You review and submit it yourself.