Estonia joins Euroland as of Jan 1, 2011

Yesterday ECOFIN - EU's Economic and Financial Affairs Council, gave to Estonia the final go ahead for joining the eurozone. Estonia will be the 17th Euro Zone country and as of January 1, 2011 Euro will be the legal tender.

Yesterday was also approved the conversion rate from Estonian kroon to euro- this will be the same exchange rate as it is today- 15,6466.

Introduction of the euro as account currency, as well as in accounting and contractual relations, is performed as a "big bang", i.e. without any Transitional Period. A two-week Dual Circulation Period is applied starting from the January 1, 2011. Both euro and kroons are accepted in shops, change is normally given in euro. After the dual circulation period, the euro will become the sole legal tender in Estonia.

Credit institutions are obliged to change kroons into euro during six months following the euro introduction at the central exchange rate and without charging service fee. Banks also intend to provide exchange at the central exchange rate and without service fee within one month prior to the euro day. 6 months after the euro day to the end of the year 2011, credit institutions will exchange kroons to euro within a limited network.

Rounding rules when converting kroons into euro, the conversion result must be rounded to the nearest cent, taking only the third decimal into account. If the third decimal is 4 or below, the converted value will be rounded down, of it is 5 and above, the convesrion value will be rounded up.

What does it mean for companies operating in Estonia?

Starting from July 1, 2010

1. All retailers have to display prices both in kroons and euro.
2. Legal entities can start updating their articles of associations and convert their capital into euro, showing nominal share or part values in euro

Starting from September- December 2010

1. Central bank will predistribute Euro cents 4 month and notes one month before the 1st of January to commercial banks in order to diversify the transportation over the Estonia. The same deadline can be agreed between commercial banks and large retailers.
2. Kroon accounts will be fully and simultaneously converted into euros at the official exchange rate and without service fees by the commercial banks. New euro account will have the old kroon account numbers.
3. All transfers and card payments will become only euro-based.
4. The euro will function as legal tender in Estonia. However, a Dual Circulation Period is necessary to ensure a smooth changeover. From January 1, 2011 until January 14, 2011, both euro cash and kroon cash shall be legal tender in Estonia and cash payments may thus be executed in both euro and kroons within these two weeks. After the expiry of this term, the euro will be the sole legal tender in the Republic of Estonia
5. All accounting will be concluded in euros.

It is wise to follow the developmens and start thinking, what should be changed and updates, both in systems and in different contracts. It would be also good to be in contact with your banks to have a dialog and receive most updated information.

Thx to member Kristiina Koel who provided above article to the Benche.