VAT in Estonia, Registration Obligation in Estonia, Obligations after VAT registration in Estonia, Using the 0% VAT rate and Claiming overpaid VAT back in Estonia
Estonian Value Added Tax Act (Käibemaksuseadus) is in accordance with EU Sixth VAT Directive.
The sales of most of the goods and services are subject to VAT. The standard VAT rate is 20%; lower rate of 9% applies to specific items. Some specific goods and services are exempt form VAT and export from Estonia is zero-rated.
Registration Obligation in Estonia
VAT registration limit is generally 16 000 EUR.
A foreign trader must register for VAT in the following circumstances:
When a trader, liable to VAT in another Member State, makes distance sale to an Estonian (excluding goods subject to excise duties), the trader can register for VAT voluntarily.
A person liable for VAT in another country without a permanent establishment in Estonia may appoint a tax agent. The Tax Board must approve the tax agent.
Obligations after VAT registration in Estonia
Once the company has been registered for VAT in Estonia the formal requirements must be met.
The monthly VAT returns should be submitted to the Tax and Customs Board and VAT paid by the 20th of the next calendar month at the latest. If this is not done the tax officials have the right to impose a fine and/or delete your VAT ID from the register.
NB! Please remember that the tax authority has the right to delete a taxable person from the register if the taxable person has failed to submit a value added tax return for the last six consecutive taxable periods.
Using the 0% VAT rate
Business to business (B2B) transactions made in EU are called as Intra Community Supply and taxed with rate 0% VAT, if the following requirements are met:
Receiving the invoice with 0% means the recipient of goods/services shall apply VAT Reverse Charge Mechanism, what means that the declaration obligation lies on the recipient of goods/services, but in te reality, the receiver does not cover the VAT in home state.
The Seller in the Intra Community Supply shall submit together with the monthly VAT declaration also the special Intra Community Supply Declaration (VD Deklaratsioon in Estonian).
Claiming overpaid VAT back in Estonia
Overpaid VAT arises, when the VAT paid once with the goods/services purchased for business purposes is higher than VAT charged, selling the goods or services of your business. Overpaid VAT shall be covered by the State, where the business mainly locates and where a company is VAT registered.
There is two ways, claiming the VAT back, if the overpayment is recognized:
For questions, please, contact Valters Gencs, attorney at law at firstname.lastname@example.org
The material contained here is not to be construed as legal advice or opinion.