​Value Added Tax (VAT) Guidelines: An overview of VAT regulations in Estonia

Taxable transactions are:

 

Not taxable transactions are, i.a.:

 

The standard VAT rate is 20 percent, one reduced VAT rate is 9 percent. 

 

VAT will not be imposed on the supply of goods and services of a social nature, e.g. Universal postal services within the meaning of the Postal Act, Health services within the meaning of the Health Service Organisation Act or Service provided by dental technicians.

 

VAT shall also not be imposed on the supply of some goods and services, such as insurance services, including reinsurance and insurance mediation, the leasing or letting of immovable or parts thereof, establishment of a usufruct on immovable or parts thereof or  Investment gold, services relating to the transfer of investment gold or entry into a corresponding transfer agreement or services relating to the supply thereof which are provided by an agent acting in the name and for the account of another person. 

 

VAT shall not be imposed on the supply of services, which is deemed to constitute supply of electronically performed services. 

 

Value-added taxation takes place in the country that is the place of supply of service or goods. As a rule, ser­vices are taxed in the recipient’s country of location if the recipient of the service is a taxpayer in another coun­try or a business entity from a non-EU country. Thus, the recipient of the service pays VAT in his or her own country – i.e. reverse charge of VAT is applied. Only in a few exceptional cases, such as services related to location of real estate, is the place of supply determined according to the physical location.

If the taxable supply of the transactions, except the transfer of fixed assets and distance selling of a person of Estonia, carried out by a person exceeds EUR 40,000 as calculated from the beginning of a calendar year, an obligation to register as a taxable person will arise for the persons as of the date on which the supply reaches that amount. The registration obligation does not arise if all the taxable supply of the person is taxable at the 0 percent VAT rate, except unless it is intra-Community supply of goods and the supply of services if the services are provided to a taxable person or a taxable person with limited liability registered by the other EU Member State.

 

According to the EU VAT package for e-commerce that entered into force on 1 July 2021, special scheme for imposing VAT on telecommunications, broadcasting and electronic services (hereinafter digital services) which is in force today (Mini One Stop Shop, MOSS) is extended also to other services where the place of supply is in the other EU Member State, as well as to intra-Community distance selling of goods and in certain cases also to the transfer of goods through the electronic interface (hereinafter e-shop). The extended special scheme is called OSS (One Stop Shop). Further, a new special scheme called IOSS (Import One Stop Shop) is imposed on distance selling of goods imported from third country. Distance selling of goods (both intra-Community dis­tance selling and distance selling of goods imported from third country) is cross-border transfer of goods to the end user. 

 

The OSS special scheme is applicable if the taxpayer provides to the end users in the Member State of their place of residence, for example, services connected with an immovable (construction, valuation); cultural, artistic, sporting, educational or entertainment services (performances, concerts, exhibitions); rental services of means of transport, etc. – you can find the longer list of such services in subsection 10 (4) of the Value Added Tax Act.

 

The implementation of the special scheme simplifies the performance of VAT obligations, which arise for a business in the other EU Member State. A business, who has chosen the implementation of the special scheme, declares the supply created in the other Member State (a person who owns e-shop in certain cases also the supply created in Estonia) and pays VAT to the Estonian tax authority.

 

The all-in threshold EUR 10,000 is introduced for gross supply of intra-Community distance selling of goods (to all Member States together) and digital services provided to the end users of other Member States. If this threshold is not exceeded, the VAT rate of the country of the seller can be applied upon the taxation of these supplies. When the threshold has exceeded and the OSS special scheme has chosen, VAT rates of the Member States of the end users shall be applied for intra-Community distance selling of goods and digital services provided to the end users, but the correspondent VAT is paid through the Estonian tax authority.

 

The implementation of the IOSS special scheme simplifies the performance of VAT obligations of a business. The business who has chosen the implementation of the special scheme, registers for the special scheme and declares and pays VAT upon the import of the goods, covered by the special scheme, only in one Member State (in the Member State of registration) and has no obligation to pay VAT at the moment of the import of goods in every EU Member State where the import takes place.

The taxable period is one calendar month. The VAT and appendix thereto has to be submitted to the tax autho­rity by the twentieth day of the month following the taxable period. The first taxable period for a taxable person and taxable person with limited liability is the period from the date of registration as a taxable person or taxable person with limited liability until the end of the same month. If the number of calendar days in the first taxable period is less than fifteen, the taxable person or taxable person with limited liability may declare the supply of the first period together with the supply of the following taxable period and submit one return con­cerning two taxable periods. A VAT return has to be submitted electronically if the person has been a taxable person for at least 12 months or more than five invoices are included in the appendix to the VAT return. 

 

If a taxable person fails to pay tax by the due date prescribed by law, the taxable person is required to calculate and pay interest on the amount of tax outstanding by the due date. Interest will be calculated as of the day following the day in which payment of the VAT was due pursuant to law until the date of payment or set-off, inclusive of the latter. The rate of interest is 0.06 percent per day. Failure to submit information to a tax autho­rity intentionally or submission of false information if the tax or withholding obligation is decreased thereby or the claim for refund is increased is punishable by a fine of up to EUR 32,000.

 

If VAT calculated during a taxable period is less than the amount if input VAT deductible by the taxable person during the same period, the overpaid amount of VAT will be refunded to the taxable person pursuant to the procedure provided for in the Taxation Act.

 

VAT paid by a taxable person of another Member State in Estonia upon the import or acquisition of goods or receipt of services used for the purpose of business being carried out in the country of location of the person shall be refunded to the taxable person of another EU Member State on the basis of an application from the taxable person and pursuant to the procedure established by a regulation of the minister responsible for the are if: 

 

Input VAT on goods or services relating to the reception of guests or the provision of meals or accommodation for employees shall not be deducted from calculated VAT. The provisions do not apply to the deduction of input VAT paid for accommodation services received during a business trip.

 

Upon the acquiring of an automobile for business purposes or using under the contract for use and purchasing of goods and receiving of services for such an automobile fifty percent of the input VAT has to be deducted from the calculated VAT.

A taxable person has to issue an invoice for the transfer of goods or provision of services within seven calendar days as of the date on which the goods are dispatched or made available to the purchaser or the services are provided or as of the last day of the taxable period, or ensure that the invoice is issued within that term by a person acting in the name and for the account of the taxable person or by the acquirer of the goods or the recipient of the services.

 

If the supply is created upon receipt of full or partial payment for the goods or services, an invoice has to be issued within seven calendar days as of the date of receipt of full or partial payment for the goods or services.

 

An invoice may be issued on paper or, subject to acceptance by the acquirer of goods or the recipient of ser­vices, by electronic means.

 

A credit invoice, which amends an initial invoice and which contains a reference to the initial invoice shall be deemed to be an invoice. All other formal invoicing requirements apply.

 

The Estonian Value Added Tax Act allows self-billing invoices, on a condition that self-bill has to be accepted by the supplier. Agreement between parties must contain the procedure for the acceptance of invoices by a supplier.