Value Added Tax — VAT, levied on goods and services sold in business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. The final consumer pays Value-added tax.
Companies are obliged to register a VAT number when sales in Estonia exceed 40,000 EUR from the beginning of the calendar year. A company can also apply for VAT registration before this threshold value is reached.
If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
As a sales taxpayer, you must:
- When selling a good or providing a service, add a sales tax to the sales price
- Keep a record of turnover tax
- Calculate and pay the sales tax
- Keep the documents relating to the transactions and issue the appropriate invoices
From the taxable turnover, you can deduct the turnover tax (turnover input tax) paid on the purchase of a good or service used for the purposes of the taxable turnover.
According to the Estonian regulations, the total rate of turnover tax is 20 per cent of the taxable value of the good or service.
For some goods and services, a tax rate of 9 per cent is applied, for example, in the case of books and workbooks used for teaching, periodicals, accommodation services and medicines noted by the Ministry of Social Affairs, Sanitary and hygienic products and medical equipment for personal use by persons with disabilities.
Some goods are subject to a 0% turnover tax, including exported goods, consultancy services rendered to a taxpayer from another EU Member State, and water and air transport used for international flights.
In the case of services, the 0% tax rate applies, for example, to services provided outside Estonia, various services related to water and air transport, and freight services. Various social goods and services are not taxed, such as postal services, insurance, health care and social services. You will find exhaustive information about the characteristics of the turnover tax rates and exemptions from this tax in the Sales Tax Act.
The period for VAT taxation is a calendar month. You can file a value-added tax return and pay VAT to the Tax and Customs Board by the 20th of the month following the taxation period. The declaration can be submitted electronically at the e-Tax and Customs Board (e-MTA) if you have been a VAT payer for at least 12 months or by contacting the regional tax centre of the Tax and Customs Board.
As an individual entrepreneur, you must pay turnover tax if you are registered as a sales tax liability. As in commercial associations, the obligation to register arises if turnover exceeds 40,000 euros per year.
For you, as an individual entrepreneur, the turnover tax rates are the same as for business associations. If you, as an individual entrepreneur, keep cash accounting, you have the right to keep turnover tax records also on a cash basis, but this should be notified to the Tax Office Customs department when registering as taxable sales tax.
A VAT refund to a taxpayer in another EU Member State is carried out on the same grounds as a VAT refund in Estonia.
Claims for reimbursement must be submitted electronically through the tax authority of the country where the entrepreneur is located, which, in turn, sends an application to the Estonian tax authority.
VAT paid by a taxpayer of another Member State in Estonia when importing or purchasing goods or receiving services used for the purpose of doing business in the country of location of this person shall be refunded to the taxpayer of another Member State on the basis of an application by the taxpayer and in accordance with the procedure established by a regulation of the person responsible for this area minister if:
- In the country where the taxable person is located, the taxable person has the right to deduct the provisional value-added tax paid on the import or purchase of goods or the receipt of services under the same conditions from the calculated value-added tax.
- In accordance with this Law, Estonian taxpayers have the right to deduct the provisional value-added tax paid on the import or purchase of goods or the receipt of services under the same conditions from their calculated value-added tax.
- The amount of value-added tax to be refunded is at least 50 EUR per calendar year, or at least 400 EUR if the application is submitted for a period shorter than a calendar year but covering at least three months.
- Not allowed to refund:
- VAT is related to the activities which are tax-exempt without the right of deduction.
- VAT expenses that are limited in the member state of reimbursement.
Professionals from Company in Estonia OÜ assist in registering VAT. Our assistance will include the following:
- Preparation of the application based on information provided by the client.
- Filing the application to the Estonian Tax and Customs Board in the presence of the applicant or digitally for e-Residency cardholders.
- Assistance in answering additional questions from the Estonian Tax and Customs Board.