Value added tax (VAT) in Estonia
In Estonia the turnover tax is basically synonymous with value added tax and is detailed in the corresponding law.

What is turnover?
  • sale of goods during commercial activities;
  • sale of service during commercial activities;
  • supply (delivery) of own goods to another EU country, with the purpose of carrying out commercial activities.

The main tax rate is 20%. In some cases a special 9% tax rate is used or zero tax rate.

Obligation to register as a VAT taxpayer:

1. If the company is not registered as a VAT taxpayer in a EU country

The obligation for registration in Estonia will not appear, if all the turnover of the company is not subject to VAT taxation, and also in some cases when the tax rate is 0%.
One of the examples is resale of goods by an Estonian company outside EU. The tax rate can be 0% when, for example, the sale/purchase of goods is carried out from the territory of tax storages.
Should be noted, that if the VAT tax rate is equal to 0%, but there is intercommunity turnover, then registration is obligatory. Also the obligation to register as VAT taxpayer appears is the company provides services to a person without VAT registration.

2. If the company is a VAT taxpayer in Estonia

In some cases a company that is registered as a VAT taxpayer in Estonia may gain an obligation to register also in another EU country.
One of the most common cases – distant sales. This means sale of goods and delivery of goods by the seller or another person to another EU country to the buyer, who is not registered there as a VAT taxpayer.
In every EU country there is their own threshold, prior to which the seller may not register in the country, where the goods are delivered. This threshold is between 35,000 euros (Estonia) and 100,000 euros (Germany). Accounting for every country is carried out separately.
Recommendation – when approaching the volume of sales in amount of 35,000 euros, it is best to double check, what is the threshold in the country where the sales are taking place.

It is important to note, that the quotas mentioned about are not relevant for excise taxes! When distant trading with excise goods the obligation to register and pay VAT appears from the first sale in every EU country, where the sale takes place. Currently there are discussions regarding changes to this system, so there is a possibility the rules mentioned above will be changed in the next few years.

Obligation for VAT registration also appear in another EU country when providing certain services, such as those connected to real estate.
Such services include:
  • hotel services;
  • construction;
  • installation services;
  • construction services (including repairs, support and other).

When providing electronic (digital) services to a buyer who is not register as a VAT taxpayer in another EU country, the seller may be obligated to register as a VAT taxpayer in the country of the buyer. Such services include:
  • website hosting;
  • supply of software;
  • access to databases;
  • download of applications or music;
  • online games;
  • distant learning.

Provider of electronic services may pay VAT using a simplified procedure in his own country until the value of provided services exceed 10000 euros (on the condition that during the previous year the sum did not exceed 10000 euros).

Furthermore even if the said limit is exceeded there is an option to use the European MOSS system.
This procedure allows the person to continue to pay VAT in the country of his registration when providing services to clients that are not registered as VAT taxpayers in other EU countries.

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