First and foremost, сompanies are obliged to register a VAT number in a case when sales in Estonia exceed 40,000 EUR from the beginning of the calendar year. If sales do not exceed 40,000 EUR in Estonia, VAT payers can be registered on a voluntary basis.
Please note that since exceeding the threshold of 40,000 EUR, you have three working days to register your company as taxable. Hence, the Estonian Tax and Customs Board will treat your company as taxable from the moment of reaching the threshold.
It is also possible to apply for VAT before the threshold value is reached. In that case, if you feel that your company is likely to reach the threshold of 40,000 EUR, it is wise to start the process beforehand.
When VAT is registered, as a VAT payer, you must pay it to the Estonian Tax and Customs Board and submit monthly VAT returns. It refers to the months during which there was nothing to declare.
As we already mentioned, you can voluntarily register your company for VAT if you don’t exceed 40,000 EUR of annual sales. You need to prove to the Estonian Tax and Customs Board that you intend to start and run your business in Estonia. Usually, the authority asks for your business plan.
Authorities may also refuse VAT registration if your company has no visible activity located in Estonia. The consideration of your application usually takes up to 5 days. Once approved, you will receive your company’s VAT number. The Estonian VAT number starts with a prefix EE which is followed by nine digits: EE123456789.
The general VAT rate is 20% in case your OÜ provides services to clients. It also could be reduced in some particular cases. For example, if your company deals with providing accommodation services, book sales of books, or medical services/products. If you serve customers in third countries or another EU country, 0% VAT is applied.
Some legal nuances also depend on the type of service that is performed, which allocate where a specific service should be subject to VAT. You can find more detailed information on the Estonian Tax and Customs Board homepage.
All in all, the taxable period for VAT is one month, and you must declare and pay VAT to the Tax Authorities by the 20th day of the month following.