Value Added Tax (VAT), levied on goods and services sold in the course of business activity, imports of goods from non-EU countries, and purchases of goods from countries of the EU. Value added tax is paid by the final consumer.
The VAT payer undertakes:
- To add VAT to the price of the sale of goods or the provision of services in Estonia.
- To keep records of value added tax.
- To calculate and pay the VAT amount.
- To store documents related to transactions and issue invoices as required.
- The general VAT rate is 20% of the taxable value of goods or services.
- A tax rate of 9% applies to certain goods and services including accommodation services, medicine, books, periodicals, health and hygiene products (determined by the Ministry of Social Affairs), and medical equipment for the disabled.
- The 0% VAT rate applies to a range of goods, including exported goods, and consulting services provided to VAT payers in another EU Member State, as well as for ships and aircraft used in international traffic. The 0% VAT rate is also applied to services provided outside Estonia, as well as to a number of services related to water and air transport and the carriage of goods.
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.
Company in Estonia OÜ assistance will include 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 card holders.
- Assistance in answering additional questions from the Estonian Tax and Customs Board.
Companies applying for VAT registration shall have an account with a bank or payment system.