Introduction 

Estonia standard VAT rate is 22%. Understanding who bears this tax responsibility is crucial in navigating the tax landscape. Registering for Value Added Tax (VAT) is necessary when a business’s sales or activities reach a certain level. In Estonia, this happens when a business’s taxable supply exceeds 40,000 euros in a year.

Limited Liability VAT Registration 

If a business’s purchases from other EU countries go over 10,000 euros in a year, they register under limited liability VAT.

VAT Groups 

When a main company and its branches work together, they can be registered as a VAT group.

How to Register or Deregister

For both registering and removing from the VAT list, an application needs to be sent to the Estonian Tax and Customs Board.

1. Persons Liable to VAT

A person liable to Value Added Tax (VAT) in Estonia is obligated to pay VAT on various transactions, including sales supply, imported goods, and services purchased from a foreign entrepreneur subject to reverse charge.

Moreover, they have the privilege to deduct input value added tax, further streamlining their tax obligations.

2. Limited Liability VAT

Individuals registered or required to register as taxable persons with limited liability fall under this category. However, this excludes those registered for VAT through the standard procedure and non-business engaged natural persons.

Those with limited liability are only required to pay VAT on specific goods and services acquired from foreign entrepreneurs, as well as on imported goods.

Unlike their counterparts, they do not have the right to deduct input VAT.

3. Other Persons

This category encompasses non-taxable individuals engaged in specific activities, including importing goods, acquiring excise goods from other Member States, or obtaining new means of transport.

It’s important to note that certain conditions must be met for VAT to apply in these scenarios.

Understanding VAT Charges

VAT is charged on:

• Supply (except those exempt from tax with a place in Estonia)
• Import of goods into Estonia (excluding tax-exempt imports)
• Provision of services with a place of supply outside Estonia (unless exempt from tax)
• Supply of goods or services exempt from tax, with voluntarily added VAT
• Intra-Community acquisition of goods (excluding tax-exempt acquisitions)
• Supply by Non-Profit Organizations and Foundations

Time of Supply

The time of supply is determined by the delivery of goods, provision of services, or when full or partial payment is received for goods or services, except for intra-Community supply.

Place of Supply

The place of supply plays a crucial role in determining the applicable tax jurisdiction. The location of goods or the type of service provided dictates where the supply is considered to be created.

This brief overview provides a simplified understanding of VAT in Estonia. For specific details and regulations, referring to the official Value Added Tax Act is recommended.

Disclaimer: This article serves as a general guide. For specific tax advice, consulting a qualified tax professional is recommended. Contact us for a consultation.