Estonia introduced VAT in 1992. Rules on Estonian VAT are based on EU VAT Directives which Estonian transposed into its VAT Act after its accession to the EU. Tax is administered by Estonian Tax and Customs Board.
Foreign companies providing goods or services to local businesses or consumers may have to register their business for Estonian VAT. They will have to follow the VAT compliance rules including invoicing and VAT rates as well as pay over Estonian VAT due.
Register for VAT in Estonia
If the total value of taxable supplies for a company in Estonia exceeds 16 000 EUR then the respective company is required to register for VAT. Voluntary registration is also possible if the threshold is not reached. The presence of a VAT representative is required for the registration of non EU businesses.
When registering a non EU company for VAT the company owner must be present. If the respective person cannot be present, it is possible to use an authorized person or a tax representative. This person will submit an application for VAT registration.
Once the procedure for VAT registration is completed, the company receives a VAT number with a form consisting of the country code - EE followed by nine digits.
VAT rate in Estonia
Standard VAT tax rate in Estonia has been 20% and a reduced rate of 9%. A number goods and services are not taxed. Estonian VAT system is based on EU Council directive 2006/112/EC and its principles are the same as in other EU countries.
VAT refund in Estonia
Companies or individuals from EU member states that want to apply for a VAT refund in Estonia can apply electronically. Estonian tax portal accepts claims until the 30 September of the following year. Company applying for VAT refund must provide proof of VAT registration and copies of the respective invoices. Verification of the documents might last up to 4 months.
Claiming overpaid VAT back in Estonia
Overpaid VAT arises when the VAT paid with the goods or services purchased is higher than VAT charged selling the goods or services. Overpaid VAT shall be covered by the State where a company is VAT registered.
There are two ways claiming the VAT back:
- Through monthly VAT declarations. The overpayment is calculated in the end of declaration form. Declaration including the overpaid VAT is considered as the claim of overpaid VAT refund. Tax and Customs Board examines the declaration if the amount is high - the Board may ask questions about the business and particular invoices. If the amount is justified the refundable VAT is transferred to the taxpayer bank account in 2 weeks.
- Cross-Border Refund System. If the goods - services, bought with foreign VAT are used for business purposes in Estonia, then Estonian VAT payer has right to get the overpaid VAT back from Estonian Tax and Customs Board, who itself contacts with the foreign tax authority and gives the overpaid VAT back. Procedure takes longer than Estonian internal procedure - 4 - 8 months.
Foreign entrepreneurs must register as VAT payers in the following cases:
- if a merchant does not conduct regular business in Estonia and pays taxes in another country; and if a merchant conducts business also in Estonia among others, but is not registered as a VAT payer;
- if a merchant is registered as a VAT payer in another EU Member State and is engaged in distance selling (excluding distance selling of excise goods) to a person in Estonia not registered as a VAT payer and the taxable value of the supply of the distance selling exceeds EUR 35,000 as calculated from the beginning of a calendar year;
- if a merchant registered as a VAT payer in another EU Member State is engaged in the distance selling of excise goods to a natural person in Estonia for personal use.
If a merchant registered as a VAT payer in another EU Member State is engaged in distance selling of goods (excluding distance selling of excise goods) in Estonia, it may register as a VAT payer on a voluntary basis. It must be noted that the tax authority is entitled to remove a taxpayer from the register if this taxpayer has not submitted a VAT declaration regarding the last six months.