VAT in Estonia. Everything you need to know
VAT is among the most important questions from our clients. Due to complex regulation, it might be challenging to understand when a company must obtain a VAT number when it might be beneficial and what are the main takeouts.
We’ve tried to answer the most frequently asked questions and help you figure everything out easily. Let’s dive right in!
What is VAT?
VAT (value-added tax) is a consumption tax placed on a product whenever a value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, minus any of the costs of materials used in the product that has already been taxed.
VAT rate in Estonia
The standard VAT rate in Estonia is 22%. In some cases, it might be reduced to 9% or 0%. Let’s take a quick look at cases when reduced VAT is applied.
When does a company need a VAT number?
A company becomes VAT liable (obliged to get a VAT number) as soon as it earns more than €40,000 annually.
So what happens if a company reaches this threshold but doesn’t register as a VAT payer? If a company doesn’t register for a VAT number before reaching the €40,000 mark, there will be only 5 days to complete the procedure. Otherwise, the company will be fined €1,300 by the Estonian government.
There is also another case when a company becomes VAT liable — if it participates in OSS or IOSS schemes. As companies must be subject to VAT in all countries from which goods are sent and customers are based.
There are also some cases when VAT number might be beneficial for a company. In order to help our clients realize whether they need to obtain VAT number, we’ve developed a free quiz-type tool that will tell you whether your company needs to obtain or might benefit from obtaining VAT number. If this tool won’t help you, you can also ask your personal manager and they will help you figure out everything regarding VAT.
Cases when a company has to become a VAT payer with limited liabilities
Yes, there is one more complexity about VAT in the EU. Even if your company hasn’t exceeded the €40,000 threshold, you might become limitedly obligated to pay VAT if:
a company purchases goods from another VAT payer the taxable value of which exceeds €10,000 (calculated from the beginning of a calendar year)
a company receives certain services from a foreign person who is not registered as a VAT payer in Estonia. The list of services is quite big and consists of such services as advertising, different kinds of consulting services, and some financial ones. We advise you to explore the full list here and comply with all these rules to avoid tax issues.
So if a company fits mentioned frames, it becomes obliged to register as a VAT payer with limited liabilities. It’s not a VAT-obliged company in the usual sense — a company has to pay VAT only on the intra-Community acquisition of goods and on receiving the services from a foreign person. Note that a company must submit a special application to the Estonian Tax and Customs Board within three days since it becomes liable.
Monthly accounting reports are mandatory for companies with VAT number
Generally, Estonian companies are required to file accounting reports to regulators once a year. But companies with a VAT number are required to complete the same procedure monthly.
Enty offers a convenient and easy way to automate accounting reporting for your company. We provide you with a simple interface that will allow you to simply upload the documents for each quarter of the year. At the same time, our accounting is included in the Control Panel subscription that lets you obtain VAT, EORI, IBAN, manage banking, legal, and other back-office processes under a single subscription.
— What if a company earned €0? Will it be necessary to file a report?
Yes, VAT declarations are mandatory even if your company earned nothing.
— So, if my company obtained a VAT number and I’ve realized that I don’t need it?
No problem, in this case, you can withdraw from VAT number. Your company won’t need to file monthly reports after that.
How to apply VAT
A VAT liable company is required to apply VAT to invoices. However, there are cases when VAT is applied at a 0% rate. Let’s figure out when you should apply VAT at 22% and when it must be applied at a 0% rate.
Enty will take care of all VAT-related issues for your company
So, everything related to VAT is quite complex and it’s almost impossible to get everything done correctly on your own (yeah, it’s even possible that you’re gonna break down and cry).
Enty is here to take care of this monkey business! We will help you figure out whether your company should get a VAT number, apply for it, will take care of invoices, accounting reporting, and declarations. Outside that, the same subscription will also include over 5 other services that will allow you to manage your company with ease.
We care about you, we will give you a warning if needed and will be there for you. Join Enty today to start the good times of your company!
