VAT registration for Estonian companies

VAT, or Value-Added Tax, is a consumption tax that is paid during the sale of any final product or service by the customer whenever value has been added. VAT is usually paid only by the retail consumer as business clients, who buy raw materials for example, are reimbursed for the purchase. The fact of being able to get reimbursements is mainly the reason why companies within the EU choose to apply for a VAT number, as it makes B2B transactions easier and cheaper.

Incorporate is ready to help you! Please feel free to reach out to us if you would like to get more information about any of our company formation & management services or  accounting services.

VAT registration

Every Estonian company is required to register their business with the Estonian Tax and Customs Board as VAT liable if the company’s annual taxable turnover exceeds €40,000. Once your company exceeds the €40,000 as annual taxable turnover, you must submit your application to the local tax authority which will get a response within three working days.

However, if there are no business transactions related to your business’ Estonian VAT number during a timeframe of 2-3 months, then, as a rule, the tax authorities will inspect if your company really has a need to keep an active VAT ID. This is due to some companies registering for VAT just to get some initial VAT-free benefits and later do not use it anymore.

Voluntary VAT registration

If your company’s annual taxable revenue is less than €40,000, registering for an Estonian VAT ID is not obligatory, but you may still apply for one voluntarily. Obtaining a VAT number before you reach the legal threshold might be a very good idea if you are starting your business and already have certain partners in place with whom you can benefit VAT deductions.

To be registered, your company must maintain proof of the fact that it is engaged in business in Estonia or is about to commence business in Estonia. This means having a sound business plan, business partners, agreements, etc. To justify it, you must demonstrate that your Estonian company is or will contribute into the Estonian economy.

With physical products, this can be either buying something from Estonia, selling something in Estonia or paying a salary which is taxed in Estonia. With services like consultations or IT for example, the registration process is a bit easier, especially if the company is registered in Estonia and salaries are not paid elsewhere. This is because it is much more difficult to determine a concrete place where the revenue has risen.

The success of the VAT registration mostly depends on the particulars of the client and their business.

VAT rates and VAT-related obligations

The VAT rate in Estonia is generally 20%, while it can be reduced to 9% and even to 0% in some cases.

9% VAT is applied if you sell are books, workbooks, periodical literature, medicine, medical equipment or provide accommodation services. While the 0% VAT rate applies for goods and services that are meant for export, equipment and objects that are meant for operation and consumption on international planes and ships, and equipment that is sent out to another EU country to be delivered to a government worker.

The taxable period for VAT in Estonia is one calendar month and as a VAT liable company, you need to calculate and pay the VAT amount to the Estonian tax authority by the 20^th day of the month that follows the taxable period.

As a VAT payer, you are required to add VAT to the sale prices whenever you sell goods or provide services to an individual residing in the EU and to an EU company that is not VAT registered. You are not required to add VAT if you are selling to an individual outside of the EU, a company domiciled outside the EU, or a company domiciled in the EU with a valid VAT number and registration.

All this means that you must keep all the VAT related documents in order and do accounting based on them regularly.

Registration process

Now, there are a couple of ways that you can go about registering your company for an Estonian VAT number and this will likely depend on your personal preference and how confident you feel about succeeding with it.

1. You can submit your VAT application during the process when you are establishing your business via the e-Business Register and you feel that you have sufficient information to present to the Tax authority.
2. If you have already registered your company or wish to apply for a VAT number later, you can still do it quite easily by yourself or with someone’s assistance.
   
   
   • In case you feel that your information is sufficient, and you meet the requirements we mentioned above, then you can do it by yourself if have the right to represent your company.
     
     To start the application process first go to the Estonian Tax and Customs Board’s website and log in. Then proceed to “Registers and inquiries” tab from the left side of the screen and select “Registration” > “Registration of the VAT liable person” > “New application” > “Application for registration as a person liable to VAT” or “Application for registration as a person liable to VAT with limited liability”.
   • The second method is to authorize a third person to do it for or together with you.
     
     This is done by a person, who has the company’s representation rights and by logging in on the Estonian Tax and Customs Board’s website. After which choosing “Settings” > “Access permissions” > “Access permissions of representatives”.
     
     Then to give permission to the third person, you must enter the person’s Estonian identification code and by choosing “Submitting application for registration as a person liable to value added tax”.

VAT registration service

Incorporate has the know-how and the experience to make sure your company’s VAT registration goes as planned. Our fee for VAT registration service includes:

• Provision of the VAT application form and assistance to complete it correctly.
• Support and advice during the VAT registration process.
• We have broad knowledge and in-depth experience with VAT registration.
• Provision of the VAT application form and assistance with its completion.
• Support and advice during the VAT registration process.

It is important to keep in mind that the Estonian Tax and Customs Board may decline any application if its contents or the process is not satisfactory. Hence, we require the payment of the registration fee in advance, and the fee is not refundable under this circumstance.

Please note that a prerequisite for the VAT registration process is that your company has a business bank account. Also, if you request our VAT registration service, we recommend you sign up for our bookkeeping services where we will also take care of VAT declarations and offer you advice in that regard.

For more information about our VAT registration service, please feel free to reach out to us.