Estonia introduced VAT in 1992. Estonia's VAT regulations are based on EU VAT Directives, which Estonia transposed into its VAT Act after joining the EU. Taxes are administered by the Estonian Tax and Customs Board.
Foreign companies supplying goods or services to local businesses or consumers may need to register their business for Estonian VAT. You must comply with VAT compliance rules, including invoicing and VAT rates, and pay the Estonian VAT due.
Register for VAT in Estonia
If the total value of taxable supplies for a company in Estonia exceeds EUR 16 000, the company concerned must 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 companies.
When registering a non-EU company for VAT, the company owner must be present. If the person concerned cannot be present, there is the option of using an authorized person or a tax representative. This person applies for VAT registration.
Once the VAT registration procedure is completed, the company will receive a VAT number with a form consisting of the country code - EE followed by nine digits.
VAT rate in Estonia
The standard VAT rate in Estonia is 20% and the reduced rate is 9%. A number of goods and services are not taxed. The Estonian VAT system is based on the 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 who want to apply for a VAT refund in Estonia can apply electronically. The Estonian tax portal accepts applications until September 30 of the following year. Businesses applying for a VAT refund must provide proof of VAT registration and copies of relevant invoices. The examination of the documents can take up to 4 months.
Reclaiming overpaid VAT in Estonia
Overpaid VAT arises when the VAT paid with the purchased goods or services is more than the VAT charged when the goods or services were sold. Overpaid VAT is covered by the state in which a business is VAT registered.
There are two ways to reclaim VAT:
Through monthly sales tax returns. The overpayment is calculated at the end of the declaration form. The declaration containing the overpaid VAT is considered a right to a refund of the overpaid VAT. The tax and customs authority checks the declaration if the amount is high - the authority can ask questions about the transaction and specific invoices. If the amount is justified, the refundable VAT will be transferred to the taxpayer's bank account within 2 weeks.
Cross-border reimbursement system. If the goods - services purchased with foreign VAT are used for business purposes in Estonia, the Estonian VAT payer has the right to recover the overpaid VAT from the Estonian Tax and Customs Board, which itself turns to the foreign tax board and the overpaid VAT paid returns. The procedure takes longer than the Estonian internal procedure - 4 - 8 months.
