There are other types of taxes applicable to companies other than the Value Added Tax. It applies to the sales of products and rendering of taxable services. A foreign business that imports goods, sell its products, or stores them within the territory must meet the tax obligations set by the Estonian tax authorities. One of these obligations is registering for it. When a company fails to register on time, the tax office may charge a fine as deemed fit. Aside from registering, a business must file monthly periodic returns and pay the necessary obligations.
If you are interested in knowing more about it, this guide offers the basic information and how to register for it.
Types of Value Added Tax Rates
Unlike in other countries, there are only two rates charged by Estonian tax authorities. Some taxable goods are liable to the standard VAT rate of 20 percent, while the reduced rate of 9 percent applies to certain services only.
Registration
Registering and filing an application for VAT is very compulsory for businesses carrying out taxable transactions. With the monthly tax paid and periodic returns filed when due, a business has fulfilled its main tax obligations. To do this, it must firstly apply for a unique tax number and then awaits the issuance. This number is used for tax purposes related to the sales of goods.
Registration Threshold
When a business surpasses certain thresholds, it must file an Intrastat statement. The thresholds available here are:
- Arrivals: EUR 230,000
- Shipments: EUR 130,000
Processing Time
After submitting the required documents, it usually takes a month for the number to be issued.
Documents Required
For accurate processing, the required documents below must be presented during the application:
- Completed registration form
- Extract from the trade register
- Proof of activity within its territory
- Certificate of VAT liability
- Power of attorney (if necessary)
- Copy of Articles of Association, etc.
Hiring A Fiscal Representative
European business entities do not need to hire fiscal agents to represent them at the tax office. However, companies owned by foreigners from non-EU countries require the services of a fiscal representative to stand in for them during registration. These agents work for a local company whose services include providing business support services such as registration, meeting tax obligations, etc. The company is liable for the VAT debts owed by the company it represents, which is why they often require a certain deposit when hired.
Filing VAT Returns
All companies must report their VAT by filing periodic VAT returns monthly. Returns must be filed online before the 20th day of the month after the tax period it relates to. When a business fails to file its returns on time, it may attract a fine from the authority. Also, when it fails to pay the due VAT, this attracts a charge too. Inaccurate filing of reports may attract a fine or penalty. Unwanted fines and penalties should be avoided by filing at the due time without error.
Penalties
Since every business operating within the territory must pay VAT and file annual returns, any company that fails to do this faces a possible fine or financial penalty. The tax authorities may subject a business to a fine for late VAT registration. Or for missing the deadline for returns filing. To avoid these, businesses are advised to comply with the rules of the Estonian tax authorities by registering for VAT at the proper time and ensuring timely filing of returns as well as payments of VAT once they commence taxable business transactions.
