We’ve acquired and developed widespread and in-depth knowledge and experience in this by assisting many non-resident and resident clients with their accounting needs over the years. This practice includes advising and helping clients apply for VAT numbers in Estonia, and other EU countries, and completing and submitting VAT returns.
After setting up your company in Estonia for active trading, one of the most important tasks is obtaining a VAT number for your business. This article will help you meet the requirements and give a few tips for the process to manage it efficiently and succeed.
If you apply for VAT registration in Estonia, you must prove that you are starting or running an active business. If the evidence is not sufficient, our tax authorities ask for additional evidence or they may collect it on their initiative.
Registration Threshold
According to the VAT Act, you must register your OÜ as a VAT payer from the day when the taxable turnover (excluding the sale of fixed assets), exceeds 40,000 euros as of the beginning of the calendar year. It is also possible to register as a VAT payer voluntarily, i.e. before the registration threshold of €40,000 is exceeded, as well as in case of tax-free intra-community trade, acquisition of goods within the Community and export. The tax authorities decide upon registration within five working days after receiving the application and necessary evidence.
VAT accounting is not difficult if all transactions take place in Estonia. However, with international transactions, there are a few hurdles that need to be overcome on the road to being tax compliant.
Most of our clients are engaged in international transactions and intra-community trade. An intra-community VAT number is required to do business across borders within the European Union. Therefore, we focus on international aspects of VAT and study when your company needs an intra-community VAT number.
All VAT-registered companies have an intra-community VAT number. This number is particularly important for business transactions within the EU – such as sales and purchases from Estonia and other EU member states. It allows the tax authorities to record transactions between countries. Companies that operate within the duty-free system (and therefore do not pay VAT) can make a special request to the tax office to obtain their intra-community VAT number. They are only required to do this if their purchases exceed 10,000 euros per year or if they conduct intra-community business.
Please note that if your company without VAT number purchases services from outside Estonia (not just intra-EU services), it must register as a limited VAT payer from the very first transaction regardless of the invoice amount. We strongly advise to avoid this route as limited VAT liability can be harmful to your business. CONTACT US NOW to learn more.
The intra-community VAT number is exclusively relevant for the import and export of goods within the EU, not outside it. During customs inspections, companies involved in intra-community deliveries must provide a declaration of goods transactions or services transactions, which includes both the seller’s and the buyer’s intra-community VAT numbers.
Companies must check the intra-community VAT number of each of their business partners before completing the transaction. Incorrect numbers may affect the calculation of the VAT they owe. A professional accountant will ensure this is taken care of to keep you compliant.
International transactions bring additional complexities to navigate. We’re happy to assist and guide you in this process.
Here are the seven requirements for VAT Registration:
- Registration of Business in Estonia. First, you need to set up your company in Estonia. To start this journey, we advise that you carefully choose a local corporate service provider and accountant keeping you compliant with laws and regulations and advising you along the way. Before you start, be sure to find a qualified*, locally trusted advisor — it’s better to be safe than sorry.
- Proof of Business Activity. You must be ready to prove that you’re engaged in business or starting a business.
- Application Submission. If the registration obligation arises from exceeding any of the above-mentioned thresholds, a formal application must be submitted to the tax authorities within three working days from that day. The tax authority will decide within five working days.
- VAT Number Issuance. A VAT number will be issued as of the date when the registration obligation arose unless a later date is specified in the application.
- Early Application. If you submit the application before the registration obligation arises (you have no taxable turnover or it does not exceed the registration threshold), the tax authority will register either as of the date the application is received, or a later date specified in the application.
- Automatic Registration: If the tax authority has information that the registration obligation has already arisen, but the registration application has not been submitted on time, the tax authority will register the person on its initiative as of the date the registration obligation arose.
- Retroactive Correction: If, after registration, the tax authority discovers that the application was submitted later than required and you should have started fulfilling your tax obligations before the date mentioned in the decision, the tax authority will retroactively annul its initial decision, make a new decision, and register your company as of the date when the registration obligation arose.
After registering your company in Estonia, your next challenge is finding a suitable accounting firm or accountant. It is highly advisable to hire an experienced accounting firm to manage your books and taxes.
The process of picking the right firm requires some preparation and know-how. With many service providers in the marketplace and on the Internet, it may seem a difficult process, but it doesn’t have to be. Read more about how to choose the right accounting firm.
If you’re not happy with your accountant or accounting firm, we’d be happy to review your case and onboard you. CONTACT US NOW to learn more.
*Providing corporate services is a regulated activity in Estonia, which means that only licenced service providers can provide you with the required support services. Ensure you do your due diligence and run background checks on your candidates to guarantee reliability.
InCorpora is authorised by the Estonian FIU (Financial Intelligence Unit) and licensed to provide financial, Trust and corporate services, including corporate structuring, tax advice tailored to cross-border operations, and regulatory compliance support.
We can provide you with all the needed support services (including VAT registration, accounting and bookkeeping, tax advice, bank account opening, residence permits etc), take care of all the paperwork, and make your business setup as simple as possible.
If you need accounting support, get in touch with our team of specialists today.
