Specific provisions on taxation and grants

Specific provisions on taxation

Special scheme for imposing value-added tax on electronic communications and electronically supplied services – MOSS

The special scheme for imposing value-added tax on a service provided electronically applies solely to a party from a non-Community state engaged in business which is not a registered taxable person in any of the Member States. Hence, the special scheme does not pertain to taxable persons registered in Estonia. The definition of an electronically provided service is set out in subsection 2 (4) of the Value-Added Tax Act.

Under the principles of the place of supply of a service, an electronically provided service creates supply in the state of the recipient of the service. In the case of this special scheme, the principle of the place of supply of the service is applied also to a service provided by a business operator in a non-Community state, provided for the personal use of a natural person in a Member State. The special scheme requires a party from a non-Community state providing services electronically for natural persons in a Member State of the Community to register, at its discretion, as a taxable person in a Member State and declare in that Member State all the services provided electronically for natural persons in all the Member States of the Community. For every Member State, services have to be indicated on an electronic return separately, and value-added tax has to be calculated on services according to the value-added tax rate of every relevant Member State. The entire calculated value-added tax on services provided in all the Member States is paid in the Member State of registration. The Member State where the service provider is registered as a taxable person transmits value-added tax based on the return to the relevant Member States.

https://www.emta.ee/eng/business-client/income-expenses-supply-profits/overview-charging-value-added-tax/special-scheme

Special scheme for accruals-based value-added tax accounting

The special scheme for accruals-based value-added tax accounting may be selected by any taxable persons whose annual turnover does not exceed 200 000 euros (the limit does not include the sale of fixed assets or their occasional sale as goods). If, according to the general procedure, value-added tax is calculated under the principle of the earliest moment, either at the time of the shipment of goods or of the provision of a service or of the receipt of funds for either, under the procedure of accruals-based value-added tax accounting generally supply arises upon receipt of funds. At the same time, a taxable person applying the accruals-based special scheme also calculates input value-added tax on an accruals basis. The accruals-based value-added tax accounting procedure does not alter accounting rules but rather solely pertains to value-added tax accounting.

A taxable person wishing to keep value-added tax accounting on an accruals basis and meeting the conditions has to notify the tax authority in writing. The tax authority has to be notified before the special scheme begins to be applied. A taxable person provides notification about it not later than during the taxable period before when the special scheme begins to be applied. It has to indicate in its notification from which taxable period it is going to start maintaining a special scheme.

A party registering as a taxable person only now and wishing to begin to apply the special scheme provides notification thereof when submitting a registration application to the tax authority. Parties wishing to register as taxable persons and to start keeping value-added tax accounting on an accruals basis also calculate when the limit for registering as a person liable to value-added tax is reached on an accruals basis.

The special scheme cannot be applied in the case of the import of goods, the intra-Community supply or purchase of goods or the provision of a service for a taxable person or limited taxable person in another Member State if it has to be declared in an intra-Community supply report. Calculation of value-added tax when services are received is not subject to the special scheme regardless of whether the service are received from a taxable person in a Member State or from a business operator in a non-Community state or of what kind of service are received. Thus, if a service is received from a party in a foreign state and the place of supply is Estonia, value-added tax accounting have to be kept according to the general procedure.

In addition to certain cross-border transactions, accruals-based accounting cannot be kept also for transactions where payment for goods or a service has been agreed to occur over a period longer than three calendar months, for example, in the case of hire purchase or leasing contracts.

Special scheme for imposing value-added tax on an immovable, waste metal, metal products or precious metals

In the case of immovables, a national reverse charge is applied only if the tax-exempt immovable specified in clause 16 (2) 3) of the Value-Added Tax Act is sold, yet the seller of the immovable wishes to tax the transaction and notifies the tax authority thereof according to subsection 16 (3) of the Value-Added Tax Act. Thus, this does not pertain to new structures (i.e. the supply of those immovables not exempt from tax) or residential premises (i.e. the supply of those immovables where supply cannot be taxed).

Under the special scheme for metal waste, metal products and precious metals, goods are taxed by the recipient – a so-called national reverse charge. In the event of an internal reverse charge, supply lies with the seller, yet the obligation to pay value-added tax lies with the buyer. Accordingly, the accounting procedure does not affect the magnitude of the supply taxed, which is relevant if value-added tax is deducted in part for a person.

An internal reverse charge is applied only if both the seller and the buyer are persons liable to value-added tax registered in Estonia. Therefore, during the sale of goods the special scheme is not applied to a limited person liable to value-added tax, a person liable to value-added tax in a foreign state or persons who are not persons liable to value-added tax. Furthermore, a buyer does not have to calculate value-added tax if it purchases the above goods from a party that is not a taxable person.

Grants for starting a business

Enterprise Estonia’s start-up grant is intended for companies or sole proprietors (füüsilisest isikust ettevõtja – FIE) that have been registered within the last two years. The start-up grant aims to support the creation of enterprises that have a lot of development potential, and thereby expand regional entrepreneurship and number of exporters. Companies that receive the grant have the obligation to meet certain goals, such as creating new jobs and increasing sales revenue. The maximum amount of start-up grant that can be applied for is 15,000 euros. The maximum grant percentage from the entire cost of the project is 80% and the own contribution must account for at least 20%.

Information hotlines and email addresses of the Tax Registry