Major changes in the Estonian VAT Act came into force as of 1 January 2010.
Among many other changes in the VAT Act, the definition of the place of supply for services, the VAT refund for non-resident persons and the intra-Community sales reporting terms were amended from the beginning of 1 January 2010.
The aim of the amendment was to adopt the changes made in the VAT directive 2006/112/EC with directives 2008/8/EC, 2008/9/EC and 2008/117/EC to the Estonian VAT legislation.
Place of supply for services
According to the amendment, the place of supply in case of providing services to a taxable person of another Member State or a person engaged in business but established in a non-EU Member State will be the state of the recipient of the services, not the state of the service provider as enacted in the VAT Act valid until 31.12.2009.
The main rule for providing services to consumers (non-taxable persons) remains the same. Therefore, from the beginning of 2010, the place of supply in case of providing services to a consumer will be the state of the service provider and a 0% VAT rate shall not be applied.
VAT refund for non-resident persons
From the beginning of 2010, the VAT refund for non-resident persons changes considerably.
According to the VAT Act valid until 31.12.2009, a non-resident person had to submit a VAT refund application directly to the Estonian Tax Authorities.
However, from the beginning of 2010, submission of VAT refund applications was simplified.
Starting from 1 January, input VAT paid in Estonia is refunded to non-resident taxable persons by the Estonian Tax Authorities under the VAT refund application, which is submitted electronically through the Member State Tax Authorities where the non-resident is established. (The application must be submitted no later than on 30 September of the following calendar year.)
Reporting terms of intra-Community supply
Until the end of 2009, the companies who have had intra-Community supply of goods during the taxation period were obliged to submit to the tax office the special report EC Sales List.
However, according to the amendments that have come into force from the beginning of 2010, also the companies who have intra-Community supply of services must submit the report EC Sales List.
Thus, from the beginning of 2010, also the services that are provided to a taxable person of another Member State should be declared in the EC Sales List. The EC Sales List report must be submitted to the Tax Authorities on a quarterly basis.
How can EY help?
Ernst & Young Baltic AS Tax department recommends the companies whose business activities are influenced by the VAT amendment to study the new tax regulation rules in order to avoid any mistreatment of the new regulation after 1 January 2010.
As the amendments to the VAT Act are significant and the VAT Act’s text is complicated, Ernst & Young can help you to review the cross-border sale and purchase transactions and provide you with recommendations for choosing the most appropriate and tax effective transactions, in order to avoid any possible misunderstandings with clients and the Estonian Tax Authorities.
By Tõnis Jakob
Comments