It is mandatory for your company to apply for VAT registration with Estonian authorities before starting your activities. Financial penalties may apply if the application for registration is submitted late.

If your company wishes to register for VAT in Estonia, it is essential to contact the Estonian tax authorities. There is no need to contact the tax authorities in your country of establishment.

In particular, your company will need to submit the following documents:

• The VAT registration form(s) completed in the language of the country
• A copy of the articles of association
• An extract from the trade register
• A certificate of VAT liability
• Power of attorney (if using a fiscal agent)
• Proof of activity on the territory of the country concerned: a contract, an order form, etc.

The Estonian tax authorities may require some of these documents to be translated into Estonian.

If your file is complete, it generally takes one month to obtain the VAT number from the competent Estonian tax office.

Estonian VAT authorities may require non-European companies to appoint a fiscal representative. This is a local company that will represent you to the local VAT authorities. He is responsible for the respect of all your VAT obligations, including those of which he was not aware. For this reason, he may require a deposit (e.g. a bank guarantee) from you before accepting the representation assignment.

European companies are not obliged to appoint a tax representative. However, to facilitate their relations with the local tax authorities, they may appoint a proxyholder to carry out the tax formalities on their behalf. In this case, it is not necessary to issue a bank guarantee. The company remains solely responsible for paying its VAT debts.

Your company must keep ledgers sufficiently detailed to enable the application of VAT and its control by the Estonian tax authorities.

If your company exceeds certain thresholds, it will be obliged to file an Intrastat statement.

The thresholds in Estonia are:

• Arrivals: EUR 400,000
• Shipments: EUR 270,000

As a supplier of goods or services, your company is normally obliged to issue an invoice with VAT to its customer. This is the general rule. However, there are many derogatory situations which transfer this obligation to pay tax to the customer himself. These situations are known as "reverse charge" situations.

The special reverse charge rules have been introduced in Estonia for foreign companies:

For supplies of goods:

Reverse charge mechanism is applicable to all domestic supplies of goods made by a business not established and not VAT registered in Estonia, provided that the customer is VAT registered in Estonia [regardless of whether or not he is established in Estonia].

For supplies of services:

Reverse charge mechanism is applicable to all domestic supplies of services made by a business not established and not VAT registered in Estonia, provided that the customer is VAT registered in Estonia [regardless of whether or not he is established in Estonia].

The VAT Directive lays down the minimum information that you must include on your invoice. In some cases, countries may add additional compulsory information. Particular attention should be paid to the conversion rates when the currency used on the invoice is not that of the country in which the transaction takes place, and to the specific statements justifying the legal reason why VAT is not charged.

Estonia has 4 different VAT rates :

• Standard rate : 22%
• Reduced rate : 9%
• Reduced rate : 5%
• Reduced rate : 0%

It is possible to send invoices in paper format.

There are several methods to obtain refunds of Estonian VAT. The practical formalities for reclaiming foreign VAT will differ depending on whether or not your company is established in Europe and/or is identified for VAT in Estonia:

• If your company has a VAT number in Estonia, it will have to submit a refund application in the form and within the timeframe required by local regulations. A VAT credit is in principle automatically carried forward to the next period, unless a tax refund has been applied for. A VAT credit is in principle granted within 60 calendar days from the date on which the VAT return was due. However, Estonian VAT authorities may in exceptional cases (e.g. in case of a tax audit) extend the term of a refund up to 120 calendar days.

• If your company is established in a European country and does not have a VAT number in Estonia, it will have to apply for a VAT refund electronically from its country of residence, in the form and within the time limits required by Directive 2008/9.

• If your company is established outside Europe and does not have a VAT number in Estonia, it may have to appoint a tax representative to submit its refund application in the form and within the time limits required by the 13th Directive.

VAT incurred on purchases, imports or intra-Community acquisitions of goods and services can be reclaimed by a foreign company provided that these expenses are for taxable activities and provided that the appropriate documentation is available.