In the shadow of
the state of emergency caused by the coronavirus and Brexit, the amendments to
the Value-Added Tax Act, which were to come into force at the beginning of the
new year, were postponed and are now expected to become applicable as of 1 July
2021. Nevertheless, we would like to introduce you to the important changes
that directly affect the Estonian business landscape today, as these changes
were planned a long time ago and have a pan-European reach.
concerns companies that supply goods and/or digital services to non-taxable persons in
the EU. The current procedure sets forth the obligation to calculate the
distance selling threshold when selling goods to a non-taxable person of
another member state. Upon exceeding the threshold, there is an obligation to
register as a taxable person liable to VAT in the buyer's country of residence.
Essentially, companies currently have to keep a separate record of the goods
sold to non-taxable persons for each country, monitor the thresholds of other
countries, apply the country's tax rate upon exceeding the threshold and seek
opportunities for declaring and meeting tax liabilities incurred in other
countries. Suppliers of digital services have it easier, as they are subject to
the common EU threshold and have the option to use the MOSS special scheme, i.e. meet
the obligation of paying VAT incurred abroad via their local tax authority.
In the coming
year, distance sellers of goods will be made equivalent to suppliers of digital
services, as a result of which a common threshold of 10,000 euros per year
will be applied in the EU along with an opportunity to apply an essentially
similar special scheme. It is important to bear in mind that the 10,000-euro
threshold applies to the total turnover of goods and digital services. This
means that, on the one hand, companies are no longer obliged to keep a detailed
record for every country, while on the other hand, the threshold can be
exceeded quite quickly. Therefore, if the change described concerns you, we
recommend that you start planning your future today. If you are not sure
whether this change concerns you, but the clients of your company are
non-taxable persons of other member states (above all natural persons), we
recommend that you contact us.
Similarly to the right of suppliers of digital services to use the MOSS special scheme, distance sellers are granted a similar right as of next year (see previous clause). Additionally, the special scheme can also be applied by companies that provide a service to non-taxable persons and whose place of supply is another member state (i.e. services listed in subsection 10 (4) of the Value-Added Tax Act). In practice, this concerns companies that provide services related to immovable property located in a foreign country, work with movables in a foreign country, organise events there, etc., i.e. those who should likely register as a taxable person in another member state under the current rules.
special scheme will also be applied to distance selling of goods imported from
non-EU countries. The special scheme can be applied for by companies that have
online trading platforms (more simply: e-commerce platforms such as Amazon,
eBay, Etsy, AliExpress, etc.), which allow for distance selling of imported
goods via their marketplace. According to the Ministry of Finance, there are no
such merchants in Estonia, which is why we will not discuss this topic in
detail but are happy to tell you about it should you be interested.
There is another
fundamental law amendment related to the special scheme described above and
e-commerce platforms in general that enters into force as of July 2021.
Currently, the amendment does not concern Estonian companies, but we have to
mention it to you as it will soon be reflected in the Value-Added Tax Act:
E-commerce platforms will become VAT collectors by acting as a purchaser of goods from a non-EU person and selling them to an EU consumer. The impact of this amendment may be visible to Estonian consumers upon making a purchase via an e-commerce platform, but it is likely insignificant to the consumer.
As of July 2021,
imported consignments from non-EU countries will become 20% more expensive for
Estonian consumers (the 22-euro tax exemption threshold is abolished). This is
fair to Estonian entrepreneurs, but unpleasant for consumers. In order to avoid
placing too much burden on all of those concerned, two special schemes are
introduced, the implementation of which is voluntary:
The way the
end-consumer sees and pays value added tax depends on the special scheme
used. Ideally, the process should
continue to be smooth and almost invisible to the end-consumer in the future.
If you have any
questions, contact your accountant or the Leinonen tax team.
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