The bill to amend the Value-Added Tax Act and the Taxation Act, adopted by the Riigikogu on 13.11.2024, will simplify the operations of small businesses in other Member States from 01.01.2025 by equalising the rights and obligations connected to the occurrence of VAT liability of enterprises that do not have a seat or permanent establishment in a Member State with those that do.
According to the procedure valid until the end of 2024, a threshold for supply has been established in the Member States, up to which a person is not obliged to register as a person liable to VAT (hereinafter referred to as taxable person), but this threshold applies only to persons with a seat or a permanent establishment in a Member State. In Estonia, the threshold is 40,000 euros. A foreign person engaged in business, who does not have a permanent establishment in the Member State where supply is generated, must, regardless of the amount of supply generated, register as a taxable person in that Member State from the date of the first taxable supply in which the purchaser of the goods or recipient of the service cannot apply reverse charge themselves. This means that, compared to a person engaged in business with a seat in the country, they do not have the right to operate as a taxable person without being registered until the supply threshold in force in the relevant country is exceeded.
To treat equally both the persons with a seat in a Member State and the non-residents with a seat in another Member State, a new special scheme for small businesses will be introduced from 1 January 2025. According to the scheme, an entrepreneur may, by operating in another Member State without having a permanent establishment, register as a taxable person there under the same conditions as entrepreneurs with a seat or a permanent establishment in that Member State. However, there is one additional condition: the special scheme for small businesses can be used by a person whose total supply in a calendar year in all Member States (including the Member State of their location) has not exceeded 100,000 euros in the current year and did not exceed 100,000 euros in the previous calendar year.
Using the special scheme for small businesses is voluntary.
Read more
- Applying for the special scheme for small businesses in other Member States
- How is the supply of a calendar year calculated
- How can an Estonian entrepreneur become a user of the special scheme for small businesses
- For non-residents who wish to apply for the special scheme for small business in Estonia
- Obligations of the user of the special scheme
- Expiration of the right to use the special scheme
- Checking the validity of the registration number of the special scheme for small businesses (EX number)
- Special scheme for small businesses – FAQ
References
The Act Amending the Value-Added Tax Act and the Taxation Act (in Estonian)