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About the special arrangement for cash accounting for value-added tax

The special arrangement for cash accounting for value-added tax (hereinafter – the special arrangement) is set out in Art. 44 of the Value-Added Tax Act.

1. Time of supply
2. Deduction of input value-added tax
3. Discontinuing implementation of the special arrangement
4. Transition from application of the general arrangement to the special arrangement and vice versa
5. Exceptions in connection with the cash accounting for value-added tax
6. Filing the VAT declaration form (KMD form) and its annex (KMD INF form)
   6.1 Filling in A part of KMD INF form (“Information on issued invoices”)
   6.2 Filling in B part of KMD INF form (“Information on received invoices”)
 

1. Time of supply


For purposes of application of the special arrangement, the time of supply is the day on which the transaction set out in Art. 11 (1) 2) or 3)  of the Value-Added Tax Act takes place, i.e. the supply takes place at the time when full or partial payment is received for the goods or services, or in the case of self-supply, the transfer of goods or provision of services.

If, for reasons independent of the taxable person that uses special arrangement, goods transferred or services provided are not paid for within the two calendar months following the date on which the goods were dispatched or made available or the services were provided, the first day of the third calendar month following the date on which the goods were dispatched or made available or the services were provided shall be the time of supply (Art. 44 (5) of the Value-Added Tax Act also applies where the taxation period of the taxable person is one quarter).

Example 1

Where the goods transferred in January are not paid for in February and in March, the time of supply is 1 April, and the supply shall be declared in April’s KMD form by 20 May (where the taxation period is one quarter – in KMD form for the II quarter by 20 July).

In case of free transfer of goods, the time of supply is the day, when the goods are transferred or made available to the recipient.

Where no payment is received for transferred goods or provided services, and the taxable person that applies the special arrangement is removed from the register of persons liable to value-added tax, the supply is considered to take place during the taxation period, when the last KMD form was to be filed.

Example 2

A taxable person submits an application for its removal from the register of persons liable to value-added tax since 1 April. Where the goods transferred in January are not still paid for in March, the supply is considered to take place in March and the supply shall be declared in KMD form by 20 April.
 

2. Deduction of input value-added tax


The right to deduct input value-added tax is created with regard to goods purchased or services paid for in connection with taxable supply related to business, i.e. where goods are purchased or services received are not paid for, there is no right to deduct input value-added tax. In case of partial payment for goods purchased or services received it is possible to deduct input value-added tax for the part paid for.

Example 3 

The goods are purchased in connection with taxable supply related to business on 30 April, and the payment is made on 6 May. In such a case there is the right to deduct the input value-added tax in May KMD form.

In case of partial payment for goods purchased or services received, there is the right to deduct the input value-added tax for the part paid for.
 

3. Discontinuing implementation of the special arrangement


Discontinuing implementation of the special arrangement can be voluntary or compulsory.

The taxable person shall in writing inform the tax authority about voluntary discontinuing implementation of the special arrangement (where the taxable income of the taxable person does not exceed 200,000 euros since the beginning of the year) no later than during the taxation period prior to the discontinuing.

Example 4

A taxable person wishes to discontinue implementation of the cash accounting for value-added tax since 1 June. The notification shall be filed no later than in May.

A taxable person is required to discontinue implementation of the special arrangement if the supply of the taxable person exceeds 200,000 euros as of the beginning of the calendar year. The special arrangement shall not be implemented as of the first date of the calendar month following generation of the supply. Upon keeping record of the threshold of the taxable supply the transfer of fixed assets and the incidental transfer of immovable as goods shall not be taken into account.

The taxable person shall in writing inform the tax authority about compulsory discontinuing implementation of the special arrangement no later than during the first taxation period since which implementation of the special arrangement is discontinued.

Example 5

A taxable person applying the special arrangement reaches the threshold of the taxable supply in April. In such a case the taxable person shall submit the notification to the tax authority no later than in May.
 

4. Transition from application of the general arrangement to the special arrangement and vice versa


When going from application of the general arrangement to the special arrangement or vice versa when determining the time of supply and deduction of input value-added tax it is necessary to take into account the rules that were in force at the time of transfer of goods and making the goods available, at the time of provision of the service, or at the time of receiving the goods or services purchased for business purposes.

Example 6

A taxable person discontinues implementation of the special arrangement since 1 May. Where partial payment for the goods transferred in April takes place in June, the taxable person declares the payment made in connection with transfer of the goods in KMD form by 20 July and the unpaid portion in KMD form by 20 August (Art. 44 (5) of the Value-Added Tax Act applies), regardless of the fact that since 1 May the taxable person implements the general arrangement of VAT accounting.

Example 7

A taxable person notifies that it shall implement the cash accounting for value-added tax since 1 May. The services provided in April (not yet paid for) the taxable person declares in April KMD form according to the general arrangement.
 

5. Exceptions in connection with the cash accounting for value-added tax


Special arrangement shall not be implemented in case of the following transactions and acts (Art. 44 (11) of the Value-Added Tax Act):

  • import of goods;

  • intra-Community supply and acquisition;

  • provision to a taxable person or to a taxable person with limited liability of another Member State of such service specified in Art. 10 (4) 9) of the Value-Added Tax Act the place of supply of which is not Estonia;

  • receipt from a foreign person engaged in business of such service the place of supply of which is not Estonia;

  • the supply, acquisition of goods and receipt of service is the payment for goods or service is carried out according to the contract, such as during a period following the dispatch of goods or provision service on the basis of the contract of lease which is longer than three calendar months (for instance, long-term lease contracts, rental contracts, instalment sale).
     

6. Filing the VAT declaration form (KMD form) and its annex (KMD INF form)


The taxable person that implements the special arrangement shall file KMD and KMD INF forms.

KMD and KMD INF forms are filed by the 20th day of each month either online or on paper. If you are a taxable person for at least 12 month or if KMD INF form has to reflect more than five invoices, you shall file KMD and KMD INF forms online.

Where the taxation period is, for example, one quarter, KMD and KMD INF forms are filed quarterly (i.e. by the 20th day of the month following the quarter).

According to Art. 27 (12) of the Value-Added Tax Act, KMD INF form shall reflect the information on invoices issued to and received from legal persons, sole proprietors as well as state, rural municipality and city authorities, where the person transferring the goods or providing the service marked the supply taxable with 20% and 9% VAT rates, except for information on invoices issued on the basis of the special arrangement set out in Art. 40 of the Value-Added Tax Act, where the sum (without VAT) of the invoice (or the total sum of invoices) per partner issued during the taxation period is less than 1,000 euros.

Where during the taxation period a taxable person does not issue or receive invoices that have to be declared in KMD INF form, a respective mark on the absence of invoices to be declared has to be made in part A and/or B of the form.

Learn more about filling in KMD form (in Estonian).

Learn more about filling in KMD INF form (in Estonian).
 

6.1 Filling in A part of KMD INF form (“Information on issued invoices”)


A part of KMD INF form reflects information on issued invoices.

A taxable person that implements the special arrangement shall reflect invoices in KMD INF form for the taxation period, when the invoice was issued and for the subsequent taxation periods until all the supply reflected in the invoice is declared in KMD form not later than within three months after transfer of goods and making the goods available, or provision of the service.

Invoices declared according to the general arrangement (where the payment for goods or service is carried out according to the contract, such as during a period following the dispatch of goods or provision service on the basis of the contract of lease which is longer than three calendar months, for instance, long-term lease contracts, rental contracts, instalment sale) shall only be reflected in KMD INF form for the taxation period when they also are to be declared in KMD form.

Learn more about filling in A part of KMD INF form (in Estonian).

Examples of filling in A part of the KMD INF form

Example 8

On 15 June 2015 the invoice for 1,200 euros (with VAT) was issued for the services provided in June. The invoice was paid in June.

The information for the invoice is reflected in KMD INF form for June as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

15

15.06.2015

1,000.00

20%

1,000.00

1,000.00

 

Since the services are paid for during the same taxation period, the service provided shall be declared in June KMD form.

Example 9

On 10 March 2015 the invoice for the services for 1,200 euros (with VAT) was issued. The invoice was paid in July.

The information for the invoice is reflected in KMD INF form for March, April and May as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

13

10.03.2015

1,000.00

20%

1,000.00

0.00

 

The information for the June invoice is reflected in KMD INF form as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

13

10.03.2015

1,000.00

20%

1,000.00

1,000.00

 

According to the time of supply, the indicated invoice is to be declared in the KMD form submitted for June. The invoice is no longer reflected in KMD and KMD INF forms for the month of transfer of payment (July).

Example 10

On 10 January 2015 the invoice for transferred goods was issued for 2,000 euros (without VAT). It was not paid in February or March. The taxation period of the taxable person is one quarter.

The information for the invoice is reflected in KMD INF form for the I quarter (submission deadline is 20 April) as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

11

10.01.2015

2,000.00

9%

2,000.00

0.00

 

The information for the invoice is reflected in KMD INF form for the II quarter (submission deadline is 20 July) as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

11

10.01.2015

2,000.00

9%

2,000.00

2,000.00

 

Example 11 

On 7 August 2015 the invoice for 6,000 euros (including 1,000 euros of VAT) was issued. On 25 August 2015 600 euros (including 100 euros of VAT) were paid under this invoice. The service was provided in September, while the final settlement was not performed until November.

The information for the invoice is reflected in KMD INF form for August as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

17

07.08.2015

5,000.00

20%

5,000.00

500.00

 

The information for the invoice is reflected in KMD INF form for September, October and November as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

17

07.08.2015

5,000.00

20%

5,000.00

0.00

 

The information for the invoice is reflected in KMD INF form for December as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12345678

OÜ Kass

17

07.08.2015

5,000.00

20%

5,000.00

4,500.00

 

According to the time of supply, this invoice shall be declared in KMD forms for August (500 euros) and December (4,500 euros).

Example 12 (transition from application of the special arrangement to the general arrangement)

The taxable person discontinues implementation of the special arrangement since 1 July. On 13 June 2015 the invoice for 6,000 euros (including 1,000 euros of VAT) is issued. Partial payment for the goods transferred in June was received in July (1,500 euros, including 250 euros of VAT) and the final payment was received in September (4,500 euros, including 750 euros of VAT).

The information for the invoice is reflected in KMD INF form for June as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12349876

OÜ Sipelgas

33

13.06.2015

5,000.00

20%

5,000.00

0.00

 

The information for the invoice is reflected in KMD INF form for July as follows:  

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12349876

OÜ Sipelgas

33

13.06.2015

5,000.00

20%

 

1,250.00

 

The information for the invoice is reflected in KMD INF form for September as follows:  

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total without value-added tax

Tax rate

Taxable value of goods or services stated on the invoice*

Taxable supply presented in fields 1 and 2 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

10

1

12349876

OÜ Sipelgas

33

13.06.2015

5,000.00

20%

 

3,750.00

 

According to the time of supply, this invoice shall be declared in KMD forms for July (1,250 euros) and September (3,750 euros). Invoices are not reflected in KMD INF form filed in August.
 

6.2 Filling in B part of KMD INF form (“Information on received invoices”)


B part of KMD INF form reflects the information on invoices received from taxable persons registered in Estonia. Information on invoices is reflected, if VAT set out in invoices is to be partially or fully deducted in section 5 of KMD form.

A taxable person that implements the special arrangement shall reflect in KMD INF A form the information on invoices fully or partially paid during the respective taxation period. Information on unpaid invoices is reflected in B part of KMD INF form for the taxation period, when the goods are transferred and made available, or the service provided. Information on unpaid or partially paid invoices is reflected in B part of KMD INF form for subsequent taxation periods until full payment of the invoice in question.

Thus, in case of implementation of the special arrangement declared invoices are reflected in B part of KMD INF form for the taxation period, when the invoice for received goods or services was received and for subsequent taxation periods until full payment of the invoice in question (i.e. until deduction of input VAT in section 5 of KMD form).

Invoices declared according to the general arrangement (where the payment for goods or service is carried out according to the contract, such as during a period following the dispatch of goods or provision service on the basis of the contract of lease which is longer than three calendar months, for instance, long-term lease contracts, rental contracts, instalment sale) are reflected in B part of KMD INF form only for taxation periods, when the input VAT indicated on the invoice is to be deducted in section 5 of KMD form.

Learn more about filling in B part of KMD INF form (in Estonian).

Examples of filling in B part of the KMD INF form

Example 13

On 3 January 2015 the invoice for services received in January for the sum of 4,800 euros (including 800 euros of VAT) was issued. It was paid in May.

The information for the invoice is reflected in KMD INF form for January, February, March and April as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

12

03.01.2015

4,800.00

800.00

0.00

 

The information for the invoice is reflected in KMD INF form for May as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

12

03.01.2015

4,800.00

800.00

800.00

 

The right of deducting input VAT is created for May KMD form.

Example 14

Partial advance payment for purposes of taxable supply in connection with purchase of goods for business was made in March (invoice issued on 5 March 2015 for the sum of 1,200 euros (including 200 euros of VAT), 300 euros of it paid in March). The goods were received in April. The final settlement (900 euros) was performed in August.

The information for the invoice is reflected in KMD INF form for March as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

11

05.03.2015

1,200.00

200.00

50.00

 

The information for the invoice is reflected in KMD INF form for April, May, June and July as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

11

05.03.2015

1,200.00

200.00

0.00

 

The information for the invoice is reflected in KMD INF form for August as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

11

05.03.2015

1,200.00

200.00

150.00

 

Example 15

Goods were purchased in June (invoice of 5 June 2015 for 1,200 euros with VAT), and where used for taxable (50%) and tax-free (45%) business-related supply as well as for purposes not related to business (5%). The goods were paid for in July.

The information for the invoice is reflected in KMD INF form for June as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value -dded tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

13

05.06.2015

1,200.00

200.00

0.00

11

The information for the invoice is reflected in KMD INF form for July as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

13

05.06.2015

1,200.00

200.00

100.00

11

Example 16

The taxable person discontinues implementation of the special arrangement since 1 August. On 3 July 2015 the invoice for services received in July for the sum of 3,000 euros (including 500 euros of VAT) is issued. The invoice is paid in December.

The information for the invoice is reflected in KMD INF form for July as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

21

03.07.2015

3,000.00

500.00

0.00

 

The information for the invoice is reflected in KMD INF form for December as follows:

No

Register code or personal ID code of transaction partner

Name of transaction partner

Invoice number

Invoice date (dd.mm.yyyy)

Invoice total with value-added tax

Value-added tax amount stated on the invoice*

Input value-added tax amount presented in field 5 of Form KMD for the taxation period

Special code

1

2

3

4

5

6

7

8

9

1

12344321

OÜ Koer

21

03.07.2015

3,000.00

 

500.00

 

The right of deducting input VAT is created for December KMD form. The invoice is not reflected in KMD INF form filed for the period from August until November.

 

08.12.2016