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Value added tax incentives applicable to diplomats, foreign missions, international organisations, EU institutions and armed forces of foreign states

Contents

1. Legislation and general information
2. Foreign missions and their diplomats in Estonia
3. Foreign missions and their diplomats in other countries
4. Representations and representatives of international organisations, and special missions
5. EU institutions, including their representations in Estonia
6. EU institutions in other Member States
7. Armed forces of foreign states
   7.1. NATO Member State
   7.2. Armed forces of other (except NATO) foreign states
   7.3. International military headquarters
   7.4. International military educational institution
8. VAT and excise duty exemption certificate
9. The form of the application for the refund of value added

1. Legislation and general information

  1. Clauses 15 (3) 5) and 51); 6) and 61); 13); (4) 14) and 141); subsection 15 (51); clause 3 (6) 3); and section 39 of the Value Added Tax Act (RT I 2003, 82, 554)
  2. Government of the Republic Regulation No 109 of 16 April 2004 „Procedure for and conditions of exemption from value added tax of goods imported to meet the needs of a foreign mission, diplomat, EU institution and the armed forces of NATO Member States and other foreign states, an international military headquarters and international military educational institution, and procedure for and conditions of the refund of value added tax” (RT I 2004, 27, 185)
  3. Government of the Republic Regulation No 214 of 11 June 2004 (RT I 2004, 49, 346)
  4. Minister of Finance Regulation No 20 of 2 May 2016 „Application form for the refund of value added tax paid on the goods acquired in Estonia” (RT I 2016, 8)
  5.   Article 51 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 sets out the VAT and / or excise duty exemption certificate

Subsections 39 (1) and (2) of the Value Added Tax Act set out the list of persons to whom value added tax shall not apply on the import of goods which are necessary for them, and upon acquisition of such goods or services in Estonia, value added tax paid on such goods or services shall be refunded:

  • § 39 (1):
    • foreign diplomatic representatives and consular agents (except honorary consuls) accredited to Estonia
    • special missions and representatives, representations or headquarters of international organisations recognised by the Ministry of Foreign Affairs

    • diplomatic representations and consular posts of foreign states

    • special missions

    • European Union institutions

    • members of the administrative staff of such representations, posts or special missions, except for the administrative staff of Union institutions

  • § 39 (2):
    • armed forces of NATO Member States (except Estonia) and the civilian staff accompanying them and their members when such forces are taking part in the common defence effort

      If tax incentives are provided for in an international agreement ratified by the Riigikogu they apply to:

    • international military headquarters

    • members of the international military headquarters and their dependents, and the employees of the contractual partners of the international military headquarters and their dependents

    • armed forces of the foreign states which are not NATO Member States and their civilian staff, the members thereof and their dependents

    • international military educational institutions

Respective tax incentives are regulated according to the procedure established by a regulation of the Government of the Republic.

According to clause 3 (6) 3) of the Value Added Tax Act the persons specified in subsections 39 (1) and (2) shall not be obliged to pay VAT in Estonia when they acquire a new means of transport from another Member State.

2. Foreign missions and their diplomats in Estonia

Value added tax shall not be imposed on the import of goods for official use to foreign missions and consular posts, and for personal use to foreign diplomatic representatives accredited to Estonia, consular agents (except honorary consuls) and the administrative staff of foreign missions. The import of goods for which value added tax exemption is applied must be declared separately on forms for diplomatic goods. The right to apply for value added tax exemption shall be approved by the Minister of Foreign Affairs with a note in box 7 of the above mentioned form.

Members of the administrative staff have the right to apply for value added tax exemption on the import of goods for personal use only in the settlement period within the first three months of residing in Estonia. Customs formalities of goods shall be carried through according to the procedure laid down in the customs rules.

Foreign missions have the right for a refund of the value added tax paid here when acquiring goods and services in Estonia. Upon acquisition of such goods or services in Estonia, the value added tax paid on such goods or services shall be refunded on the conditions set out in subsection 39 (1) of the Value Added Tax Act, taking into consideration the exceptions provided for in subsection 39 (4) of this act. The exceptions named in subsection 39 (4) are provided for in the Government of the Republic Regulation No 214 of 11 June 2004. In order to receive a refund, the total value of the goods and services, inclusive of value added tax, has to be at least 64 euros according to the invoice. Value added tax is also refunded on the occasion of smaller amounts in the case of utilities, communication services and liquid fuel within the meaning of the Liquid Fuel Act.  

Value added tax paid upon acquisition of used goods is not refunded. Likewise, the value added tax paid upon acquisition of foodstuff is not refunded.   

In order to receive a refund the foreign mission has to submit a respective application to the Ministry of Foreign Affairs on each month by the tenth day of the following month, attaching invoices or their copies pursuant to the requirements set out in section 37 of the Value Added Tax Act, which are confirmed by the persons that issued the invoices.

The application form (140.07 KB, PDF) is established by Minister of Finance Regulation No 20 of 2 May 2016 (PDF) (RT I, 05.05.2016, 8).

The right of the applicant to request for value added tax refund is approved by the Minister of Foreign Affairs or an official authorised by the Minister with his/her signature and seal on the application. The Ministry of Foreign Affairs submits the application with the accompanying documents to the tax authority by the 20th day of the month in which the documents are received or of the following month (in the case the documents are received after the 10th day).

Value added tax refund can be requested in the course of up to 90 days as of the day of acquisition of goods or provision of services. 

The tax authority makes a decision in respect of the application and transfers the refundable amount into the bank account specified in the application within 30 days of receipt of the application and the attached invoices from the Ministry. Invoices marked by the tax authority and the copy of the application are returned to the Ministry of Foreign Affairs.  

3. Foreign missions and their diplomats in other countries

According to clause 15 (3) 5) of the Value Added Tax Act goods sold to another Member State to diplomatic representations or consular posts, including the representations of Estonia in other Member States, are subject to the 0 per cent value added tax rate.   

Services provided to the above listed persons are also charged with 0 per cent rate (clause 15 (4) 14) of the Value Added Tax Act).

As a document certifying the right to apply 0 per cent rate of value added tax foreign missions submit the VAT and excise duty exemption certificate (subsection 15 (51) of the Value Added Tax Act) to the transferor of the goods or the provider of the services according to Council Implementing Regulation (EU) No 282/2011, and one copy of this certificate must remain to the transferor of the goods/provider of the services.

Upon the sale of goods to foreign missions located in a non-Community state the export rules have to be taken into account.

4. Representations and representatives of international organisations, and special missions

In addition to foreign missions and representatives, the value added tax exemption is also extended to various representations and representatives of international organisations and special missions:

5. EU institutions, including their representations in Estonia

(e.g. Representation of the European Commission in Estonia, Information Office of the European Parliament in Estonia, European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice (EU-LISA))

EU institution is an institution to which the Protocol on the Privileges and Immunities of the European Communities applies.

According to section 39 of the Value Added Tax Act, value added tax shall not be imposed on the import of goods which are necessary for official use of the Union institutions. The exemption does not apply to members of the administrative staff.  

Goods transferred and services provided to the said institutions in Estonia are liable to value added tax until 1 January 2017.  

EU institutions located in Estonia can request for refund of the value added tax paid here when acquiring goods and services for official use.  

The requirement of at least 64 EUR per invoice of the cost of goods/services applies to the institutions, except in regard to utilities, communication services and fuel; the value added tax paid on the acquisition of foodstuff is refundable as well.

EU institutions send annually requests for reimbursement (usually in the form of letter) and copies of the invoices to the Ministry of Foreign Affairs. The refund is paid within six months of the receipt of request.

From 1 January 2017 the rate of value added tax on the goods transferred and services provided to Union institutions located in Estonia shall be 0 per cent (clause 15 (3) 51 and clause (4) 142) of the Value Added Tax Act). The document in proof of the supply covered by 0 per cent value added tax rate is the value added tax exemption certificate approved by the representative of an institution and the Ministry of Foreign Affairs. The 0 per cent rate of value added tax applies to the Union institutions located in Estonia, provided that the total value of such goods or services, exclusive of VAT, is at least 53 euros according to the invoice. The total value of the invoice may be smaller in the case of public utility services, telecommunications services and fuel.

6. EU institutions in other Member States

Pursuant to the Agreement Implementing the Protocol on the Privileges and Immunities of the European Communities in the Republic of Estonia the rate of 0 per cent shall be imposed on all intra-Community services to be provided to such institutions in Estonia.  

European Commission considers each service producing a supply in other country than the country of origin of the EU institution to which the service is provided as an intra-Community service. It means that all services provided in Estonia to a community institution in another Member State are covered by the definition of intra-Community services, and direct exemption, i.e. the rate of 0 per cent shall be applied to them.

On goods and services that are sold from Estonia to community institutions located in other Member States the 0 per cent rate of value added tax shall be imposed according to clause 15 (3) 5) (goods) and clause (4) 14) (services) of the Value Added Tax Act.

As a document certifying the right to apply the 0 per cent rate of value added tax institutions submit the VAT and excise duty exemption certificate to the transferor of the goods or provider of the services according to Council Implementing Regulation (EU) No 282/2011, and one copy of this certificate is to be kept by the transferor of the goods/provider of the services.

7. Armed forces of foreign states

7.1. NATO Member State

In accordance with clause 15 (3) 6) of the Value Added Tax Act the rate of value added tax is 0 per cent of the taxable value on goods transferred and transported to another Member State which is also a Member State of NATO, intended for the official use of the armed forces or the civilian staff accompanying them, when such forces are taking part in the common defence effort.

Likewise, the 0 per cent value added tax rate applies to services provided to armed forces located in a foreign state (clause 15 (4) 14) of the Value Added Tax Act).

The rate of 0 per cent also applies to goods (clause 15 (3) p 61 of the Value Added Tax Act) transferred and services (clause 15 (4) 141) of the Value Added Tax Act) provided to the armed forces of NATO Member States (except Estonia) located in Estonia and intended either for the official use of the armed forces or civilian staff accompanying them, when such forces are taking part in the common defence effort. 

As a document certifying the right to apply the 0 per cent rate of value added tax the armed forces of NATO submit the VAT and excise duty exemption certificate to the transferor of the goods or provider of the services according to Council Implementing Regulation (EU) No 282/2011 whereof one copy is to be kept by the transferor of the goods/provider of the services.

According to subsection 39 (2) of the Value Added Tax Act value added tax is not imposed on the import of goods to the armed forces of NATO Member States (except Estonia) and civilian staff accompanying them or to their members when such forces are taking part in the common defence effort.

7.2. Armed forces of other (except NATO) foreign states

The tax incentives apply in Estonia to the armed forces and civilian staff of other foreign states, the members thereof and their dependents if so provided for in an international agreement ratified by the Riigikogu.

The right of the armed forces and accompanying civilian staff, the members thereof and their dependents to apply for exemption from or a refund of value added tax shall be approved by the Minister of Defence or an official authorised by the Minister.

7.3. International military headquarters

Value added tax shall not be imposed on the import of goods to international military headquarters if tax incentives are provided for in an international agreement ratified by the Riigikogu. Exemption from value added tax on the import of goods or a refund of value added tax on the acquisition of goods or services from Estonia apply to the members of international military headquarters, their dependents and the members of contractual partners of the headquarters and their dependents if tax incentives are provided for in an international agreement ratified by the Riigikogu. Upon acquisition of goods and services, the value added tax paid on such goods and services in Estonia shall be refunded to the members of international military headquarters and their dependents if the total value of the goods and services is at least 64 euros.

Likewise, the 0 per cent value added tax rate is imposed on the sale of goods and services to the headquarters, if such tax incentive is provided for in an international agreement ratified by the Riigikogu. Such international agreements are primarily the Agreement between the Parties of the North Atlantic Treaty regarding the Status of their Forces (NATO SOFA) (RT II 2004, 31, 114), Protocol on the Status of International Military Headquarters set up pursuant to the North Atlantic Treaty (Paris Protocol) (RT II 2004, 31, 114), and the Agreement between the Republic of Estonia and the Supreme Headquarters Allied Powers Europe and Headquarters, Supreme Allied Commander Transformation to Supplement the Paris Protocol (RT II, 14.05.2013, 1).

A document certifying the right to apply the 0 per cent value added tax rate is the VAT exemption certificate approved by the representative of the armed forces of NATO or the military headquarters and the Ministry of Defence the format of which is established by the Council Implementing Regulation (EU) No 282/2011 (Annex II).

The right of the headquarters and their contractual partners and the dependents thereof to apply for exemption from or a refund of value added tax shall be approved by the Minister of Defence or an official authorised by the Minister.

The right of the members of the headquarters and their dependents to apply for exemption from or a refund of value added tax shall be approved by the Minister of Defence or an official authorised by the Minister.   

7.4. International military educational institution

Subsection 39 (2) of the Value Added Tax Act also includes tax incentives for international military educational institutions. In Estonia there is one such educational institution at present – Baltic Defence College. Pursuant to Article 8 of the Ratification Law of the Protocol between the Government of the Republic of Estonia, the Government of the Republic of Latvia and the Government of the Republic of Lithuania concerning the status of the Baltic Defence College and its personnel”, passed by the Riigikogu on 13 October 1999, the College is exempted from import duties on goods imported by the College for its official use. The College is reimbursed for the amount of value added tax or excise duties paid on the goods and services purchased for official use to the extent possible within national legislation of the Parties. The tax incentives named in the Agreement are applied to the College pursuant to subsections 39 (2) and (3) of the Value- Added Tax Act, according to which tax incentives are, inter alia, stipulated for international military educational institutions if such tax incentives are provided for in an international agreement ratified by the Riigikogu. Pursuant to the Ratification Law passed by the Riigikogu the College is reimbursed for the amount of value added tax paid on the purchases to the extent possible within national legislation of the Parties. Since the specific extent of tax incentives granted for a military educational institution is not stipulated by the national legislation, the College is reimbursed for the amount of value added tax and excise duty paid on the goods and services purchased for official use.

8. VAT and excise duty exemption certificate

The document in proof of the transfer of goods or provision of  services with the 0 per cent value added tax rate is the value added tax exemption certificate (subsection 15 (51) of the Value-Added Tax Act; hereinafter the Certificate) established by Council Implementing Regulation (EU) No 282/2011. The form of the Certificate is accessible here (215.46 KB, PDF), in Estonian here (119.28 KB, PDF).

With the Certificate a body/individual eligible for the exemption confirms the authenticity of the data and provides the information in box 3 necessary for the evaluation of the request for exemption in the host Member State, i.e. the state to which the goods are delivered or where the body/individual that has purchased the service is established.

It is important for the Seller to check the information provided in box 6 of the Certificate, where it is specified whether all the goods/services acquired meet the requirements of tax exemption in this state. In the case of a partial tax exemption the seller applies the 0 rate within the extent specified in box 6. To the rest of the goods/services the standard rate is applied.

One copy of the Certificate is kept by the seller who is obligated to retain it as part of the accounting records according to the Estonian legislation.

To simplify the procedure, the competent authority of a host Member State can dispense with the obligation on the eligible body (the purchaser indicated in box 1) to ask for the stamp in the case of exemption for official use. The purchaser mentions this dispensation in box 7 with reference to the relevant document according to which the stamp is not mandatory.

9. The form of the application for the refund of value added

The form of the application for the refund of value added tax is established by Regulation of the Minister of Finance No 20 of 2 May 2016. The application for the refund of value added tax shall be submitted respectively to the Ministry of Foreign Affairs or the Ministry of Defence by the 10th day of the month together with the invoices confirmed by the issuer or their copies as provided for in section 37 of the Value-Added Tax Act.   

The refund of value added tax may be claimed in the course of up to 90 calendar days as of the day on which the goods are acquired or services are provided.   

The application with the documents shall be submitted to the tax authority by the 20th day of the month of the receipt of the documents or the following month (if the documents were received after the 10th date).  

The tax authority makes a decision in respect of the application and value added tax to be refunded shall be transferred into the bank account specified in the application within 30 days of receipt of the application and added invoices from the Ministry.

The Tax authority returns the marked invoices together with the copy of the application to the Ministry of Foreign Affairs or the Ministry of Defence.

 

15.09.2017