Overview of the situation
There are two different views among accountants in Estonia about which invoices and cheques can be offset against value added tax. The first group of accountants believes that on any expense account or cheque it is sufficient to write the company details by hand. The second group believes that the invoice or cheque should contain the details of the client's company on the supplier's side.
What does the Tax Board think?
Unfortunately, the Tax Board's opinion on this is strongly worded.The details of the invoice must be given by the seller of the goods or services. We have asked them several times about this. In their replies they refer to the Value Added Tax Act.
What does the law say?
This situation is dealt with in § 37 (7) of the Value Added Tax Act, which sets out the details that must be on the primary document on the basis of which the value added tax can be deducted.
Value Added Tax Act - § 37 (7)
(7) The following shall be set out in an invoice:
- the serial number and date of issue of the invoice;
- the name and address of the taxable person and the person’s registration number as a taxable person;
- the name and address of the acquirer of goods or the recipient of services;
- the registration number of the acquirer of goods or the recipient of services as a taxable person if the acquirer of goods or the recipient of services has tax liabilities upon the acquisition of goods or receipt of services;
- the name or a description of the goods or services;
- the quantity of the goods or extent of the services;
- the date of dispatch of the goods or provision of the services or the date of receipt of full or partial payment for the goods or services if the date can be determined and differs from the date of issue of the invoice;
What does it mean?
This means that the incoming turnover tax can only be deducted on the basis of invoices issued in the name of your company by the seller of goods or services and which have all the statutory details, including the purchaser's details. In other words, it makes no sense to add your own details to an invoice or cheque, as it is not possible to deduct turnover tax from such a document.
I hear there's a simplified procedure?
Yes, in points 9 to 11 of paragraph 37 of the Value Added Tax Act refer to simplified types of invoices. The amount of the invoice must not be more than 160 euros without VAT. There are only two types of invoice:
- a cheque or bill for passenger transport services
- a cheque printed by a parking ticket machine, petrol station vending machine or similar.
On these types of invoices, you can and should add your company name and tax registration number. It will then be possible to deduct turnover tax from them.
That is, if you buy office supplies from Selver, Maxima, Prisma or another grocery store in Estonia, use a self-checkout counter.
Conclusion
You should ask your suppliers to issue invoices or cheques in your company's name. The only exception to this are cheques for passenger transport and cheques issued by an automatic petrol station payment terminal.