Situation
In the last few years, there was an increasingly frequent situation where an Estonian company bought goods from another country in the European Union, and did not bring them into Estonia, but instead sold them to another EU country or a third country. As a rule, in this case, the Estonian company gave its Estonian VAT number to the supplier for the transaction, or the seller of the goods found the VAT number of the Estonian company himself and pointed it out in his invoice. At first sight, everything seems logical, and there are no tax risks. However, this is not the case.
Tax risk
If your company does not bring goods into Estonia, and you use your Estonian VAT number for such a transaction, you take the risk of actually paying VAT in Estonia on such a purchase.
Let us look at the situation with concrete examples.
Example 1. Sales to non-VAT registered person from the EU
An Estonian VAT registered company buys goods located in Germany from a German VAT registered company, which it then sends from Germany to individual buyers in France. The Estonian VAT number is used for the transaction.
The transaction remains an intra-Community acquisition for the Estonian company, but the Estonian company has the obligation to pay real VAT in Estonia on this purchase, even though it is written VAT 0% in the invoice.
How can you avoid the tax risk?
You can avoid this situation by telling the seller that you do not want to use the Estonian VAT number, because you do not intend to send the goods to Estonia. In this case, the seller will probably tell you that he cannot sell you the goods with a 0% VAT number. Then you need to register your company as a VAT payer in the seller's country. After registering you will give the vendor your VAT number and they will sell you the goods with VAT but you will have the right to deduct this VAT.
NB! If you receive a VAT number in another EU country, you will need an accountant or tax advisor who will deal with tax filing in that country.
Example 2. Export of goods from the EU
An Estonian VAT registered company buys goods that are in Germany from a German VAT registered company, which it then sells to Ukraine. The Estonian VAT number is used for the transaction.
The transaction remains an intra-Community acquisition for the Estonian company, but the Estonian company has the obligation to pay real VAT in Estonia on this purchase, even though it is written VAT 0% in the invoice.
How can you avoid the tax risk?
You can avoid this situation by telling the seller that you do not want to use the Estonian VAT number because you do not intend to send the goods to Estonia. In this case, the transaction will not appear on the Estonian tax return and you will not have to pay VAT in Estonia. The seller of the goods should give another reason why he will sell to you with 0% VAT. For example, exporting goods from the EU.
Exception is a triangular deal
You can safely use your Estonian VAT number if the transaction is a triangular transaction.
The necessary conditions for a triangular transaction are:
Each party to the transaction has a VAT number valid at the time of the transaction
2) Goods must go from one EU country to another (except Estonia)
3) The actual movement of goods must match the VAT numbers used by the companies, i.e. if the goods are in Germany at the time of sale, the seller must use the German VAT number, the Estonian company the Estonian VAT number and the French company the French VAT number.
Example 3. Triangular deal
An Estonian VAT registered company buys goods located in Germany from a German VAT registered company, which it then sells to a French VAT registered company and the goods move to France. The Estonian VAT number is used for the transaction
In this case, the transaction is triangular and the Estonian VAT number can be used for it. The VAT rate will be 0%.
Ссылки на законы и пояснения Налогового департамента Эстонии
- Link to an article on this topic on the tax department
- Numbers of court decisions in the European Court of Justice: C-536/08 ja C-539/08
- Explanation of the Estonian Value Added Tax Act from the Ministry of Finance
- Value Added Tax Act of Estonia