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12.2. VAT on the Supply of Services by Non-Residents

See Sec. 12.1. for the general rules. All supplies of services deemed to be used in Estonia are subject to VAT therein.

Estonia has introduced a reverse-charge system for all domestic supplies of goods and services by non-resident companies. When a non-resident company without a VAT registration number in Estonia invoices VAT-registered taxable persons for locally supplied goods or services in Estonia, the Estonian VAT due on the supply is shifted to the customer, who self-assesses this VAT in his Estonian VAT return. If the customer is not registered for VAT purposes in Estonia, the non-resident company is obligated to VAT-register in Estonia. If the non-resident supplier is VAT-registered in Estonia, the reverse-charge mechanism will not apply, and the supplier will be required to charge VAT on local supply.

Non-resident companies providing electronic services to taxable persons (B2B) are chargeable to VAT on a reverse charge basis, and the customer using such services is liable to VAT.

Non-resident companies providing electronic services to non-taxable persons (B2C) are liable to VAT, and the non-resident company is required to register for VAT. However, with the use of MOSS, such registration requirements can be avoided. See Sec. 12. above for new place of supply rules and VAT MOSS option registrations and filing requirements for supply for certain specified services to consumers located in the EU.

The following are considered as electronically supplied services:

  • Website supply;
  • Web-hosting;
  • Distance maintenance of programmes and equipment;
  • Transfer and updating of software transmitted by electronic means;
  • Images, text and information transmitted by electronic means, and making electronic databases available;
  • Music, films and games, including gambling games, transmitted by electronic means;
  • Political, cultural, sporting, scientific and entertainment broadcasts transmitted by electronic means; and
  • Distance education and other services similar to the services specified above.

Consequently, if a non-resident company performs only domestic supplies of goods or services in Estonia, it can entirely avoid a VAT registration in Estonia. However, if other transactions occur (other than intangible services that are also subject to a reverse charge), VAT registration is required to declare these other transactions (such as intra-community supplies, intra-community acquisitions, exports, imports, and the purchase of services subject to the reverse-charge mechanism).