VAT knows its place

In this article we describe shortly how to apply value added tax (VAT) while providing services. It depends on a place where service was supplied (means turnover occured).

First of all, it is the place where service was supplied (turnover occured) to be determined. 

Tax rate is 20% if the place where turnover occured is Estonia. If not – tax rate is 0%.

Service was supplied and turnover occured in Estonia if:

1. Service was provided in Estonia, and
2. Customer is:

* – the place of supply is not Estonia if a taxable person provides the following services:

1. grant of the use of intellectual property or transfer of the right to use intellectual property;
2. advertising services;
3. services of consultants, accountants, lawyers, auditors and engineers, translation services, data processing or the supplying of information;
4. financial services, except for leasing safes, or insurance services, including reinsurance and insurance intermediation services;
5. allowing use of manpower;
6. the hiring or leasing of or establishment of a usufruct on movables, except means of transport;
7. electronic communications services, including assignment of rights to use transmission lines;
8. electronically supplied services;
9. allowing access to natural gas or electricity, heating and cooling energy network connections, and transmission of natural gas or electricity, heating or cooling energy through networks and services directly related thereto;
10. transfer of permitted limit values of emissions of greenhouse gases;
11. refraining from the services specified in clauses 1-10 hereto, waiving the exercise of a right or tolerating a situation for a charge.

In all other cases the place of supply is not Estonia, except of situations described in Value-Added Tax Act §10 cl 2 and 4.