Registration as a VAT payer

Legal basis

For the purposes of subsection 1 of § 3 of the VAT Act a person liable to value added tax (hereinafter taxable person) is a person who is engaged in business (a natural or legal person, both resident and non-resident), including a legal person in public law or a state, rural municipality or city authority, and is registered or required to register as a taxable person (§ 19). A taxable person of a foreign state or another Member State is a person, including a pool of assets or association of persons without the status of legal person, who is treated as a person liable to value added tax according to the legislation of the state concerned.

An Estonian or a foreign person means a person whose registered seat or principal place of residence is Estonia or a foreign country, respectively, and who, according to the legislation of the respective country, is regarded as a person liable to value added tax.

A foreign taxable person is not deemed to be an Estonian taxable person due to its permanent business establishment located and engaged in business in Estonia if the foreign person does not participate in a transaction or act subject to taxation through its permanent business establishment located in Estonia (subsection 3¹ of § 3 of the VAT Act).

A foreign person is not regarded as a taxable person in the Member State where his permanent establishment is registered as a taxable person if the transactions do not relate to his permanent establishment. Therefore, the taxation and reporting of cross-border transactions must be based on the persons involved in the transaction. If the actual consumer of the service or the recipient of the goods is a foreign taxable person in his Member State who is also registered as a taxable person in Estonia, the transaction is taxed at a 0 per cent rate, i.e. the reverse charge is carried out and the tax liability is transferred to another Member State.