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Changes to VAT in 2019

The Estonian Parliament adopted on 14 November 2018 changes to the VAT Act, which will prescribe the VAT treatment of vouchers (i.e. gift cards), simplify the requirements for declaring the import VAT in the VAT return and adjust the VAT treatment of telecommunication and electronically supplied services. These new rules will be effective from 1 January 2019.
• Pursuant to EU Directive 2016/1065, the VAT Act will introduce the rules for time of supply and taxable value of vouchers, as well as the definitions for single-purpose and multi-purpose vouchers.
• For VAT purposes, vouchers will be deemed to be instruments where there is an obligation to accept it as a consideration for a supply of goods or services. These new VAT rules will not be applied to vouchers which will only entitle the holder to the discount upon the purchase of goods or services.
• Single-purpose voucher means a voucher where the place of supply of goods or services to which voucher relates and the amount of VAT due on these goods or services are known at the time of issue of the voucher. For example, it can be the gift card of the restaurant, at the issue of which is known that it will be used for the payment of meals in that restaurant and therefore such supply of goods or services can be taxed with VAT already at the time of the issue of the voucher.
• Upon the transfer of the single-purpose voucher, the VAT liable supply of goods or services will be deemed to take place on that day to the extent of value of that voucher, or on the day when the full or partial prepayment for such voucher has been received. The actual handing over of goods or provision of services in return of the single-purpose voucher will not be regarded as an independent transaction.
• Each transfer of the single-purpose voucher by the person acting in his own name will be regarded as a supply of goods or services to which that voucher relates.
• Multi-purpose vouchers are all other vouchers, at the issue of which the place of supply of goods or services and the amount of VAT due on these goods or services are unknown at the time of issue of the voucher. For example, it can be a gift card of the hotel chain, with which the holder of the card can pay for accommodation or meals in the hotels or restaurants in different countries of that hotel chain. It can be also a gift card of the bookstore, which can be used for payment of goods subject to different VAT rates. Therefore, the respective supply of goods or services cannot be subject to VAT at the time of transfer of the voucher.
• In case of the multi-purpose voucher, the VAT will be accounted at the time of handing over the goods or provision of services related to that voucher, based on the consideration paid for the multi-purpose voucher or in the absence of that information the monetary value of that voucher. If the multi-purpose voucher covers only a part of the value of goods or services, then upon the determination of the taxable value will be taken into account the value of the voucher and any other amounts treated as consideration received by the seller of goods or provider of services from that transaction.
• Where a transfer of single-purpose or multi-purpose voucher is made by the person acting on behalf of another taxable person, then such transfer will be regarded as a supply of goods or services by that other person on behalf of which the first-mentioned person is acting for. The VAT liable supply will be deemed to be effected by that other person at the earliest on the day, when the payment for the voucher has been received by that other person or when the goods or services have been delivered by that other person.
According to the new transitional rule, the changes in the VAT treatment of vouchers will be applied only to vouchers issued on and after 1 January 2019.
• The VAT Act will include the new § 101 , which introduce new rules for the determination of place of supply of telecommunications or electronically supplied services rendered to non-taxable persons (i.e. final customers, other than VAT registered persons of other EU member states):
o Thus, if the supply of cross-border telecommunications or electronically supplied services rendered by the taxable person to non-taxable persons will not exceed EUR 10 000 during the calendar year neither in the current nor in the preceding calendar year, then the taxable person will impose local VAT also on these cross-border services according to the local VAT rules. In such a case, the provider of referred services will declare the supply of cross-border services rendered in the domestic VAT return as a local VAT supply. The person must also follow the local rules upon the issue of the VAT invoice for these services.
o For example, where the Estonian company renders electronically supplied services to final customers in Finland and Sweden in the total amount of EUR 1000, then the Estonian company may treat such supply as its domestic supply subject to Estonian VAT, without any requirement to declare that in Finland or Sweden. Commencing from the date when the Estonian company exceeds the threshold of EUR 10 000, the Estonian company must follow the general rule, by registering itself for VAT in the countries of his final customers or by submitting the application to Estonian Tax and Customs Board to apply the MOSS (Mini One-Stop-Shop) scheme.
• With regard to declaration of import VAT in the VAT return, the list of respective conditions will no longer include requirements that the person’s zero-rated supply should represent from the total supplies at least 50% during 12-month period and that the person should have submitted VAT returns only electronically during 12-month period.
• The non-EU company will be entitled to use the MOSS scheme upon the rendering of telecommunications and electronically supplied services to EU final customers even when the company has been registered for VAT in the EU member country, but the company has no fixed establishment or permanenent establishment in the EU. The use of this special MOSS scheme allows the company to register himself only in single EU member state and the company will not be required to register himself in each EU member state, where he renders services to final customers. In such a case, the company declares and pays VAT only in the member state where the company was registered. As an exception, the respective special scheme cannot be used in the EU member state, where that non-EU company has fixed establishment or permanent establishment. In such a case, also the VAT due on telecommunications and electronically supplied services must be declared and paid in the standard procedure of that member state.