Minister of Finance Annely Akkerman (Reform) has submitted for a round of approvals a newly completed bill of amendments to the Value-Added Tax Act under which tax authorities will start receiving data regarding cross-border payments on a quarterly basis and Estonia's VAT receipts should improve starting in 2024.
"Currently we're losing out [in cross-border e-commerce] on millions of euros in VAT, and it is difficult for honest business owners to compete with those who aren't paying VAT," Akkerman explained.
According to the minister, no specific data exists regarding how many such transactions go undeclared and VAT unpaid.
Insufficient information regarding VAT obligations doesn't concern just Estonia, however, but rather all EU member states. Going forward, payment service providers operating in the EU will be required to submit data on cross-border payees and payments to tax authorities on a quarterly basis.
The relevant directive must be transposed by member states by the end of next year, and upon entry into force, tax authorities will start submitting data to the Central Electronic System of Payment Information (CESOP).
This EU-wide database aggregates information regarding recipients of cross-border payments, and from it, the state will receive information regarding persons who may have incurred a tax liability in Estonia due to cross-border sales.
For example, Chinese traders' payment service providers are often based in Europe. In the future, these providers will be obligated to provide information via their state tax authorities to CESOP regarding payments that their online store receives. This way, Estonia will have the opportunity to see a particular online store's Estonia-related turnover.
The obligation to report information regarding payees will apply in cases in which the total number of payments per payee exceeds 25 payments per quarter. Payment information is submitted on a quarterly basis, with the first submission slated to take place on March 31, 2024.
Cross-border sales by e-traders in another member state to a consumer located in Estonia are subject to taxation in Estonia if the e-trader's total cross-border sales within the EU exceed €10,000 per calendar year. Below this threshold, the e-trader has the right to treat cross-border sales as domestic sales within their country of residence, i.e. the goods are taxed in the e-trader's country of residence.
If the e-trader is a person from a third country, i.e. non-EU country, goods sent to Estonia will be taxed upon their importation.
Editor: Aili Vahtla