Turnover tax (VT) is one of the key taxes levied by the state on enterprises and organizations for the sale of goods and services. In Estonia, VAT rates are set by the VT Act and range from 0 to 22%. This article discusses the main aspects of applying different VAT rates, as well as cases when turnover is not subject to this tax.
General VAT rate
The basic VAT rate in Estonia is 22%. It applies to all types of activities that do not fall under special tax regimes or benefits. This applies to most goods and services sold in the country.
For example:
- sale of cars;
- communication services;
- provision of legal advice;
- construction of buildings and structures.
Thus, if the goods or services do not fall under the preferential categories, the tax rate will be 22%.
Turnover subject to VAT at a rate of 9%
Some types of goods and services are subject to VAT at a reduced rate of 9%. These goods include:
- food products, except for alcoholic beverages and tobacco products;
- medicines for medical use;
- goods for children, such as clothing, footwear, toys and books;
- newspapers, magazines and periodicals.
This rate allows to reduce the tax burden on socially significant goods and services, making them more accessible to the population.
Turnover subject to VAT at a rate of 5%
Another reduced VAT rate of 5% applies to the following categories of goods and services:
- hostels and hotel services;
- transportation of passengers and baggage;
- some medical services provided by doctors and dentists;
- agricultural products produced by local farmers.
This rate is aimed at supporting certain sectors of the economy and reducing the cost of vital services.
Turnover subject to VAT at a rate of 0%
There are also situations in which the sale of goods and services is exempt from VAT. Such transactions are subject to a rate of 0%, which effectively means exemption from taxation.
Examples of such transactions include:
- export of goods and services outside the European Union;
- international transportation of goods and passengers;
- sale of books, textbooks and other educational materials;
- provision of medical services within the framework of compulsory health insurance.
These exceptions help stimulate export activities and support important social areas.
Non-taxable turnover
In addition, there is a category of turnover that is completely exempt from VAT. This includes:
- financial services: banking, insurance and investment funds;
- educational services provided by government agencies;
- medical services financed from the state budget;
- services related to culture and art, such as organizing concerts.
Exempting these types of activities from turnover tax is aimed at developing social infrastructure and supporting cultural initiatives.
To summarize
Estonian legislation provides for a flexible system of turnover tax rates, taking into account the specifics of various sectors of the economy and the social significance of certain goods and services. The diversity of tax rates allows the state to regulate economic activity, supporting priority areas of development and ensuring the availability of necessary goods and services for the population.