Input VAT on purchases

This page covers the VAT side of purchase invoices: which code a purchase gets, and which VAT return it goes on.

Purchases from foreign suppliers

Only a supplier registered for VAT in Estonia can charge VAT you deduct here (VAT Act § 29(3)). So the code Arvello suggests depends on the supplier's Estonian VAT registration, not on its country. A supplier with an Estonian VAT number gets the standard rate, and so does a foreign company registered for Estonian VAT: record its number in the contact's Estonian VAT number field (see Clients & suppliers).

When the supplier is foreign and has no Estonian VAT registration on file, each line asks What is it?, and the suggested code follows from the answer and the supplier's country:

A service used abroad is supplied in the country where it happens (VAT Act § 10(4)), so no Estonian VAT arises on it and it's never reverse-charged. That covers passenger transport and a car hired for up to 30 days (§ 10(7)); freight, and a car hired for longer, are ordinary Services. The foreign VAT on its receipt isn't deductible in Estonia either. The suggestion is only a default: you can change the code on any line.

A supplier in another EU country whose VAT number ends in EX uses the EU scheme for small businesses: it charges no VAT, and you don't self-assess its goods or services either (VAT Act § 3(7)). Arvello suggests Not subject to VAT for it and doesn't ask What is it?. A recurring expense from such a supplier is generated with Not subject to VAT too, even when its template was saved with a reverse-charge code before the supplier joined the scheme. A draft from such a supplier that still has reverse-charge lines, saved before its contact showed the EX number, isn't posted: change those lines to Not subject to VAT, then post it.

The VAT return checklist warns when a finalised line charges Estonian VAT — a standard or reduced rate, or Zero-rated purchase (0%, no self-assessment) — from a supplier with no Estonian VAT registration on file. Correct the code, or add the supplier's Estonian VAT number if it has one.

Import VAT

Goods from outside the EU are taxed when they clear customs, not by the supplier. Record the import VAT as its own expense with the code Import VAT (customs declaration), using the customs declaration, the customs broker's or courier's import VAT bill (DHL's, for example), or EMTA's customs decision as the document. On that line the amount you enter is the VAT itself: the line has no net amount and no rate. Keep the expense in euros, as the declaration states the VAT, and date it on the day customs released the goods, the date on the declaration: the VAT is deducted in that month (VAT Act § 31(8)), and Arvello deducts it in the month of the expense's date. Don't code a courier's import VAT bill at 24%: that puts the VAT on the wrong lines and lists the courier in KMD INF as if it had sold you the goods.

The VAT goes on KMD line 5 and on line 5.1, the import VAT included in line 5. When the import is a fixed asset, book the line to the Fixed assets account (Equipment & Hardware) and it also goes on line 5.2. Import VAT is left out of KMD INF Part B. The supplier's own invoice for the goods stays a separate expense at Not subject to VAT.

If EMTA has allowed your company to declare import VAT on the VAT return instead of paying it at customs (VAT Act § 38(2¹)), see Import VAT in Special VAT cases.

Purchases also used privately

Lines at a standard or reduced rate have a Business use (%) field, 100 by default. Lower it when the purchase is also used privately, such as a phone or home internet: only that share of the VAT is deducted (VAT Act § 29(4)), and the rest is part of the cost. A €50 phone bill with €12 VAT at 60% business use deducts €7.20; the other €4.80 is booked to the line's expense account. When the invoice is listed in KMD INF Part B, it carries the deducted VAT and exception code 11. A passenger car, and fuel, repairs or leasing for it, is deductible at most 50% unless the car is used only for business (VAT Act § 30(3)–(4)): pick the car in the line's Vehicle field (see Company cars). Reverse-charged and import VAT lines don't have the field. Private use limits their deduction too, but Arvello can't split it yet: if such a purchase is partly private, correct line 5 in e-MTA.

Company cars

When the company has a car or van of its own under Expenses → Vehicles & Mileage, each expense line has a Vehicle field: pick it for the vehicle itself or anything for it (leasing, fuel, servicing, parking). Arvello then limits a car's VAT to 50% unless a full-deduction period covers the expense's date, and fills KMD lines 5.3 and 5.4. A supplier's credit note keeps each car's line. The rules are in Vehicles and mileage.

Suppliers on cash-based VAT accounting

A supplier using cash-based VAT accounting (kassapõhine käibemaksuarvestus) says so on its invoice. Tick Supplier uses cash-based VAT accounting on such an expense. You deduct its VAT only when you pay it (VAT Act § 31(10)), but Arvello deducts by invoice date. So the VAT return checklist blocks approval of a month with such an invoice that wasn't paid in full in that same month, and of the month you pay one that was declared in another month. File those months in e-MTA for now.

If you also make VAT-exempt sales

Once your company has VAT-exempt sales in a calendar year — letting a flat, say, or insurance brokerage — input VAT on purchases used for both taxable and exempt sales is deductible only in part, by the year's ratio of taxable to total turnover, corrected at the year end (VAT Act §§ 32–33). Arvello doesn't calculate the ratio and deducts that VAT in full. Every later VAT return that year with input VAT warns about it, and the year's first return with exempt sales and December's ask you to review the whole year's purchases. Make the corrections on lines 10 and 11 in e-MTA.

Which VAT return it goes on

Input VAT is claimed in the month the supplier delivered, not the invoice month, with rules for late invoices, VAT you account for yourself and prepayments. See Which VAT return a purchase goes on.

See Preparing a KMD return for how the full return comes together.