Opinion by Epp Lumiste in article „Is the increase of threshold for VAT taxable person useful for companies?“
Online financial portal Raamatupidamisuudised has asked from experts if the increase of threshold for registration as a person liable to value added tax is a positive or negative change for companies. Namely, in 2018 an amendment to Value-Added Tax Act will enter into force increasing the threshold for registration as a person liable to value added tax from previous 16,000 Euro to 40,000 Euro.
Hereby the opinion of attorney-at-law Epp Lumiste:
The legislator has explained the increase of threshold for registration as a person liable to value added tax mainly with the decrease of administrative burdens of micro-enterprises but will the amendment be actually accompanied by the desired result?
In case the micro-entrepreneur is using in its economic or professional activities the services and/or goods received from another taxable person, then it is more useful to register oneself as a person liable to value added tax since the input value added tax can be reclaimed.
It is likely that an entrepreneur who is providing services to some entrepreneur in EU Member State, is also interested in being a person liable to value added tax. Thus it is likely that in the given cases and as from the enforcement of the amendment, the number of voluntary registrations as a person liable to value added tax will increase.
The amendment regarding the increase of threshold did not influence the regulation on voluntary registration. According to the valid legislation, in the case of voluntary registration, tax auditor may inquire additional information and the entrepreneur must be able to prove the performance of entrepreneurship. This together with explanations to the tax auditor will become more time-consuming than submitting a VAT declaration.
In the explanatory letter the legislator has stated that 51% of VAT declarations have been submitted in less than 15 minutes. Therefore the increase of threshold for registration as a person liable to value added tax to 40,000 Euro is likely to increase also the administrative burden of an entrepreneur.
The opinions of other experts (in Estonian) can be read here: