Tag Archives: methods of calculation

91-99 P. Zeiger, A. Nurk, J. Lehtsaar and R. Värnik
Possibilities and contradictions in the calculation of the flat rate of the Value Added Tax Special Scheme for farmers in the European Union based on the Estonian example
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Possibilities and contradictions in the calculation of the flat rate of the Value Added Tax Special Scheme for farmers in the European Union based on the Estonian example

P. Zeiger¹, A. Nurk², J. Lehtsaar³ and R. Värnik⁴

¹Estonian University of Life Sciences Institute of Economics and Social Sciences,Kreutzwaldi 1, 51014 Tartu Estonia; e-mail: peedu.zeiger@emu.ee
²Her Majesty’s Treasury; Budget, Tax and Welfare Directorate; International IndirectTaxes Team, 1 Horse Guards Road, London SW1A 2HQ United Kingdom;e-mail: aili.nurk@hm-treasury.gsi.gov.uk
³Estonian University of Life Sciences Institute of Economics and Social Sciences,Kreutzwaldi 1, 51014 Tartu Estonia; e-mail: jyri.lehtsaar@emu.ee
⁴Estonian University of Life Sciences Institute of Economics and Social Sciences,Kreutzwaldi 1, 51014 Tartu Estonia; e-mail: rando.varnik@emu.ee

Abstract:

The current article deals with the application of the optional flat rate value added tax (hereinafter referred as VAT) scheme for farmers (VAT special scheme, special scheme, special flat-rate) in the member states of the European Union. In the flat rate VAT scheme, farmers are not registered as taxable persons liable for VAT; therefore it is not possible for the farmers to deduct the VAT paid on their inputs from the VAT payable on the supply of agricultural products. To compensate the VAT paid on inputs, the farmer adds the flat rate VAT to the taxable amount of his supply.The research results suggest that it is not currently justified to apply the special flat rateVAT scheme in Estonia. In the case of the continuation of subsidies payable to farmers it is necessary, based on the Estonian example, to make an amendment to the directive which would also allow the subsidies to be included in the amount of income in the calculations of the special flat rate. By applying the current provisions of the directive, the calculation of the special flat rate would result in a flat rate that would give rise to over-compensation in the agricultural business sector.

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