Estonian VAT basics and the €40,000 registration threshold

Value added tax, or VAT, is the tax that a registered company adds to its sales and pays to the state. It sounds simple, but the question most founders ask first is when they must start charging it. This guide explains the €40,000 registration threshold, the rates you will meet, the choice to register voluntarily, and what a VAT invoice must show so that your customers can reclaim the tax.

What VAT is in one paragraph

VAT is a tax on the value added at each step of a sale. A registered business charges VAT on its sales, which is its output VAT. It also pays VAT on the things it buys, which is its input VAT. Each period the company adds up both, and pays the difference to the state, or reclaims it when the input VAT is larger. The monthly return that does this is the KMD, explained in the guide on KMD and KMD INF.

The €40,000 registration threshold

EMTA, the Tax and Customs Board, states the rule on its registration pages. A company must register for VAT when its taxable turnover exceeds €40,000 counted from the start of the calendar year. The count covers supplies whose place of supply is Estonia. Turnover that is taxed elsewhere, or that is exempt by law, does not count towards the threshold in the same way.

Three points follow from the rule:

• The threshold is counted from 1 January of each calendar year. It is not a rolling twelve-month figure, so a company can cross it in the middle of the year.
• A company that passes the threshold must register. The duty does not depend on whether you want to charge VAT.
• If you miss the deadline, the tax authority can register you with effect from the day the threshold was passed. Invoices issued after that date may then have to be reissued with VAT.

Some explanations online still describe the threshold as a twelve-month figure. Use the EMTA pages as the source, and check the current text before you decide.

Voluntary registration

You may register for VAT even when your turnover is far below €40,000. Many companies do this because their customers are other VAT-registered businesses. Those customers want an invoice with VAT on it, and they can reclaim that VAT only when the invoice comes from a registered supplier.

Voluntary registration has a cost. Your prices must include VAT, you must file a VAT return every period, and you must keep the records that support it. Registration is a business decision, so compare the two sides before you apply.

The rates

Estonia uses three main rates and a zero rate. Check the rate for every product on the EMTA list, because some goods and services have their own rate.

• 24% is the standard rate. It applies from 1 July 2025, when it replaced the 22% rate. Most services and goods are taxed at this rate.
• 13% applies to accommodation, including accommodation with breakfast, from 1 January 2025.
• 9% applies to some goods, such as press publications. The EMTA list also covers books and other items; check the current list before you set a price.
• 0% applies to some supplies, including exports outside the EU and some supplies to other EU businesses. A zero rate is not an exemption: the company can still reclaim its input VAT.

Each rate has its own line in the return. The KMD shows the taxable amount for the 24% rate in row 1, for the 9% rate in row 2 and for the 13% rate in row 2.2, and the total VAT in row 4.

Reading a VAT invoice

When you receive a supplier invoice that shows VAT, you can reclaim the input VAT only if the invoice is complete and the purchase is for the business. Look for four things:

1. The supplier's name, address and VAT number, which starts with EE for an Estonian business.
2. The rate and the amount of VAT for each line, or for each rate.
3. The total excluding VAT, the VAT amount and the total including VAT.
4. A date and a number that identify the invoice.

A VAT class in your books records which rate each line used, and it sends the amount to the right row of the return. Choosing the right class is the step that most often goes wrong, so check it when you record the invoice.

Reverse charge and cross-border sales

Some sales between VAT-registered businesses in different EU countries are taxed under the reverse charge. In that case the seller shows no VAT, and the buyer accounts for the VAT in its own return. The rule depends on the place of supply and on the customer's VAT number, so check both before you invoice.

An EMTA page also covers a separate limit for acquisitions of goods from other EU countries. According to EMTA, registration with limited liability applies once those acquisitions pass €10,000 counted from the start of the year. Check the current wording before you rely on it.

A worked example with round numbers

Suppose your OÜ sells consulting services in Estonia and has invoiced €30,000 in the first months of the year, without VAT. Each month you add the sales again, and the running total is compared with €40,000 from 1 January. In month four the total passes €40,000. The company must register, and the sales from the date it must register carry VAT. Under the 24% standard rate, a sale of €1,000 without VAT becomes €1,240 on the invoice, and the €240 goes into the KMD as output VAT. Check the registration date with EMTA, because a late registration can change which invoices need VAT.

The numbers are invented for the example. Your own turnover, place of supply and products decide whether the rule applies to you.

What to do now

If your company is new, write down your expected sales for the calendar year and track them each month. If you are close to the threshold, read the EMTA registration pages before the month you pass it. If you are already registered, make sure every invoice shows the correct class, and file the return on the 20th of the month after the period.

Sapita does not give tax advice. It keeps the books, prepares the KMD and shows the due dates. Confirm the rules for your case with the official sources or with an adviser.

Key terms in this guide

• VAT: the tax on value added.
• VAT registration: the step that makes a company a VAT payer.
• Output VAT: the VAT you charge on your sales.
• Input VAT: the VAT you pay on your purchases.
• VAT class: the code that sets the rate and the return row of a line.
• VAT number: the number that identifies a VAT-registered business.
• Reverse charge: the rule that moves the VAT to the buyer.
• KMD: the monthly VAT return.
• KMD INF: the annex that lists partner sales and purchases.
• VD: the report of intra-EU supplies.
• OSS: the scheme for EU consumer sales.
• Foreign currency: amounts written in another currency.

Sources

• EMTA, VAT registration (käibemaksukohustuslasena registreerimine): emta.ee
• EMTA, value added tax, rates and the threshold: emta.ee
• Value Added Tax Act (käibemaksuseadus), Riigi Teataja: riigiteataja.ee