VAT rates & tax codes

Every line on an invoice or expense in Arvello carries a tax code. The code does two jobs: it sets the VAT rate for the line, and it decides where the amount lands on the KMD — the VAT return filed with EMTA, the Estonian Tax and Customs Board. Get the code right and the return assembles itself.

Tax codes in Arvello are date-aware. Estonia has changed its rates more than once recently, so the codes on offer depend on the document's date — an invoice from May 2025 calculates at 22%, one from July 2025 at 24%, and both stay correct in your books.

VAT rates as of 2026

Older documents keep their own rates: the standard rate was 22% from January 2024 to June 2025 and 20% before that, and press publications were 5% until the end of 2024.

The tax codes

The codes available for documents dated in 2026, as they appear in Arvello:

Eight historic codes — Standard rate (22%), Standard rate (20%), VAT not deductible (§ 30, 22%), VAT not deductible (§ 30, 20%), Press publications (5%), Reverse charge, EU supplier (0%, self-assessed at 5%), Reverse charge, non-EU supplier (0%, self-assessed at 5%) and Intra-community acquisition (0%, self-assessed at 5%) — appear only for documents dated within their validity periods.

While your company is registered for the EU One-Stop Shop, four OSS codes join the sales list. They charge VAT at the rate of the customer's EU country rather than an Estonian rate — see EU One-Stop Shop (OSS). While it's registered for the EU import scheme, two IOSS codes do the same for goods sent straight from outside the EU — see EU import scheme (IOSS). An IOSS code is never a line's default: you choose it.

How a line gets its code

When you choose a client, Arvello sets a default code on every line from your VAT registration status, the client's country, VAT number validity and customer type, and the invoice date:

• Company not VAT-registered → Not subject to VAT, always
• Estonian client → the standard rate for the invoice date
• EU client with a validated VAT number → Intra-community services (0%)
• EU client without a valid VAT number → the Estonian standard rate. If your company is registered for OSS on the invoice date, a private individual, or a business with no VAT number or one VIES found invalid, gets the OSS standard-rate code for what you mainly sell instead
• Business client outside the EU → Export of services (0%)
• Private individual outside the EU → the Estonian standard rate for the invoice date

The default is only a default: every line has its own tax code dropdown, so a single invoice can mix rates — and only codes valid on the document's date are offered. Some codes add the required invoice wording automatically, such as the reverse-charge reference to Article 196 of the EU VAT Directive. Client VAT numbers come from the client record.

A private individual outside the EU starts on the standard rate because, under the VAT Act, most services sold to a consumer are taxed in Estonia, wherever the consumer lives (§ 10(1)). The services listed in § 10(5) are the exception: sold to a consumer outside the EU, they're supplied outside Estonia and take 0% (§ 15(4)(1)). The list:

• licensing intellectual property, or transferring the right to use it
• advertising
• consulting, accounting, legal, audit, engineering, translation, data processing and information services
• financial and insurance services, except that the ones § 16 exempts, such as insurance, loans and deposits, stay exempt, under VAT exempt: insurance or VAT exempt: financial services
• supplying staff
• hiring out movable property other than means of transport
• electronic communications services
• electronically supplied services, such as software downloads, apps and SaaS subscriptions
• access to gas, electricity, heating and cooling networks, and transmission through them
• transferring greenhouse gas emission allowances
• being paid to refrain from, or tolerate, any of the services above

Switch the lines for those services to Export of services (0%). A business outside the EU is different: services under the general rule are supplied where the business is, whatever they are (§ 10(4)(9)), so its lines already start on Export of services (0%). When you pick a private individual outside the EU, the invoice form shows a note naming the most common listed services.

Some services are taxed where they take place, whoever the client is. Accommodation, event admission, restaurant meals and passenger transport in Estonia, and services connected with property here, are taxed in Estonia even for a business client abroad (§ 10(2)), so those lines need an Estonian rate, or VAT exempt letting of property for letting property here (§ 16(2)(2)).

The client's details can't tell goods from services, so a business client outside the EU starts on Export of services (0%). When a line is goods you ship out of the EU, switch it to Export of goods (0%), whoever the client is. When you sell goods and also charge for delivering or packing them, those charges are part of the goods' taxable value, so they take Export of goods (0%) too. Both codes report on KMD line 3, but only exported goods also go on line 3.2.

Northern Ireland is the exception for goods. EU VAT rules for goods still apply there, so goods you send to a private individual in Northern Ireland are an EU sale, not an export: they keep the Estonian rate, or take an OSS code if you declare EU distance sales through OSS — see EU One-Stop Shop (OSS). For services, Northern Ireland is outside the EU like the rest of the UK. A client in Northern Ireland is recorded with United Kingdom as their country, so for a private individual in the UK the invoice form's note covers both: goods shipped to Great Britain take Export of goods (0%), goods sent to Northern Ireland don't.

Some sales follow rules of their own, each covered in Special VAT cases: selling or letting property, selling under the domestic reverse charge, services to EU businesses that are exempt or zero-rated in their own country and new vehicles sent to other EU countries.

What the invoice PDF prints for each code — exemption notes, the VAT breakdown by rate and VAT in euros — is in Creating invoices.

Apart from the property codes' own checks, the exempt codes differ only for the registration threshold (VAT Act § 19¹(3)). For an occasional transaction, such as interest on the company's own deposit, use VAT exempt: other.

What each code drives on the KMD

Line numbers are those on the KMD form in use since July 2025. On older returns, sales at the then-standard rate went on line 1: 22% from January 2024 to June 2025, and 20% before that.

The domestic rate codes also drive the KMD INF invoice annex — see Preparing a KMD return for how that's assembled and reviewed.

Reverse charge from suppliers in and outside the EU

When a foreign business that isn't registered for VAT in Estonia charges you no VAT for something taxed in Estonia — most business services, such as software or consultancy, and accommodation here — you account for the VAT yourself: the taxable value goes on the KMD line for its rate, and the same VAT is deducted on line 5. A hotel stay abroad or a ticket to a conference abroad isn't taxed in Estonia, so there's no VAT to account for on it. The return also lists the purchase on an information line, and which one depends on where the supplier is:

• Supplier in another EU country → line 6. Pick Reverse charge, EU supplier (0%) for services and Intra-community acquisition (0%) for goods.
• Supplier outside the EU → line 7. Pick Reverse charge, non-EU supplier (0%) — for a subscription to a US software service, say, or consultancy from a UK or Norwegian firm.

Line 6 is only for suppliers in other EU countries, so a service from outside the EU coded for it is on the wrong line even though the VAT adds up. A VAT return's review checklist flags such services when the supplier's contact — its country and VAT number, whichever are set — points outside the EU: ones recorded before the non-EU codes existed, for example, or created by an older recurring expense. Goods you import from outside the EU are a different case: their VAT is charged at import through the customs declaration, not under the reverse charge, and you record it with Import VAT (customs declaration) — see Purchase invoices.

Accommodation in Estonia from a foreign business goes on line 7, whichever country the business is in. Estonia taxes accommodation at 13%, and line 6 only takes services taxed at 24% or 9%. If a foreign business that isn't registered in Estonia invoices you for a hotel stay or a flat here without VAT, pick Reverse charge, accommodation (0%, self-assessed at 13%), whether it's from inside or outside the EU. Accommodation was 9% until the end of 2024, so a stay before 2025 takes the 9% code for the supplier's region.

Two rarer purchases from EU suppliers belong on line 7 too: goods the supplier installs or assembles in Estonia, and goods you buy as the last customer in a triangular deal. Reverse charge, non-EU supplier (0%) files them there, even though the supplier is in the EU.

When a received e-invoice is marked reverse charge, Arvello picks the code from the supplier's VAT number: a number from outside the EU gets Reverse charge, non-EU supplier (0%), an Estonian one Reverse charge, Estonian supplier (0%) (see Special VAT cases), and any other Reverse charge, EU supplier (0%). You can change it on the draft before you approve it.

Two more reverse charges are covered in Special VAT cases: buying from an Estonian business under the domestic reverse charge, and the reverse charge at a reduced rate for things Estonia taxes at 9%.

Non-deductible VAT on meals and entertainment

The VAT Act doesn't let a company deduct the VAT on what it spends receiving guests, or on feeding or housing its own staff (§ 30(1)). A client dinner, a team lunch, catering at a company event, or a hotel for a visiting partner all fall under it. The VAT on those invoices is part of the cost, even though the supplier charged it.

Code these lines VAT not deductible (§ 30) at the rate on the receipt: 24% for meals, 13% for accommodation. Arvello then:

• records the VAT the supplier charged, so the expense matches the receipt
• books that VAT to the line's expense account instead of VAT receivable
• leaves it off line 5 of the KMD, so it isn't reclaimed
• leaves the invoice out of Part B of the KMD INF annex, which lists only invoices whose VAT you deduct

A €100 dinner with €24 VAT is €124 of cost: nothing goes to VAT receivable and nothing to the return.

Accommodation on a business trip is the exception: its VAT stays deductible (§ 30(2)), so a hotel for an employee travelling for work keeps Accommodation (13%). One invoice can mix both — a hotel bill with the room on Accommodation (13%) and a client dinner on VAT not deductible (§ 30, 24%). Arvello then deducts only the room's VAT, and when the invoice is listed in Part B of the KMD INF annex (a supplier registered for VAT in Estonia whose invoices for the month reach €1,000 excluding VAT), it carries exception code 11, which marks VAT deducted in part.

When you categorise a bank payment as Meals & Entertainment, it gets this code by default. On an expense, Arvello suggests the code when a line's description looks like a meal (restaurant, lunch, dinner, café, catering, or the Estonian words for them) and lets you switch with one click. It's always your choice per line. If your company isn't VAT-registered, nothing changes: you can't deduct VAT anyway, so expenses are recorded with Not subject to VAT at the amount you paid.