If your Estonian company sells to customers in other EU countries — or buys from suppliers there — you need to understand how VAT works across borders. The rules are different for business customers (B2B) versus consumers (B2C), and getting it wrong means either overcharging your clients or owing VAT you didn't collect.
B2B Services: The Reverse Charge
When you sell services to a VAT-registered business in another EU country, the general rule is straightforward: you don't charge Estonian VAT. Instead, your customer accounts for VAT in their own country through the reverse charge mechanism.
In practice:
- You verify your customer's VAT number through VIES (the EU VAT Information Exchange System)
- You issue an invoice with EUR 0 VAT and a note referencing the reverse charge (Article 196, EU VAT Directive)
- Your customer self-assesses VAT in their country and (usually) deducts it immediately — net effect for them is zero
- You report the sale on KMD lines 3 and 3.1 and the EC Sales List (Form VD)
The critical step is VIES verification. If your customer's VAT number is invalid or you skip the check, the reverse charge doesn't apply and you may need to charge Estonian VAT at 24%.
When You're the Buyer
The reverse charge works both ways. When your Estonian company buys services from an EU supplier:
- The supplier invoices you without their local VAT
- You self-assess Estonian VAT on the purchase: the taxable value goes on the KMD line for its rate, usually line 1 (24%), and on the informative line 6, so the VAT is part of your output VAT on line 4
- You simultaneously claim the input VAT deduction on KMD line 5
- Net VAT effect: zero (the two amounts cancel out)
This is sometimes confusing because it looks like extra paperwork for no tax consequence. But the reporting is mandatory — it ensures the transaction is visible to both countries' tax authorities.
B2C Sales to Other EU Countries: The EUR 10,000 Threshold
Selling to consumers (people, and organisations without an EU VAT number) in other EU countries follows different rules. Two kinds of sale count towards one EU-wide threshold of EUR 10,000 a calendar year:
- Goods you ship to them from Estonia (intra-EU distance sales)
- Telecommunications, broadcasting and electronically supplied services, such as software, streaming and online courses
Other services to consumers, such as consulting delivered from Estonia, don't count towards the threshold and generally keep Estonian VAT.
Up to EUR 10,000: as long as these sales, across all EU countries together, didn't go over EUR 10,000 last calendar year and don't go over it this year, Estonian VAT rules apply. If your company is VAT registered, you charge Estonian VAT and report the sales on your KMD (the monthly VAT return) as usual.
Over EUR 10,000: from the sale that takes this year's total over EUR 10,000, VAT is due in each customer's country, at that country's rate. Earlier sales in the year aren't affected. In 2026, standard rates range from 17% in Luxembourg to 27% in Hungary, and most countries also have reduced rates for some goods and services. Because last year's total counts too, the customer's country's VAT then applies for the whole of the following year as well. This is the case even if your company isn't registered for VAT in Estonia.
Opting in: below the threshold, you can choose to charge the customer's country's VAT anyway. That choice binds you for at least two calendar years.
The threshold is only available to companies established in Estonia alone. If your company has a branch or other fixed establishment in another EU country, it can't use it.
The One-Stop Shop (OSS)
Once VAT is due in other EU countries, there are two ways to pay it: register for VAT in each country you sell to, or use the One-Stop Shop (OSS). Its Union scheme lets you declare the VAT for every other EU country on one quarterly return in e-MTA, the online portal of the Estonian Tax and Customs Board (EMTA). OSS is voluntary. The main rules:
- It needs Estonian VAT registration. Only a company registered for VAT in Estonia (with a KMKR number, your Estonian VAT number) can use OSS. A company that isn't registered and has gone over the threshold either registers in Estonia and joins OSS, or registers for VAT in each country it sells to.
- When it starts. OSS applies from the first day of the quarter after you apply. If you've already made a sale it covers, applying by the 10th of the month after that sale lets it apply from that sale.
- A quarterly return with a fixed deadline. You file the return and pay the VAT by the last day of the month after the quarter: 30 April, 31 July, 31 October and 31 January. The date doesn't move when it falls on a weekend or public holiday.
- Nil returns. A quarter with no OSS sales still needs a return.
- It stays off your KMD. OSS sales don't appear on your KMD at all. Estonian VAT on your own costs is still deducted on the KMD as usual.
- In euros. Sales in another currency are converted at the European Central Bank rate for the last day of the quarter, or the next day a rate is published.
- Corrections go in a later return. A filed OSS return can't be amended. Mistakes, credit notes and other changes to an earlier quarter go into the corrections section of a later return, up to three years after the original return's deadline.
- Countries don't net against each other. Each country's balance stands alone. In EMTA's own example, a credit note leaves Poland at minus EUR 20 while Finland is owed EUR 80: you pay EUR 80, not EUR 60, and Poland refunds the EUR 20 directly to your bank account.
- Records are kept for 10 years from the end of the year of the sale, longer than the usual 7 years for accounting records.
Selling Imported Goods: The Import One-Stop Shop (IOSS)
If a supplier outside the EU ships low-value goods straight to your customers in the EU (dropshipping is the typical case), the scheme built for this is the Import One-Stop Shop (IOSS).
IOSS covers distance sales of goods sent directly from outside the EU to consumers in any EU country, Estonia included, in consignments with an intrinsic value of up to EUR 150: the goods' price without VAT, leaving out transport and insurance when they're charged separately. Excise goods such as alcohol and tobacco are excluded.
Under IOSS, you charge VAT at the customer's country's rate when they pay, the parcel clears customs under your IOSS number without import VAT, and you declare the VAT on a monthly return. IOSS is voluntary: without it, the customer pays the import VAT when the parcel arrives.
- No VAT registration needed. Unlike OSS, IOSS is open to any business established in Estonia, registered for VAT or not. You apply in e-MTA yourself, without an intermediary, and the scheme applies from the day EMTA issues your IOSS number (IM followed by 10 digits).
- All or nothing. Once registered, IOSS covers all your qualifying sales, not just some of them.
- The tax point is when payment is accepted. That's the day the customer's payment, or their commitment or authorisation to pay, comes in, not the invoice date. It decides both the VAT rate and the month the sale is declared in.
- A monthly return. You file it and pay the VAT by the last day of the following month. The date doesn't move for weekends or public holidays, and a month with no IOSS sales still needs a nil return. Corrections and currency conversion work as for OSS, month by month, and IOSS records, including each sale's order or consignment number, are also kept for 10 years.
- What IOSS doesn't cover. Goods first stored in an EU warehouse and shipped from there are ordinary EU sales (OSS distance sales, or domestic sales), not IOSS. IOSS also doesn't cover consignments over EUR 150, or sales through a marketplace that acts as the deemed supplier: the marketplace declares that VAT, not you.
Intra-Community Supply of Goods
If you sell physical goods to a VAT-registered buyer in another EU country, this is an intra-Community supply — zero-rated (0% VAT), provided:
- The buyer has a valid VAT number (verified via VIES)
- The goods physically leave Estonia to another EU member state
- You have proof of transport (shipping documents, etc.)
You report these sales on:
- KMD line 3 (all supplies at 0%)
- KMD line 3.1 (intra-Community supply of goods and services — a subset of 3)
- KMD line 3.1.1 (goods specifically — a subset of 3.1)
- EC Sales List (Form VD), column 3
Intra-Community Acquisitions (When You Buy)
When your Estonian company acquires goods from another EU country:
- The supplier charges 0% VAT (they're making an intra-Community supply)
- You self-assess Estonian VAT on the purchase: the taxable value goes on the KMD line for its rate, usually line 1 (24%), and on the informative line 6 (total) and line 6.1 (goods)
- You deduct the input VAT on KMD line 5 if the goods are for taxable business use
Triangulation (Three-Way Transactions)
A simplified scheme exists for three-party transactions across three EU countries. For example: your Estonian company buys goods from a French supplier, but the goods ship directly to a German customer. The key conditions: all three parties must be VAT-registered in three different EU states, and transport must be arranged by the seller or intermediary — not the final buyer.
The simplification means the intermediary (your Estonian company) doesn't need to register for VAT in the destination country. Instead:
- The French supplier zero-rates the supply to you
- You issue an invoice to the German buyer with a "reverse charge" notation
- The German buyer self-assesses VAT
- You report the transaction on Form VD, column 4
The reverse charge notation on the invoice is essential — EU case law has confirmed that omitting it can invalidate the simplification.
Exports Outside the EU
Selling goods or services to customers outside the EU is generally zero-rated (0% VAT). For goods, you need customs export documentation. For services to non-EU businesses, the place of supply is typically the customer's country, so no Estonian VAT applies.
For services to consumers outside the EU, it depends on the service. Many common ones are supplied where the consumer is, so no Estonian VAT applies: consulting, accounting, legal and engineering services, translation, advertising, data processing and information services, licensing intellectual property, and electronically supplied services such as software and streaming (KMS § 10(5)). These sales still go on KMD line 3, as 0% supplies.
Other services to non-EU consumers follow the general rule, which puts the place of supply in Estonia as the supplier's country, so Estonian VAT applies. Services tied to a location, such as work on property or events, follow their own rules.
The EC Sales List (Form VD)
This monthly report is filed alongside your KMD by the 20th of the following month. It's required whenever you make intra-Community supplies and lists:
- Your customer's VAT number and name
- The value of intra-Community goods supplied
- The value of triangular transaction goods (if you're the intermediary)
- The value of intra-Community services supplied
Late filing can result in penalties of up to EUR 3,200.
Looking ahead: from April 2027, the KMD moves to data-based filing. Instead of the return form, you submit the transaction data behind it, and Form VD's data is filed as part of the VAT return rather than as a separate report.
Common Pitfalls
Forgetting VIES verification. Always verify your B2B customer's VAT number before applying the reverse charge. A screenshot or printout of the VIES result is good practice.
Misclassifying B2B as B2C. If your customer is a business but doesn't provide a valid VAT number, you may need to treat the transaction as B2C. That means Estonian VAT or, for goods and electronic services once you're over the EUR 10,000 threshold, the customer's country's VAT.
Losing track of the EUR 10,000 threshold. Goods shipped to consumers in other EU countries and electronic services sold to them add up to one EU-wide total, and last year's total counts as well as this year's. Once it goes over EUR 10,000, the customer's country's VAT applies from that sale on. You can't wait until year-end to switch.
Skipping nil returns. An OSS return is due every quarter, and an IOSS return every month, even with no sales under the scheme. If EMTA sends reminders about unfiled OSS returns for three quarters in a row, and none of those returns is filed within 10 days of its reminder, that leads to exclusion, with a two-year ban from both OSS and IOSS in every EU country.
Incomplete KMD reporting. Cross-border transactions often need to appear on multiple KMD lines (e.g., line 3, line 3.1, and line 3.1.1 for goods). Missing a line doesn't change your tax liability but can trigger queries from EMTA.
Leaving "reverse charge" off a triangulation invoice. Without it, the tax authority can refuse the simplified scheme and require you to register for VAT in the destination country.
OSS and IOSS in Arvello
Arvello supports both schemes, working from your own books:
- Threshold tracking. Once you've invoiced consumers in other EU countries, a dashboard card shows this year's and last year's sales to them against the EUR 10,000 threshold, and the new-invoice form warns you when a sale would take you over it or you're already past it. The figure is an estimate: it counts every sale to a consumer in another EU country, so it can come out higher than the total the threshold actually counts.
- OSS invoicing. Once you've recorded your OSS registration, invoices to consumers in other EU countries use OSS tax codes at the customer's country's standard rate, or a reduced rate you choose. The VAT is booked to a separate OSS liability account and kept off your KMD. Arvello's OSS support is for companies established in Estonia alone, the same condition the threshold has.
- The quarterly OSS return. Arvello computes each quarter's return from your invoices and credit notes, per country and rate, including corrections to earlier quarters. You approve it and download the XML file to upload in e-MTA.
- IOSS. IOSS sales are entered in the invoice form, with the payment date and order number, or imported from a CSV file of orders. The monthly IOSS return file is prepared the same way as the OSS one.
- Deadlines and payments. Both returns' deadlines appear on your dashboard, and Arvello emails a reminder while a return is still unfiled. OSS and IOSS payments to EMTA, and refunds from other countries, are matched in banking.
The Help Centre has the details: EU One-Stop Shop (OSS) and EU import scheme (IOSS).
