The standard VAT rate in Estonia is now 24% — up from 22% since 1 July 2025. If your OÜ sells goods or services, VAT is likely the first tax obligation you encounter. But many company owners — especially e-residents selling B2B services — are unsure when they need to register, how the monthly KMD return works, and what input VAT they can actually recover.
This post covers the 2026 VAT rates, the registration threshold, a simplified KMD walkthrough, how reverse charge works for EU services, and what you can reclaim.
VAT Rates in 2026
| Category | Rate | Examples |
|---|---|---|
| Standard | 24% | Most goods and services |
| Accommodation | 13% | Hotels, guesthouses |
| Reduced | 9% | Press, periodicals, books, medicines |
| Zero | 0% | Exports outside EU, intra-EU supply of goods |
| Exempt | N/A | Financial services, education, healthcare, residential rental |
The standard rate increased from 20% to 22% on 1 January 2024, then to 24% on 1 July 2025. The accommodation rate went from 9% to 13% on 1 January 2025. Press and periodicals went from 5% to 9% on 1 January 2025.
For a full timeline of rate changes, see Estonian Tax Rates 2026.
When to Register for VAT
Mandatory registration
VAT registration becomes mandatory when your company's taxable turnover exceeds EUR 40,000 in a calendar year. You must register within 3 business days of exceeding the threshold.
Taxable turnover includes all sales of goods and services subject to VAT (including zero-rated sales), but excludes the transfer of fixed assets and occasional financial or real estate transactions.
Voluntary registration
You can register voluntarily before reaching the EUR 40,000 threshold. This makes sense when:
- Your customers are mostly VAT-registered businesses (they deduct the VAT anyway, so it doesn't affect your pricing)
- You have significant input VAT to recover (e.g., purchasing equipment, SaaS tools, professional services)
- You want to appear as an established business on invoices
Once registered, you are committed to filing monthly KMD returns — even in months with zero activity.
Non-resident businesses
If your company makes taxable supplies in Estonia and is not established here, registration is mandatory regardless of turnover. There is no EUR 40,000 threshold for non-residents.
EU small business scheme
From 2025, a cross-EU small business scheme allows businesses with total EU-wide turnover below EUR 100,000 to benefit from their home-state VAT exemption across EU Member States. If your Estonian company qualifies and you only sell below threshold amounts, this may be relevant.
Filing the KMD (VAT Return)
The KMD (käibemaksudeklaratsioon) is filed monthly via e-MTA by the 20th of the following month. Payment of any VAT owed is due on the same date.
Key KMD lines explained
The KMD has many lines, but most small service-based companies only use a handful:
| Line | What it captures | Typical use |
|---|---|---|
| Line 1 | Taxable supply at 24% (standard rate) | Your domestic sales at the standard rate |
| Line 2 | Taxable supply at 9% (reduced rate) | Only if selling books, press, medicines |
| Line 2.1 | Taxable supply at 13% | Only if providing accommodation |
| Line 3 | Supply at 0% rate | Exports and intra-EU supplies |
| Line 3.1 | Of which: intra-EU supply to other EU businesses | B2B sales to VAT-registered EU buyers |
| Line 4 | Total output VAT | Calculated: 24% of Line 1 + 9% of Line 2 + 13% of Line 2.1 |
| Line 5 | Total input VAT to deduct | VAT paid on business purchases |
| Line 6 | Intra-EU acquisitions and services received | Reverse-charge transactions (self-assessed VAT) |
| Line 10 | VAT payable | If output > input |
| Line 11 | VAT overpaid | If input > output |
Lines 10 and 11 are mutually exclusive — you either owe VAT or you're owed a refund.
KMD INF annex
Filed together with the KMD, the INF annex provides invoice-level detail for transactions where the total per business partner in the period is EUR 1,000 or more (excluding VAT). Part A lists invoices issued; Part B lists invoices received.
Reverse Charge: EU B2B Services
This is where most e-resident freelancers and SaaS companies encounter VAT complexity. When your Estonian company receives services from a VAT-registered business in another EU country, the reverse charge mechanism applies.
How it works
- The EU supplier invoices you without VAT (they reference Article 196 of the EU VAT Directive)
- Your company self-assesses the Estonian VAT on the transaction
- You declare the purchase on KMD Line 6 (both the taxable value and the self-assessed VAT)
- You simultaneously deduct the same VAT as input on KMD Line 5 (if the service is used for taxable business purposes)
- The net VAT effect is zero — you charge yourself VAT and immediately deduct it
Why bother?
Even though the net effect is zero, both entries must appear on the KMD. Failing to declare the reverse charge — even when it nets to zero — is a compliance issue that EMTA can flag.
VIES validation
Before applying reverse charge, the supplier's EU VAT number should be verified through VIES (VAT Information Exchange System). If the number is not valid, the transaction cannot be treated as B2B with reverse charge — the supplier would need to charge their local VAT instead.
Input VAT Recovery
If your company is VAT-registered, you can recover the VAT paid on business purchases. This is one of the main benefits of voluntary registration.
What you can recover
Any VAT paid on goods or services used for taxable business purposes is deductible as input VAT. Common examples:
- Software subscriptions (SaaS tools, hosting, cloud services)
- Professional services (accounting, legal)
- Office equipment and computers
- Marketing and advertising costs
- Business travel (where VAT is charged)
What you cannot recover
- VAT on purchases used for VAT-exempt activities
- VAT on entertainment and hospitality (partially restricted)
- VAT on passenger cars used partly for personal purposes (50% deduction applies unless 100% business use is documented)
Passenger car rule
If your company owns or leases a passenger car, input VAT deduction is limited to 50% unless you can demonstrate and document that the car is used 100% for business. The KMD has specific lines (5.3 and 5.4) for reporting passenger car VAT.
Worked Example: Freelance Developer
An Estonian OÜ (VAT-registered) provides software development services. In March 2026:
Sales:
- EUR 5,000 to a German company (B2B, VAT-registered in Germany) — intra-EU supply of services
Purchases:
- EUR 200 SaaS subscription from an Irish company (B2B) — reverse charge applies
- EUR 100 office supplies from an Estonian shop (EUR 100 + EUR 24 VAT = EUR 124 total)
The KMD for March:
| KMD Line | Description | Amount |
|---|---|---|
| Line 3 | Supply at 0% rate | EUR 5,000 |
| Line 3.1 | Of which: intra-EU supply | EUR 5,000 |
| Line 4 | Total output VAT | EUR 0 (0% rate = no output VAT) |
| Line 5 | Total input VAT to deduct | EUR 72 (EUR 24 from office supplies + EUR 48 from reverse charge) |
| Line 6 | Intra-EU services received | EUR 248 (EUR 200 taxable value + EUR 48 self-assessed VAT at 24%) |
| Line 11 | VAT overpaid (refund) | EUR 24 |
The reverse charge on the Irish SaaS subscription:
- Taxable value: EUR 200
- Self-assessed VAT (24%): EUR 48
- This EUR 48 is both output (included in Line 6) and input (included in Line 5)
- Net effect of reverse charge: EUR 0
The EUR 24 refund comes from the office supplies input VAT. Since all sales were at the 0% rate (intra-EU B2B), there is no output VAT to offset — so the input VAT results in a refund.
EC Sales List (Form VD): The EUR 5,000 intra-EU service supply to the German company must also be reported on Form VD, filed by the 20th alongside the KMD.
Place of Supply: Where Is VAT Charged?
| Scenario | Place of supply | VAT treatment |
|---|---|---|
| B2B services to EU | Customer's country | No Estonian VAT — reverse charge |
| B2B services to non-EU | Outside EU | No VAT (export of services) |
| B2C services (general) | Estonia (supplier's country) | Estonian VAT at 24% |
| B2C digital services in EU | Customer's country (above EUR 10,000) | Customer's local rate (via OSS) |
| B2C digital services (below EUR 10k) | Estonia | Estonian VAT at 24% |
For most B2B service companies (freelancers, consultants, SaaS), sales to other EU businesses are zero-rated with reverse charge, and sales outside the EU carry no VAT obligation. Estonian VAT at 24% typically applies only to domestic sales and B2C sales.
Filing Deadlines
| Obligation | Deadline |
|---|---|
| KMD (VAT return) | 20th of the following month |
| KMD INF (invoice annex) | 20th of the following month (filed with KMD) |
| EC Sales List (Form VD) | 20th of the following month |
| VAT payment | 20th of the following month |
For a complete calendar of all Estonian tax deadlines, see Estonian Business Tax Deadlines.
Prepare Your KMD with Arvello
Arvello's VAT module tracks your sales and purchases with the correct VAT rate for each transaction. At month-end, the KMD is generated automatically — including reverse charge entries, the KMD INF annex, and Form VD for intra-EU supplies. Review the numbers and submit to e-MTA.
