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.
Only turnover whose place of supply is Estonia counts. It includes sales of goods and services subject to VAT (including zero-rated sales) and regular VAT-exempt real estate, insurance and financial turnover, but excludes the transfer of fixed assets and occasional real estate or financial transactions. Most services you sell to businesses registered for VAT elsewhere in the EU, or to businesses outside the EU, have their place of supply in the customer's country, so they don't count.
If all of your turnover is VAT-exempt or taxed at 0% (other than intra-EU supplies of goods), there's no obligation to register, however large it is. An unregistered company that buys services such as software, advertising or consulting from a foreign business may still have to register as a limited taxable person (piiratud maksukohustuslane). It then pays Estonian VAT on those purchases but can't deduct it.
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, except for businesses from other EU countries that use the EU small business scheme below.
EU small business scheme
Since 1 January 2025, a company established in Estonia can use another EU country's VAT exemption for small businesses instead of registering for VAT there. Two conditions apply. First, its turnover across the whole EU, Estonia included, must not have exceeded EUR 100,000 last calendar year and must not exceed it this year. Second, its turnover in that country must stay within the exemption threshold that country sets for its own small businesses, and that country's rules decide what happens if you go over it. Going over it last year rules the exemption out for this year. An overrun this year of up to 10% keeps the exemption until the year ends by default, but a country can allow more or end the exemption straight away. You notify EMTA in advance in e-MTA, receive a VAT identification number ending in EX, and report your turnover every quarter. Input VAT on costs related to those exempt sales can't be deducted in Estonia.
The scheme only matters for sales that are taxed in another EU country and would otherwise mean registering for VAT there. Sales to businesses in other EU countries under the reverse charge don't need it.
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 | Transactions taxed at 24% (standard rate) | Your domestic sales at the standard rate, plus reverse-charged purchases taxed at 24% |
| Line 2 | Taxable supply at 9% (reduced rate) | Only if selling books, press, medicines |
| Line 2² | 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 2² |
| Line 5 | Total input VAT to deduct | VAT paid on business purchases |
| Line 6 | Intra-EU acquisitions and services received (for information) | The taxable value of goods and services bought from EU businesses under the reverse charge |
| Line 12 | VAT payable | If output > input |
| Line 13 | VAT overpaid | If input > output |
A reverse-charged purchase goes on the line for its own rate, just as a sale would: most services are taxed at 24% (Line 1), but books or e-books bought from another EU country, for example, go on Line 2 at 9%.
Lines 12 and 13 are mutually exclusive — you either owe VAT or you're owed a refund. Lines 10 and 11, just before them on the form, are for adjustments such as the year-end recalculation of input VAT you could only partly deduct; most small companies rarely need them.
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 taxable value on the KMD line for its rate (Line 1 for the 24% most services carry) and again on the informative Line 6; the self-assessed VAT is therefore part of your output VAT on Line 4
- 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
A VIES (VAT Information Exchange System) check is the seller's job, not the buyer's: your supplier checks that your Estonian VAT number is valid before invoicing you without VAT. Your own duty to self-assess doesn't depend on checking the supplier in VIES. The one exception is a supplier from another EU country that uses the EU small business scheme and puts its VAT number ending in EX on the invoice: then there's nothing to self-assess.
Foreign VAT on an invoice is never deducted on your KMD. If a supplier charged it by mistake, the fix is a corrected invoice. VAT properly charged abroad, such as on a hotel stay, can be reclaimed through the EU VAT refund procedure in e-MTA.
When you're the seller, checking your customer's VAT number in VIES is your job: see Cross-Border VAT for Estonian Companies.
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 hosting guests, and on meals or accommodation for your own staff (accommodation on business trips is the exception)
- 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 1 | Transactions taxed at 24% | EUR 200 (the Irish SaaS subscription, self-assessed) |
| 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 48 (24% of Line 1; the sales at 0% add nothing) |
| 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 (for information) | EUR 200 (the taxable value only) |
| Line 13 | 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 4, because the EUR 200 is on Line 1) 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 from sales to offset — so the input VAT results in a refund. EMTA doesn't pay it out automatically: the overpayment sits on your company's prepayment account, where it can cover other taxes, until you apply in e-MTA to have it refunded.
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 to other EU countries | Customer's country (once over the EUR 10,000 EU-wide threshold) | Customer's country's rate, through OSS or a VAT registration there |
| B2C digital services to other EU countries (up to the EUR 10,000 threshold) | Estonia | Estonian VAT at 24%, as on domestic sales |
| B2C services to non-EU consumers: consulting, legal, accounting, advertising, data processing, electronically supplied services and the other taxable services listed in KMS § 10(5) | Outside the EU | No Estonian VAT (0%, reported on KMD Line 3) |
The EUR 10,000 threshold is one EU-wide total: digital services and goods shipped to consumers in all other EU countries count together. Estonian VAT continues only while neither last year's nor this year's total has gone over it, and only for companies established in Estonia alone.
For most B2B service companies (freelancers, consultants, SaaS), sales to other EU businesses are zero-rated with reverse charge, and sales to businesses outside the EU carry no Estonian VAT. Estonian VAT at 24% typically applies only to domestic sales and to some sales to consumers: services that follow the general rule, and digital services and goods sold to consumers elsewhere in the EU while you're under the EUR 10,000 threshold.
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 puts a tax code on every sales and purchase line. It suggests a default, for example from the client's country and VAT number, and you can change it on any line. 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.
Selling to consumers in other EU countries? Arvello also estimates those sales against the EUR 10,000 threshold, for this year and last. Once you've recorded your OSS registration, your invoices to them use the customer's country's standard rate, or a reduced rate you choose, and Arvello prepares the quarterly OSS return from your books, corrections to earlier quarters included, as an XML file to upload in e-MTA. For goods shipped straight from outside the EU, it prepares the monthly IOSS return the same way. Cross-Border VAT for Estonian Companies explains how both schemes work.
