VAT registration

VAT registration in Estonia is not automatic when you set up a company.  Until you register, you cannot deduct input VAT on goods or services bought for business purposes.

This article explains the rules for VAT registration in Estonia and helps you understand:

• when VAT registration is mandatory and when it is optional,
• how to apply for a VAT number,
• your main obligations after registration, and
• how VAT applies to international transactions.

VAT registration threshold

The turnover threshold for mandatory VAT registration is EUR 40,000, calculated from the beginning of a calendar year.

Before reaching this threshold, VAT registration is optional. Whether voluntary registration is beneficial depends mainly on:

• how much VAT the company pays on goods and services it buys, and
• whether its clients are private individuals or VAT-registered businesses.

Being VAT-registered also means:

• monthly VAT reporting, and
• in most cases, higher accounting costs in Estonia.

How the threshold is calculated

Only the sales where Estonia is the place of supply under EU VAT rules count toward the threshold for VAT registration obligation in Estonia. This depends on the type of goods or services you sell, not on where you or your company are located.

The following sales are included when calculating the Estonian VAT registration threshold:

• Goods located in Estonia at the time of sale, including goods sold from a warehouse in Estonia.
• Goods that are delivered from Estonia, even if the customer is located in another country.
• Services supplied in Estonia under EU VAT place-of-supply rules, such as:
  • Services physically performed in Estonia
  • Events, training, or activities that take place in Estonia
  • Short-term rental of goods or property located in Estonia.

Examples of sales that do not count toward the Estonian VAT threshold

• B2B services sold to foreign VAT-registered companies, where the place of supply is the customer’s country and the reverse-charge mechanism applies.
• Digital services sold to EU consumers, where VAT is due in the consumer’s country (often reported via the OSS scheme).
• Goods sold and delivered outside Estonia, where the goods do not pass through Estonia at any point.
• Sales that are taxable entirely in another country, even if the company is registered in Estonia.

Only the part of your turnover that falls under Estonian place-of-supply rules is relevant for determining whether VAT registration in Estonia is mandatory.

Voluntary VAT registration before the threshold

Your company may apply for VAT registration voluntarily before it has reached the 40,000 EUR threshold. Voluntary registration is only possible when your business has a clear connection to Estonia under EU VAT rules. This means that at least some of your goods or services must have Estonia as their place of supply, or your activity must otherwise be clearly linked to Estonia.

Situations where voluntary registration may be useful

• You work mainly with EU VAT-registered B2B clients
• You wish to deduct input VAT on business expenses
• You need a VAT number to access online marketplaces, platforms or suppliers that require one

Connection to Estonia: what EMTA looks for

To approve voluntary registration, EMTA must be able to confirm that your business activity is legitimate, economically justified, and sufficiently tied to Estonia. They may ask for:

• A description of your business model
• Contracts, agreements, or sample invoices
• Proof of economic activity (e.g., website, platform accounts, bank statements)
• Information showing why Estonia is the correct place of VAT registration under EU VAT rules

Examples of insufficient connection to Estonia

Voluntary VAT registration is generally not approved when

• An Estonian-registered company has no employees in Estonia, the e-resident board member is based in another EU country, clients are located in other EU countries, and services are provided outside Estonia. In this case, the place of supply is generally the country where the services are performed, not Estonia. 
• An Estonian company sells or intermediates goods that do not move through Estonia, are not purchased from Estonia, and are sold from another EU country. This turnover is taxable in that other country, and Estonian VAT registration is not needed. 

• A company is registered in Estonia but all its transactions are taxable only in other countries. In this case, VAT obligations must be assessed with the tax authority of the relevant country. 

  This also applies to companies planning to use the OSS scheme: if the e-resident and the activity are based outside Estonia, VAT and OSS registration must be done in the country of establishment, not in Estonia. 

Examples of sufficient connection to Estonia

Voluntary VAT registration may be justified when:

• A company is registered in Estonia and has employees working in Estonia, pays salaries, declares and pays labour taxes in Estonia, and provides services from Estonia. 
• A company sells or intermediates goods that are purchased in Estonia, move through Estonia, or are stored in Estonia, for example in a warehouse located in Estonia, with sales taking place from Estonia. 

Voluntary VAT registration can only be granted when this connection to Estonia is clearly demonstrated. 

How to register for VAT

To register as a VAT payer in Estonia, submit an application to the Estonian Tax and Customs Board via the e-services environment e-MTA. The application can also be submitted through the e-Business Register, by email, at a service bureau, or via a notary.

What to know

• There is no state fee for VAT registration.
• The application must be digitally signed by a management board member or an authorised representative.

After approval

• The company receives a notification in e-MTA.
• The VAT number becomes visible in e-MTA.
• The VAT number is automatically published in the Business Register.

A decision is typically issued within five business days. If approved, the company is registered as a taxable person from the application date.

An Estonian VAT number:

• starts with the prefix EE,
• followed by nine digits (for example: EE123456789).

VAT obligations after registration

The following assumes that you have established an Estonian OÜ, are registered for VAT and provide services to your clients.

Charge VAT

Services provided in Estonia (B2B or B2C)

When you issue invoices to Estonian customers (both companies and individuals), you must charge Estonian VAT at the standard 24% rate, regardless of where the service provider is located. 

Visit Estonian Tax and Customs Board website for information on reduced or zero rates. 

Services provided to customers outside Estonia (B2B)

When you issue invoices to corporate customers (business-to-business, B2B) in other EU Member States or in third countries, you must:

• include the customer’s VAT registration number on the invoice, and
• add a reference to the reverse charge mechanism

In this case:

• you apply 0% VAT on the invoice, and
• the customer accounts for and reports VAT by self-assessment in the country that issued their VAT identification number.

Services provided to customers outside Estonia (B2C)

When you provide services to final consumers (business-to-consumer, B2C) in other EU Member States or in third countries, VAT treatment depends on EU place-of-supply rules and the type of service provided.

• In many cases, Estonian VAT applies.
• In other cases, you may be required to register for VAT in the country where the final consumer is located and comply with local VAT rules.

The applicable VAT treatment is determined by place-of-supply rules set out in VAT law. The Estonian Tax and Customs Board provides an overview of these rules and service-specific guidance on their website.

Deduct input VAT and VAT refunds

If your company provides services that are entirely taxable, then you can deduct VAT paid on the purchase of goods and services on all costs related to your business activities aimed at making taxable supplies (with a couple of exceptions to the general rule).

 If at the end of the month, you have paid more input VAT than you have added to your taxable supply, then after official approval from the Tax Authorities, these funds will be released to your prepayment account and you can use them to cover other tax-related liabilities or apply for a refund.

Reverse charge obligations

As a VAT-registered taxable person, your company must calculate and pay VAT on:

• goods and services purchased under the reverse charge mechanism from other EU Member States and from third countries.

In some limited cases, goods purchased from another Estonian VAT-registered person may also be subject to reverse charge (for example, scrap metal).

VAT reporting and deadlines

• The VAT taxable period is one month.
• VAT must be declared and paid by the 20th day of the following month.
• VAT returns are submitted via the e-Tax/e-Customs online environment.

Reporting obligations include

• KMD – the monthly VAT return;
• KMD INF – an annex listing domestic sales and purchase invoices with counterparties exceeding EUR 1,000 per month;

• VD return – a monthly report of services supplied to VAT-registered customers in other EU Member States, also due by the 20th day of the following month.