For more than a decade, Estonia’s tax system has been recognized as the best in the Organization for Economic Cooperation and Development (OECD) for its simplicity and business friendliness. However, value-added tax (VAT) rules can still be confusing to businesses new to the country. Rates evolve constantly, registration thresholds are easy to cross, and compliance expectations are precise.

Below, we’ll explain which Estonia VAT rates apply to different goods and services, who needs to register for VAT, how refunds work, and how to calculate VAT correctly as you scale across borders.

What’s in this article?

• What is the Estonia VAT rate?
  
• What are the reduced VAT rates in Estonia?
  
• Who needs to register for VAT in Estonia?
  
• What is an Estonian VAT number?
  
• How does VAT compliance work in Estonia?
  
• How do VAT refunds work in Estonia?
  
• How do you calculate VAT in Estonia?
  
• How Stripe Tax can help
  

What is the Estonia VAT rate?

Estonia generally applies the standard VAT rate of 24%. This rate applies to the vast majority of goods and services used in Estonia, including consumer products, professional services, software, electronics, food, restaurant meals, and digital and physical business-to-consumer (B2C) and business-to-business (B2B) transactions.

Businesses should assume this rate by default unless a specific reduced rate or exemption applies as explained below.

What are the reduced VAT rates in Estonia?

Estonia has reduced VAT rate categories for certain goods and services, which can affect pricing, margins, and compliance.

13% VAT rate for accommodation

Accommodation services are taxed at a semi-reduced rate that sits between the standard and lowest tiers.

9% VAT rate

A lower VAT rate applies to goods and services Estonia treats as socially or culturally useful, including medicinal products, medical devices for people with disabilities, books and ebooks, educational literature, and press publications (e.g., newspapers and other periodicals).

Zero-rated

Some transactions are taxed at 0%: exports, intracommunity supplies (sales of goods between different EU member states), and certain supplies used for international transport, such as aircraft and ships. For these sales, VAT is not charged to the customer, but the sale is still considered taxable and businesses can reclaim any related input VAT.

VAT-exempt goods and services

Certain services deemed to be of a social nature fall entirely outside the VAT system, including postal services, most healthcare services, education, and insurance services, among other transactions. These supplies do not include VAT, and businesses generally cannot reclaim VAT on costs tied to exempt activities.

Zero-rated and exempt transactions might look similar on an invoice, but they behave differently. Zero-rated sales preserve your right to recover VAT on expenses, while exempt sales usually turn VAT into a real cost for the business.

Who needs to register for VAT in Estonia?

Whether you need to register for VAT in Estonia hinges in part on where your business is based.

Here are the rules regarding VAT registration in Estonia:

Estonian-established businesses

You must register for VAT once your taxable turnover exceeds €40,000 in a calendar year. Registration is required as soon as the threshold is exceeded. The threshold does not apply if your entire turnover consists of exempt or zero-rate goods and services, excluding intracommunity supplies of goods.

Businesses below the threshold can register voluntarily, which can be beneficial if you have meaningful VAT on startup costs that you want to recover.

EU businesses selling in Estonia

If you sell goods or digital services to Estonian consumers from another EU country and exceed the €10,000 EU-wide distance-selling threshold, you must charge Estonian VAT.

Other nonresident businesses from the EU, such as businesses selling B2B into Estonia or selling nondigital services, have no automatic VAT registration obligation until their supply in the EU exceeds €100,000. Other stipulations, outlined in Section 19 of the tax code, can also come into play.

Non-EU foreign businesses selling in Estonia

Nonresident, non-EU businesses must register upon their first taxable sale into Estonia. There is no VAT threshold for businesses outside the EU.

What is an Estonian VAT number?

An Estonian VAT number is an identifier inside the EU VAT system. In Estonia, it’s referred to as a Käibemaksukohustuslasena registreerimise (KMKR) number. VAT numbers are publicly verifiable, which helps tax authorities and trading partners confirm that a business is properly registered and eligible to participate in VAT-rated transactions. VAT numbers can be validated through the EU VAT Information Exchange System (VIES).

An Estonian VAT number starts with the country code, EE, and is followed by nine digits. The VAT number is issued after successful registration with the Estonian Tax and Customs Board.

How does VAT compliance work in Estonia?

Estonia’s VAT compliance framework is strict, predictable, and almost entirely digital.

Here’s what you need to know about VAT compliance:

• Monthly VAT returns: VAT-registered businesses must file a return every month, regardless of turnover size, reporting taxable sales, VAT charged, VAT paid on purchases, and the net amount to be paid or refunded.

• Filing deadline: VAT returns must be submitted by the 20th day of the month following the reporting period.

• Electronic filing: All VAT returns are filed through Estonia’s online tax portal, which is mandatory and fully digital. Paper filings are not accepted unless VAT registration is newer than 12 months, or if fewer than 5 invoices are included in the annex to the return.

• Payment and interest: In cases where incomplete or incorrect VAT returns result in underpayment, the tax authority can fine up to €32,000. On top of that, in case VAT returns are retroactively corrected and the payable VAT amount increases through the correction, late payment interest is accrued daily at a rate of 0.06%. If intentionally incomplete or incorrect VAT returns result in underpaid VAT (or incorrect refund claims) that exceed €40,000, businesses might be subject to criminal punishment.

• Recordkeeping requirements: Retain VAT records, including invoices and supporting documents, for at least seven years and keep them available electronically.

How do VAT refunds work in Estonia?

VAT refunds are especially important for export-heavy, fast-growing, or investment-heavy businesses operating in Estonia. VAT tied to exempt supplies generally cannot be reclaimed, which can materially affect businesses operating in sectors, such as healthcare or education.

Here’s how VAT refunds work in Estonia:

VAT-registered Estonian businesses

If the VAT you’ve paid on business expenses exceeds the VAT you’ve charged customers in a reporting period, you can claim a refund or carry the credit forward to offset future VAT liabilities. Refund claims are made through the regular monthly VAT return.

The tax authority might delay or audit a refund if the claim is unusually large or inconsistent with past filings, so make sure to keep all invoices, contracts, and proof of export or zero-rated transactions.

EU businesses without Estonian registration

Companies established in other EU countries can reclaim Estonian VAT through the EU cross-border VAT refund system, filing the claim via their home tax authority. Refund applications for a given calendar year must be submitted by September 30 of the following year, and minimum claim amounts apply depending on the claim period.

Non-EU businesses

Businesses established outside the EU can reclaim Estonian VAT only if their home country offers reciprocal VAT refunds to Estonian companies. Refund claims can be submitted directly to the Estonian tax authority and often require original invoices and, in some cases, a local representative to manage the process.

How do you calculate VAT in Estonia?

VAT calculation in Estonia shows up in a few different places: pricing, invoicing, and monthly reporting. Getting these right depends on knowing which rate applies and whether you’re working with VAT-inclusive amounts.

Here’s how you calculate and apply VAT in Estonia:

• Adding VAT to a net price: To calculate VAT on a VAT-exclusive price—which is not prevalent in the EU, as the VAT-inclusive price has to be shown to buyers—multiply the net amount by the applicable VAT rate and add it to the total. For example, a €100 sale taxed at the standard 24% rate results in €24 of VAT and a total price of €124.

• Extracting VAT from a gross price: When a price already includes VAT, divide the total by one plus the VAT rate to find the net amount. With a 24% rate, that means dividing by 1.24 to separate the taxable base from the VAT portion.

• Handling reduced and zero rates: Reduced rates follow the same math with a different percentage, while zero-rated transactions add no VAT but still need to be tracked and reported as taxable sales.

• Logging reverse-charged transactions: For services or goods subject to reverse charge, no VAT is charged on the invoice. But the transaction must still be reported correctly so the customer can self-account for VAT.

• Calculating VAT for returns: Each reporting period, you total the VAT charged on sales and subtract the VAT paid on business expenses. The result determines whether you owe VAT or are due a refund.

When selling across borders, the correct VAT rate depends on the customer’s location, VAT status, and the type of product or service supplied, which makes manual calculation harder to scale. Stripe provides VAT calculation tools that automatically apply the correct VAT rate at checkout based on transaction details and customer location.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, VAT, and GST on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.