Value Added Tax (VAT) is a consumption tax imposed by the state, paid by persons registered as VAT liable, either due to meeting the liability threshold or voluntarily registering. In Estonia, an economic operator is required to register for VAT purposes when their taxable supply exceeds €40,000, calculated from the beginning of the year.
VAT-liable persons in Estonia must pay VAT on various transactions, including:
- Sales supplies,
- Goods and services purchased from foreign entrepreneurs under the reverse charge mechanism,
- Goods imported into Estonia, and
- Goods purchased from other taxable persons within Estonia that are subject to internal reverse charge.
Additionally, VAT-registered persons are entitled to deduct input VAT on their business expenses.
Upcoming VAT Rate Changes in 2025
Estonia is introducing significant changes to its VAT rates in 2025, affecting businesses and consumers alike. These amendments to the VAT Act will take effect in two stages:
- From 1 January 2025:
- The VAT rate for accommodation services and accommodation services with breakfast will increase from 9% to 13%.
- The VAT rate for press publications will rise from 5% to 9%.
- From 1 July 2025:
- The standard VAT rate will increase from 22% to 24%, applicable until 31 December 2028.
As of 1 July 2025, the VAT rates in Estonia will be:
- Standard rate: 24%,
- Reduced rates: 13%, 9%, and 0%.
These changes are part of Estonia's efforts to adjust its tax framework to meet economic demands and fiscal targets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
