Navigating VAT in Estonia: A Complete Guide
- matiannus
- May 16
- 12 min read
Updated: Aug 27
This guide is designed to help companies better understand VAT, GST, and Sales tax obligations for digital services, ordinary services, physical goods, and e-commerce, based on the latest regulations and best practices.
You’ll learn:
Where your business may have VAT or Sales tax obligations, depending on your business model and clients
The difference between Standard VAT and Limited VAT registration in Estonia
Which thresholds apply to your company
Our goal is to make VAT compliance straightforward so you can focus on running and growing your business.
Selling Goods Online (Distance Selling)
Distance selling refers to the online sale of physical goods via e-commerce marketplaces, dropshipping, print-on-demand platforms, or your own webshop. It assumes that goods do not transit through Estonia.
VAT Requirements (by Customer Type)
1. EU Consumers / EU Companies & Organizations without a VAT Number
(or if their VAT number cannot be verified in the VIES system)
Sales below €10,000 (total across all EU distance sales):
Use your Estonian VAT number.
Charge 24% Estonian VAT.
Report and pay VAT to the Estonian Tax Authority.
Deduct Estonian inbound VAT from suppliers.
⚠️ This threshold does not apply if you have a Permanent Establishment (PE) in another EU country (e.g., warehouse/storage).
Sales above €10,000 or if you have a PE abroad: You must charge the VAT rate of the customer’s country. To remit VAT, you can choose between:
Option A: Local VAT registration
Obtain a local VAT number in each EU country where you sell.
Submit local VAT reports under each country’s rules.
Advantage: If local suppliers (e.g., fulfilment centers) charge VAT, you can deduct it immediately on your local VAT return.
Important: Local VAT registration is mandatory if you have a PE in that country.
Option B: One-Stop Shop (OSS) system
Register once in Estonia and report all EU sales via the OSS return.
Advantage: No need for multiple VAT numbers in different EU countries.
Limitations:
OSS cannot be used in countries where you already have a local VAT number, a PE, or intra-country sales.
Example: Goods stored in Germany and sold to German consumers → you must register in Germany.
Input VAT paid in other EU countries cannot be deducted through OSS. Instead, you must apply for a VAT reclaim via the Estonian Tax Authority.
Refund minimum: €50
Refunds above €400 can be requested throughout the year
Processing time: 4–8 months (varies by country)
2. EU Companies with a Valid VAT Number (verified in VIES)
You can apply the reverse charge mechanism for B2B sales:
Invoice with 0% VAT.
Add a reverse charge note on the invoice.
Ensure the customer’s valid VAT number is included.
Your company must also hold a VAT number in the country where the goods are stored.
⚠️ If customer details or VAT numbers are missing/invalid, you must charge the local VAT rate of the country where goods are stored. In that case:
Collect and forward VAT to the local Tax Authority.
You may deduct locally paid VAT from your VAT liability.
3. Non-EU Consumers, Companies, or Organizations
Report sales on your Estonian VAT return with a 0% VAT rate.
A threshold of €40,000 applies.
⚠️ You are also required to comply with local VAT/GST/Sales Tax rules in the customer’s country.
Collect and remit taxes locally.
Usually requires a local tax service provider to handle registration and filings.
✅ Summary:
EU consumers (no VAT): Estonian VAT under €10k, customer’s country VAT above €10k.
EU businesses (with VAT): Reverse charge (0%) if details are valid; otherwise local VAT.
Non-EU customers: Report in Estonia (0%) + comply with local VAT/GST rules abroad.
Selling Digital Services
Digital services (also called TBE services – telecommunications, broadcasting, and electronic services) are services supplied automatically over the internet with little or no human intervention. These include, but are not limited to:
SaaS (software as a service) subscriptions
Mobile app subscriptions
Software downloads, updates, and maintenance
Online platform services (for consumers, merchants, freelancers)
Digital content (images, videos, text, information)
Music, films, and games
Broadcasting, influencer services, referrals (e.g. social media channels)
Website supply and hosting
Online advertising (Google Ads, AdWords, etc.)
Distance education or training by pre-recorded classes
⚠️ Important: Services delivered personally (via phone, video call, email, or chat) are not digital services. These are considered ordinary services.
VAT Requirements by Customer Type
1. EU Consumers / EU Companies & Organizations without a VAT Number
(or if their VAT number cannot be verified in the VIES system)
Sales below €10,000 (combined EU sales of goods + services):
Use your Estonian VAT number.
Charge 24% Estonian VAT.
Report VAT to the Estonian Tax Authority.
Sales above €10,000:
Charge the VAT rate of the customer’s EU country.
Choose one of two options to remit VAT:
Option A: Local VAT registration
Obtain a VAT number in each EU country where you sell.
File local VAT returns under local law.
Advantage: Deduct inbound VAT from suppliers immediately.
Mandatory if you have a Permanent Establishment (PE) in that country.
Option B: One-Stop Shop (OSS)
Report all EU sales via OSS in Estonia.
Advantage: One single VAT registration for all EU distance sales.
Limitations:
Cannot use OSS in countries where you have a local VAT number, PE, or intra-country sales.
Input VAT paid abroad cannot be deducted in OSS → instead, apply for VAT reclaim through the Estonian Tax Authority.
Refund minimum: €50; above €400 can be requested anytime.
Processing time: typically 4–8 months.
2. EU Companies with a Valid VAT Number (verified in VIES)
If you hold an Estonian VAT number:
Apply the reverse charge mechanism → invoice with 0% VAT, include a reverse charge note, and ensure your customer’s valid VAT number is listed.
If reverse charge is not used → charge 24% Estonian VAT.
Report sales in your Estonian VAT return.
If you do not hold an Estonian VAT number:
Do not apply VAT.
The invoice must state that your company is not VAT-registered.
3. Non-EU Consumers, Companies, or Organizations
Typically, you must register for VAT/GST/Sales tax in the customer’s country and remit taxes locally.
If you have an Estonian VAT number:
Charge 0% Estonian VAT.
Report sales in your Estonian VAT return.
Threshold: Estonian VAT registration is required once your annual turnover exceeds €40,000.
4. Estonian Consumers, Companies, or Organizations
If you hold an Estonian VAT number:
Always charge 24% Estonian VAT.
Report in your Estonian VAT return.
Threshold: VAT registration is mandatory upon reaching €40,000 annual turnover.
✅ Summary:
EU B2C under €10k → Estonian VAT (24%).
EU B2C above €10k → Customer’s country VAT (local registration or OSS).
EU B2B (with VAT) → Reverse charge (0%) if verified.
Non-EU clients → Follow local VAT/GST rules, Estonian reporting at 0%.
Estonian clients → Always 24% VAT once registered.
Selling Ordinary Services from Estonia
Ordinary services are services delivered with active human involvement. Examples include:
On-site services: cleaning, design work, computer repair, restaurants, catering, movie theatres, office, and business services.
Remote human-delivered services: consultation, training, coaching provided by phone, video call, email, chat, or messaging.
⚠️ Excluded: digital services, travel services, transport services, real estate services, and some other specific categories.
VAT Requirements by Customer Type
1. EU Consumers / EU Organizations / EU Companies without a VAT number
If you have an Estonian standard VAT number → charge 24% Estonian VAT and report it in your VAT return.
If you do not have an Estonian standard VAT number (or only a limited VAT number) → you cannot apply VAT. The invoice must state that your company is not VAT-registered.
2. EU Business Clients with a valid VAT number
If you have an Estonian standard VAT number:
Apply the reverse charge mechanism → invoice with 0% VAT, include a reverse charge note, and verify the client’s VAT number in VIES.
Alternatively, you may charge 24% Estonian VAT, and the client can reclaim it locally.
In both cases, report the sale to the Estonian Tax Authority.
3. Non-EU Business Clients
Regardless of your VAT registration status, do not charge VAT (not even 0%).
If you have an Estonian standard VAT number, report the sale as an export of services in your VAT return.
4. Non-EU Consumers
If you have an Estonian standard VAT number, you must charge 24% Estonian VAT.
Report the sale in your VAT return.
✅ Summary:
EU B2C (no VAT) → Estonian VAT 24% (if registered).
EU B2B (with VAT) → Reverse charge (0%) or 24% VAT (client reclaims).
Non-EU B2B → No VAT, export of services.
Non-EU B2C → 24% Estonian VAT (if registered).
Selling Local Services and Physical Goods Abroad
Local services include activities such as travel, tour guiding, event tickets, transport, real estate services, beauty, catering, and restaurants provided outside Estonia. It also covers the sale of physical goods through retail shops, markets, fairs, or wholesale, where the goods are delivered outside Estonia.
VAT Requirements
For all clients:
VAT Rate – Transactions are subject to the local VAT/GST/Sales Tax rules of the country where the goods are sold or services are provided.
Reporting – You must register for VAT (or the local equivalent) and report according to the laws of that country.
✅ In short: If sales or services take place outside Estonia, VAT must be handled under the local rules of the country of supply.
If You Purchase Digital Services
Purchasing digital services means buying services delivered automatically over the internet with little or no human involvement. Examples include:
Website and domain hosting
Online advertising (Google Ads, Meta Ads)
SaaS subscriptions (e.g., accounting tools, project management apps)
E-commerce platform services (e.g., Amazon seller account fees)
Access to digital content (images, videos, text, AI tools like ChatGPT)
👉 Each of these purchases can trigger the requirement to register for Estonian Limited VAT if you are not already VAT-registered.
VAT Requirements
1. If you purchase from an EU or Non-EU supplier with a VAT number outside Estonia (or an EU VAT number starting with “EU”):
If you are not registered for standard VAT in Estonia:
Your supplier will charge you 24% Estonian VAT, which you cannot deduct.
Additionally, you must pay another 24% VAT on the gross amount to the Estonian Tax Authority (resulting in double VAT).
Alternatively, you must report the purchase to the Estonian Tax Authority and pay 24% VAT on it.
⚠️ In this case, you must register for an Estonian Limited VAT number starting from the date of purchase.
If you are registered for standard VAT in Estonia:
Case A: Supplier charges 24% Estonian VAT → you can deduct it in your VAT return.
Case B: Supplier issues an invoice with your Estonian VAT number + a reverse charge note → invoice shows 0% VAT, and you report the purchase under reverse charge in your Estonian VAT return (no VAT due).
✅ In summary:
Not VAT-registered: You’ll likely face double VAT → register for Limited VAT immediately.
Standard VAT-registered: You can deduct or use reverse charge → no double VAT burden.
Common Situations Where VAT Is Misunderstood
1. Understanding EU VAT Numbers
Every EU country issues its own VAT numbers, which are 9 digits long and begin with a two-letter country code.
Example: Austria → AT123456789
Example: Estonia → EE234567890
Depending on your business model, your revenue may be taxable in different EU countries, or inbound VAT paid in another country may be deductible there. That’s why country-specific VAT registrations are often required for cross-border business.
👉 When planning international operations, you should carefully consider in which countries your company needs VAT registration. Being incorporated in Estonia does not automatically mean all VAT obligations will be limited to Estonia.
2. VAT Numbers with the Prefix “EU”
Sometimes you may see VAT numbers starting with the prefix EU.
Example: Google LLC → EU372000041
Example: OpenAI LLC → EU372041333
Example: GoDaddy LLC → EU826010755
These “EU” VAT numbers are issued to non-EU entities that need to operate within the EU VAT system.⚠️ Companies incorporated inside the EU will never receive a VAT number starting with “EU.”
3. Reclaiming VAT from “EU” Prefix Suppliers
If your supplier charges you VAT under an EU-prefixed VAT number, this VAT cannot be reclaimed or deducted from your VAT liability. However, you must still report it in your Estonian VAT return.
If your supplier does not charge VAT, but provides an EU VAT number on the invoice, you must still report the transaction in your Estonian VAT return, both as an inbound and an outbound charge.
✅ In summary:
Standard EU VAT numbers = issued by EU member states.
“EU” prefix VAT numbers = issued to non-EU companies.
VAT charged under “EU” numbers cannot be reclaimed.
All such transactions must still be reported in Estonia.
Importing Goods into the EU (Outside Estonia)
When your Estonian company imports goods into the EU through another country (not Estonia), customs clearance takes place in the country of entry.
Unless your shipping company handles the import on your behalf, or you operate a drop-shipping model where the consumer pays VAT upon delivery, your company is usually required to have a valid VAT number in the country of import.
This VAT number is needed to process import procedures, import duties (if applicable), and VAT on import.
Reclaiming Import VAT
If you do not make sales in the importing country:
You can reclaim the import VAT through the Estonian Tax Authority without needing a VAT number in the country of import.
If you do make sales in the importing country:
You must have a local VAT number there in order to reclaim import VAT and report your sales locally.
EORI Number Requirement
For all import and customs procedures, your company must also hold an EORI number (Economic Operators Registration and Identification), issued by the Estonian Tax Authority.
✅ In short:
Goods enter the EU = customs clearance in the entry country.
No sales there → reclaim VAT via Estonia.
Sales there → VAT number in that country required.
Always needed → EORI number for customs.
The €40,000 Estonian VAT Threshold – Common Misunderstanding
The €40,000 VAT threshold in Estonia is often misunderstood.
This threshold applies only if your business supplies services in Estonia (place of supply = Estonia) or sells goods in Estonia or outside the EU through traditional (non-e-commerce) models.
For most e-resident companies, clients are located outside Estonia, meaning VAT obligations usually arise in the client’s country, not in Estonia.
👉 Example: The €40,000 threshold does not apply to e-commerce B2C sales into the EU.
Key Points to Remember
For e-commerce goods and digital services sold to EU consumers, the threshold is €10,000.
This €10,000 limit is combined across all EU countries, not per country.
In many cases, local VAT becomes due from the first sale, depending on the country, the type of goods or services, and the sales model.
✅ In short:
€40,000 → applies to Estonian-based supplies (local services, local goods, exports outside the EU).
€10,000 → applies to EU-wide e-commerce and digital B2C sales.
Standard vs. Limited VAT Liability
Limited VAT Liability (Purchases from EU Suppliers)
Even if your company does not have a VAT number, all purchases from vendors and suppliers with an EU VAT number must be reported monthly to the Estonian Tax Authority.
Commonly overlooked cases include online services such as:
Website hosting
Google or Apple services
Platform or account fees
Other digital subscriptions
As soon as your company makes such a purchase, it is required to register for Limited VAT liability in Estonia — effective in the same month the purchase occurs.
Standard VAT Liability (Sales to B2C Clients)
If your company sells goods or services to consumers or organizations without VAT numbers (B2C sales), the sale is generally taxable in the client’s country, not Estonia.
You must charge VAT according to the VAT rate in the customer’s country and report it there.
In many cases, VAT can be reported using the OSS/IOSS scheme via the Estonian Tax Authority, simplifying compliance.
Multiple VAT Obligations
Businesses with clients across different countries may be liable for VAT in multiple jurisdictions.
This requires careful planning to avoid compliance gaps.
✅ Summary:
Limited VAT → triggered by EU supplier purchases (e.g., SaaS, ads, hosting).
Standard VAT → applies when selling B2C, with VAT due in the client’s country.
Multi-country VAT → possible if you serve customers in several jurisdictions.
Need Help with Estonian Company VAT?
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Summary
This guide offers Estonian-registered companies a roadmap for handling VAT on goods and services, both locally and across borders. For international businesses, understanding these rules is essential to staying compliant and avoiding penalties.
Most major e-commerce platforms and website providers already support global VAT/Sales tax collection. With the right account setup, you can automatically charge the correct tax to consumers in each market. For example, in the USA, sales tax rates vary by state and must be applied accordingly.
⚠️ Important: The OSS/IOSS scheme only applies within the European Union. For sales outside the EU (e.g., USA, Canada, Australia), you must comply with local VAT/GST/Sales tax rules, file returns in those countries, and forward the collected tax to their local authorities.
For truly global operations, it is highly recommended to work with a specialized tax service provider that covers your target markets and manages both your tax reporting and payments.
Always consult with a qualified tax professional or your e-commerce platform provider to ensure accurate local tax administration and to stay up to date with the latest VAT, GST, and Sales tax regulations.
Disclaimer
The information in this article is provided for general informational purposes only and reflects the information at the time of publication. While we strive for accuracy, we make no guarantees regarding the completeness, reliability, or timeliness of the content, and errors or omissions may occur.
This article does not constitute professional advice. Readers should seek guidance from a qualified professional regarding their specific circumstances. We accept no liability for any actions taken, or not taken, based on this content.
All information is subject to change without notice, and we are under no obligation to update it.
Sunio OÜ – Member of Sunio Group
Licence # FIU000124 – Financial Services, Trust & Company Service Provider
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