Estonia's standard VAT rate goes from 20% to 22% at the 2024 year-end

Until 31.12.2023, the VAT rate on taxable supplies in Estonia is 20% (apart from special cases).

From 01.01.2024, the VAT rate on taxable supplies in Estonia is 22% (apart from special cases).

What to keep in mind when issuing sales invoices

Sale of goods

• If the goods are shipped to the customer in 2023, the sales invoice is issued in 2023 at 20%. The customer may pay it in 2024.
• If you issue a prepayment invoice for goods in 2023 and the customer pays it in full in 2023, the sale is taxed at 20% VAT.
• If the goods are shipped in 2024 – so the sales revenue lands in 2024 – but the customer paid in 2023, VAT falls in 2023.
• If the customer pays part of a prepayment invoice in 2023 and the rest in 2024, the part paid in 2023 is taxed at 20% VAT and the part paid in 2024 at 22% VAT.
• If the customer paid part of the price in 2023, the goods are shipped in 2024, and the customer pays the rest in 2024, the sales invoice may have lines at different VAT rates: the prepayment line at 20% VAT and the other line (for example, the balance) at 22% VAT.
• If the goods are shipped in 2024 and the customer made no prepayment in 2023, the sales invoice is issued in 2024 at 22% VAT.

So please be careful with prepayment invoices in 2023, and tell your customers that on a prepayment invoice, the VAT rate depends on when the invoice is paid!

The money must be in the seller’s bank account or till, or the card payment made, by 31.12.2023 at the latest!

Keep track of when the goods are shipped and when the invoice is issued. With a prepayment invoice, what matters is when the money reaches the seller’s account!

The VAT rate matters most on sales to private individuals, and on any sale where the buyer cannot deduct the input VAT.

If in doubt, ask your accountant!

Sale of services

• If a service is provided in 2023 but the sales invoice is issued in January 2024 (by 7 January at the latest), the time of supply is 2023, and for taxable supplies in Estonia the rate is 20% VAT.
• If a long-term service runs partly in 2023 and partly in 2024, issue a sales invoice for the 2023 part in December 2023 at 20% VAT, and for the 2024 part in 2024 at 22% VAT.
• If you issue a prepayment invoice for a service in 2023, the VAT rate depends on when the money arrives. If the seller receives it in 2023, the rate is 20%. If the seller receives it in 2024, the rate is 22%.
• If part of the payment for a service arrives under a prepayment invoice in 2023 and part in 2024, the service is taxed at two different rates. The sales invoice may have lines at different VAT rates.

Note: extract from the VAT Act

“A taxable person is required to issue an invoice for the transfer of goods or the provision of a service within seven calendar days of the day on which the goods were dispatched or made available to the buyer, or the service was provided. For long-term services and regularly transferred goods or regularly provided services, the invoice must be issued within seven calendar days of the last day of the taxable period referred to in § 11(4) of the VAT Act.”

Keep track of which period the service was provided in and when the sales invoice was issued. With a prepayment invoice, what matters is when the money reaches the seller’s account!

If you want a transaction taxed at 20% VAT, the money must be in the seller’s bank account or till, or the card payment made, by 31.12.2023 at the latest!

The VAT rate matters most on sales to private individuals, and on any sale where the buyer cannot deduct the input VAT.

Check your contracts and price lists!

The important question: does your sale price include VAT, or is VAT added on top?

If in doubt, ask your accountant!

Special cases

Some transactions have their own rules on which VAT rate applies – real estate in particular.

More information on the Tax and Customs Board’s website (in Estonian)

Please also check the purchase invoices you receive, to make sure they show the correct VAT rate!