From 01.01.2024 the standard rate for VAT in Estonia is 22% instead of 20%.
It is important to note that this is a change to the current VAT 20% rate, which means that you would have to use VAT 22% rate on your invoices from 01.01.2024. Invoices, to which other VAT rates are applicable, such as EU VAT 0%, will not be affected by this law change.
In 2023, the Estonian government has decided to raise the VAT by an additional 2%, this law was confirmed by the Estonian parliament in an emergency meeting in June 2023. The change received a strong opposition from the citizens of Estonia and there were many strong positions against the current government in coalition as well as the law change itself. However, there was no success in counteracting it and from the new year, there will be a new standard VAT rate applicable.
In relation to this change, there are 2 transitional provisions in the Estonian VAT ACT:
– Until 31 December 2025, provided that the goods or services supplied are subject to a standard VAT rate, the user of cash accounting of VAT may pay VAT at the rate of 20% on the supply of the goods or services generated after 31 December 2023 if an invoice was issued to the purchaser and the goods were dispatched or made available or the service was supplied before 1 January 2024.
– The second transitional provision concerns transactions relating to long-term contracts, in particular transactions relating to immovables. Until 31 December 2025, a taxable person will be entitled, on the basis of a written contract concluded before 1 May 2023, to apply the 20% VAT rate applicable on the supply of goods or services until 31 December 2023, provided that the relevant contract provides that the price of the goods or services includes VAT at a rate of 20% or VAT at the rate of 20% is added to the price and the contract does not provide for a change in the price resulting from a possible change in the rate of VAT.
(Source: Estonian Tax Office)
