Regardless of where you’re based, you have to deal with Estonian VAT rules if you have clients or work as a freelancer in Estonia. VAT, or Value Added Tax, is a consumption tax levied on the purchase of almost all goods and services in the EU. While you might already know that, you might be unaware of the specific rules surrounding your product, which you should follow if you want to stay tax compliant.
The standard rate of VAT in Estonia is 20% and is administered by the Estonian Tax and Customs Board. This guide includes everything you, as a freelancer, need to know about VAT in Estonia in a nutshell. Let's get started!
The standard rate of VAT, or käibemaks in Estonian, is 20%. There is, however, also a reduced tax rate of 9%, which applies to certain goods and services. Freelancers must charge the amount that applies to their products and services:
If your annual turnover exceeds 40,000 Euros, you are obligated to register for VAT. You must first submit an application for registration as a VAT payer to the Estonian Tax and Customs Board within three working days as of the date on which the need for registration arises.
If you have no taxable sales yet, or your turnover doesn’t exceed 40,000 Euros, registration as a VAT payer is voluntary.
The prerequisite for VAT registration is that you must be engaged in business or about to commence business in Estonia.
You must first submit an application for registration as a person liable to VAT, either online or in-person at the nearest tax office. Once your application is approved and you receive your VAT number, you must declare VAT every month.
You can also register using the Mini One-Stop-Shop, an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return. This scheme is optional but beneficial if you have customers in multiple countries within the EU, including Estonia. In addition, MOSS allows you to avoid registering in each Member State of consumption.
The Estonian business environment of nurturing and encouraging startup growth is perfect for freelancers and self-employed entrepreneurs. Thanks to e-Residency, the country is open for freelancers worldwide to grow their client base, launch innovative products and services, and manage the administrative side of their businesses with minimal bureaucracy.
With an e-Residency, you can enter the EU market with ease, grow your business remotely, and join a global community of like-minded e-resident entrepreneurs and expert service providers.
You can then register for VAT by following the steps mentioned above.
After registering for VAT, you must make sure to:
VAT invoices are the official record of how much tax you charge and collect, and therefore the official proof of how much tax you owe the government. In order to completely comply with VAT laws, you must make sure to include the following in your Estonian VAT invoices:
The invoices must be issued within six months of delivering your product or service. You must then store these invoices electronically for ten years.
Does that sound excessive? Xolo can help! We automatically generate, send, and store all your invoices digitally, so you won’t have to worry about misplacing them over the next decade.
The VAT registration and reporting process can be such a hassle at times, but we hope this guide has helped you answer some questions when it comes to VAT rates in Estonia. And to alleviate legal challenges and risks when being your own boss, Xolo also offers compliance and legal support to help you stay on good track:
Send your invoices as a freelancer or launch your dream solo business while staying fully VAT-compliant!