Regulatory updates - Estonia

From July 1, 2025, the new standard VAT rate has been changed to 24% instead of the previous 22%.

The authorities also announced that from July 1, 2025, the right to apply the 20% tax rate established by subsections 46 (24) and (25) of the Value-Added Tax Act will be repealed.

This change is set to remain in place until December 31, 2028.

As part of the amendments, the transition period for contracts signed before May 1, 2023, with a 20% VAT rate will be shortened. If such contracts do not include provisions for price adjustments based on VAT changes, the 20% rate will only be applicable until June 30, 2025.

On December 3, 2024, the Ministry of Finance submitted the proposals and unveiled the intention to develop the bill for amending the VAT Act.

The Ministry is considering:

- the abolishment of the 1,000 EUR threshold for declaring transactions[1] and

- the introduction of mandatory e-invoicing for all VAT-subjected B2B transactions.

The bill expected to be drafted in 2025 might come into effect in 2027.

In the meantime, as previously reported by Pagero, all businesses registered as e-invoice receivers in the business register (including all public sector entities) will be able to require suppliers to submit machine-readable electronic invoices starting July 1, 2025.

To sum up, the extension of e-invoicing requirements entering into force from July 1, 2025 is still in force, whereas the Ministry proposed to roll out mandatory e-invoicing from 2027.

Pagero closely monitors these developments and will continue notifying our customers about the latest changes.

[1] Currently, VAT declarations KMD and an Annex KMD INF listing all sales and purchase invoices with domestic counterparties exceeding 1,000 EUR in one month must be declared on KMD INF.