Invoicing and Tax regulation in Estonia

Navigating Estonia’s evolving e-invoicing and tax regulations can be challenging. That’s why this guide provides an overview of the latest requirements to help you stay compliant and avoid potential penalties.

In the guide, we will cover:

Regulations Timeline

Estonian E-invoicing Requirements (2024 updated)

Tax Regulations

Digital Reporting

Penalties

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Regulations Timeline

A quick overview of all current and upcoming regulations that Estonia mandates regarding e-invoicing and digital reporting. For more details, check out the sections below.

 

Regulations in effect:

Public entities must be able to accept and process e-invoices.

B2B and B2C e-invoicing is voluntary.

All public administration suppliers based in Estonia must issue electronic invoices.

 

Upcoming changes to Estonian e-invoicing:

1 July 2025: Sellers will be obligated to receive and issue e-invoices upon customer request.

 

 

Estonian E-invoicing Requirements (2024 Updated)

In Estonia, the current regulations require public sector entities to accept and process e-invoices, and public administration suppliers must issue them.

While B2C and B2B e-invoicing remains optional until 2025, many Estonian businesses have already proactively adopted this technology. The benefits of e-invoicing include improved operational efficiency, faster payment processing, better compliance with tax regulations, and significant cost savings, making it a better choice than traditional paper invoices.

Though e-invoicing is not yet mandatory, it is highly encouraged. To support this transition, Estonia has implemented:

The PEPPOL network

The European standard format EN 16931

 

Governmental Body Responsible for E-invoicing

The Estonian Tax and Customs Board (Maksu- ja Tolliamet) is responsible for e-invoicing regulations.

Click here to visit their official website.

 

E-invoicing Formats

In Estonia, e-invoices are generally exchanged using the XML format or the European UBL 2.1. However, there is no central hub or platform. Instead, businesses use e-invoicing networks like PEPPOL and reliable access point providers such as Space Invoices to ensure compliance.

 

E-invoice Requirements

Invoices must be issued within seven calendar days from the date the goods are dispatched or the services provided. They can be issued in either electronic or paper form and must comply with EU standards, including the following components:

Date of Supply and Issuance

A Unique, Sequential Number

Identification of the Seller and Buyer: Including full name, address, and VAT identification number (VAT for buyer only if applicable)

Details of Goods or Services Provided: Description, quantity, unit price

VAT Information: Total amount excluding VAT, applicable VAT rate, total VAT amount

Total Amount Including VAT

Payment Terms: Due date and payment method

Currency

Reference Information (optional)

Legal Information

Certain transactions may require additional information:

B2B Transactions:

B2C Transactions:

Simplified invoices include:

 

E-invoice Archiving

E-invoices must be archived for a minimum of seven years.

 

 

Tax Regulations

VAT Rates

In 2024, Estonia's standard VAT rate is 20%, with a reduced rate of 9% for items like books, certain medicines, and accommodation services, and a lower rate of 5% for press publications. However, in 2025, these rates will increase:

The standard rate will rise from 20% to 22%.

The reduced rate will increase from 9% to 13%.

The low rate will go up from 5% to 9%.

 

Corporate Tax

Estonia has a corporate tax rate of 20%, but this only applies to distributed profits. For reinvested profits, Estonia offers reduced corporate taxes:

14% Tax Rate on Regular Distributions: Companies that regularly distribute dividends can benefit from a lower effective tax rate of 14%.

0% Tax on Retained Earnings: Profits retained and reinvested in the company are not taxed in Estonia.

Estonia also has an extensive network of double tax treaties with over 60 countries. These treaties can reduce or eliminate withholding taxes on dividends, interest, and royalties, and provide for the avoidance of double taxation.

 

VAT on Digital Services in Estonia

Digital services in Estonia are generally subject to a standard rate of 22%. However, the rate can vary depending on the client's location and status:

For B2B Transactions: Typically, the reverse-charge mechanism applies, indicated on the invoice. The place of supply is determined by the customer's location, and a valid VAT identification number is required from the customer.

For B2C Transactions: The VAT is charged and paid by the supplier, but the rate is determined based on the customer's location. If the customer is from Estonia, the Estonian VAT rate of 22% applies.

Digital services, also known as electronically supplied services (ESS), include services delivered over the internet or an electronic network, such as:

Websites and web hosting

E-books

Software downloads

Music, films, and games

 

 

Digital Reporting

Estonia has already implemented some digital reporting requirements, with more on the way:

B2G e-invoicing is mandatory.

B2B e-invoicing is coming soon.

All tax declarations, including corporate income tax, VAT, payroll taxes, and others, must be filed electronically through the Estonian Tax and Customs Board's e-Tax system.

Real-time VAT reporting is mandatory, requiring businesses to submit detailed sales and purchase records (the KMD IN) electronically alongside the VAT return for transactions exceeding EUR 1,000 in a month.

 

VAT Registration and Thresholds

For EU-based entities in Estonia, the VAT registration threshold is €40,000, but you can opt for voluntary registration if you're below that threshold.

Non-EU businesses selling into Estonia, however, have no VAT registration threshold and must register immediately.

 

VAT Returns and Payments

In Estonia, VAT returns must be submitted digitally, with reports and payments due by the 20th of the month following the tax period. While it's recommended to use the Estonian Tax and Customs Board’s online portal, it's not mandatory.

How often you need to report depends on your company's annual turnover:

Monthly reporting is usually required for most businesses.

Longer reporting periods may be allowed if a valid reason is provided to the Estonian Tax and Customs Board.

 

 

Penalties

Submitting your Estonian VAT return late can result in penalties of up to €32,000, plus a daily interest charge of 0.06% on overdue payments.

Non-compliance with e-invoicing requirements can lead to fines of up to €3,200 from the ETCB.

Providing incorrect tax information that leads to underpayment may result in penalties of up to 100% of the unpaid tax, along with a daily interest of 0.06% until it's settled.

If your business exceeds the VAT threshold, and you fail to register, fines of up to €3,200 can be imposed.

Not meeting digital reporting obligations, such as submitting reports in the wrong format, can also result in fines of up to €3,200.

 

 

Achieve Global Invoicing and Tax Compliance with Space Invoices

One way to comply with (e-)invoicing, tax, and reporting regulations in Estonia is to use a provider like Space Invoices.

You will be able to:

Use one API for current and future global tax and invoicing compliance, including Estonia.

Save time and money with integration that takes less than a week.

Support and upsell your clients worldwide, including Estonia.

Ensure all documents are archived and successfully reported to responsible institutions.

Become the one-stop shop for current and future clients.

Streamline processes and eliminate manual errors, saving time and money.

Do you have questions about achieving compliance in Estonia?

We are ready to help.

 

The information in this guide is strictly informative, as regulations and timelines change frequently. While we make every effort to monitor updates and maintain the accuracy of our content, we recommend consulting with a tax professional or e-invoicing specialist for the most reliable and personalized advice. This guide was last updated on August 27, 2024.

 

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