Estonia to Increase VAT Rate by 2025

The Estonian government is set to increase the VAT rate applied to any accommodation services and press publications. In addition, plans are on the way for the standard VAT rate in Estonia to increase from 22% to 24% by July 2025.

Estonian VAT Rate Changes

The Estonian Government has approved some VAT rate changes. These changes are projected to take place starting 1 January 2025. Let’s dive into some of the adjustments below:

• Accommodation Services: The VAT rate will increase from 9% to13%.
• Press Publications: The VAT rate with increase from 5% to 9%. It will return to the previous VAT rate before its drop in 2022.

Special Provisions:

To any users of the VAT cash accounting scheme, special provisions will be provided to ease the transition. The special provisions are aimed at aiding businesses by allowing them to continue paying the lower VAT rates until 31 December 2026. Businesses will only be allowed these special provisions under certain circumstances:

• A 9% VAT rate can be applied to accommodation services only if the service was invoiced prior to 1 January 2025. Regardless of when the service will be delivered. For example, if the accommodation was invoiced in December 2024 but the use of the accommodation will only be in December 2025, a 9% VAT rate will still be applicable.
• Likewise, a 5% VAT rate can be applied to any press publications that were invoiced prior to January 2025, regardless of the supply date.

More about these changes can be found here.

Standard VAT Rate Change in Estonia by July 2025

In addition to the above-mentioned approved changes, Estonia has also announced a possible change in its standard VAT rate from 22% to 24% by July 2025. Although, this increase has not been officially approved yet, one should keep an eye out for its implementation. In January 2024, the VAT rate was initially increased by 2% – from 20% to 22%.

While the change in the standard VAT rate to 22% has already been adopted, there are existing transitional measures that are still currently applicable:

• The user of the VAT cash accounting scheme may apply a 20% VAT rate until December 2025, provided that the goods or services are subject to a standard VAT rate and the supply of goods or services was made effective before 1 January 2024.
• The second transitional provision involves transactions relating to long-term contracts, specifically transactions relating to immovables. The VAT rate of 20% may still be applicable until 31 December 2025 under certain conditions.

More information regarding these transitional provisions can be found here.

Currently, the official VAT rates relevant in Estonia are the following:

• Standard Rate: 22%.
• Reduced Rates: 9% and 5%.

Evidently, it can be quite challenging to stay up to date with all the global VAT changes. It can be quite costly for businesses who use the incorrect VAT rate. As tax offices may issue penalties and add interest to any returns filed using the incorrect rate. Don’t let this be you, contact VATIT Compliance today to avoid any confusion.