Type VAT Rate
Standard Rate

Applies to most goods and services.

Reduced Rates

Applies to some goods and services such as food or home energy.

VAT Rates for Digital Products
Audiobook 20%
eBook 20%
ePeriodical 20%

Value Added Tax in Estonia

VAT (or Value Added Tax) is a type of indirect consumption tax imposed on the value added to products or services, specifically during different stages of the supply chain. A supply chain may include legally separate entities involved in production, wholesale, distribution, supply, or any other stages that add value to a product. VAT is generally reclaimed by businesses that are involved in the supply chain and that carry a registered Käibemaksukohustuslase number (KMKR). The end-consumer at the end of the supply chain will pay the consumption tax.

A VAT is commonly used by governments around the world as one of their main sources of revenue. Failure to report and pay VAT may therefore result in heavy penalties.

All member states that are part of the European Union (EU) are legally required to enforce a standard rate of not less than 15%.

Charging VAT on Digital Products

EU member state governments want to ensure that they receive taxes on all goods and services consumed by their citizens. Physical products are taxed at customs. Digital products don’t cross any borders to pass through customs. As a business, you are made responsible to charge the applicable VAT regardless whether you are based inside or outside the EU.

As a supplier of electronically supplied services (i.e. digital products) to EU customers, you’re responsible for applying, collecting and remitting VAT to the individual 28 member states at their various VAT rates (Article 196 VAT Directive). This has been simplified in 2015 with the Mini One Stop Shop (MOSS).

Exceptions to Charging VAT in Estonia

When you make a sale to a customer in Estonia, request the customer’s KMKR. Most businesses (or individuals carrying out an economic activity) will have one, private individuals will not. Some buyers may try to pretend that they’re a business just to avoid the VAT charge, so they’ll submit a dummy KMKR. Check to make sure each VAT number is valid. You can use Vatstack Validations to verify the KMKR automatically during online payment.

If your customer owns a valid KMKR, you’re exempt from charging VAT in intra-community (EU) and cross-border (international) supplies. The transaction is covered by the reverse charge mechanism. With the reverse charge mechanism, the buyer is responsible for filing VAT on the transaction. We have a more detailed compliance guide for handling VAT in Estonia.

Further Resources