VAT in Estonia Now at 24% — What Does This Mean for e-Residents?

As of July 1, 2025, Estonia has officially bumped up the VAT rate (käibemaks) from 22% to 24%. If you run a company in Estonia, especially through the e-Residency program, this change hits you directly. Time to figure out how to navigate it!

If your company is registered for VAT, you need to apply the new rate to all relevant invoices and transactions starting from this date. Otherwise, you’re looking at potential fines and accounting headaches!

Why This Matters for e-Residents

Whether you live outside Estonia but own an Estonian company, keep your eyes peeled if you:

• Issue invoices with VAT (within Estonia or via OSS/iOSS);
• Work with individual clients in the EU or Estonia;
• Run an e-commerce, IT, consulting, or online services business.

Using the wrong rate could land you in hot water with the tax authorities.

Where Did This Come From?

Estonia planned this change back in 2023 to keep the budget steady during tough economic times. You can read more on the EMTA website. Oh, and the idea of dropping VAT to 20% in 2029? Scrapped. The 24% rate is here to stay at least until the end of 2028.

What Changes in Practice?

📍 Invoices After July 1, 2025:

• All invoices, even for older contracts, now need to include 24% VAT.
• This applies to both digital invoices and cash register receipts.

📍 Prepayments and Transition Period:

• Got a prepayment before June 30 but delivering goods or services after July 1? You’ll still need to apply 24% VAT if the settlement happens later.
• Focus on the date of the taxable event, not just the payment date.

📍 Software and Documents:

• Update your ERP systems, online cash registers, and invoice templates.
• Double-check that 24% is set as the default rate in your settings.

How Does This Affect Your Business?

According to ERR, the increase is already making waves:

• Prices in retail and dining have gone up.
• Consumer goods are seeing less demand.
• B2C companies are tweaking their pricing strategies.

If you deal with individual clients, it’s smart to let them know upfront that prices are rising due to the new VAT rate, not because you felt like it. Transparency keeps trust intact!

What Should e-Residents Do Now?

• Make sure all invoices after July 1 include 24% VAT.
• Update your CRM, payment systems, and online store settings.
• Check with your accountant about prepayments or subscriptions — there might be some quirks.
• Let your clients and partners know about the rate change to avoid surprises.

How GTPartner.ORG Can Help

We’ve already updated our systems to handle the new VAT rate and are here to support e-Residents. If you’re working with us, your documents are already compliant. Plus, we can:

• Update your invoice and document templates.
• Check your accounting system settings.
• Help your business adapt to the new tax rules.

Not with us yet? Drop us a line, and we’ll do a free initial check to ensure your accounting is ready for the new rate.

Wrapping Up

The VAT rate in Estonia is now 24%, and it’s already in effect. For e-Residents, this means paying extra attention to documents, pricing, and client communication.

Tip: Review your invoices, update your systems, and reach out to pros if needed. It’ll save you time and keep mistakes at bay.

Article Author

Yauheni Mialik

Founder of Digital Invest OÜ and legal & tax advisor at GTPartner. Expert in Estonia’s e-Residency program, specializing in international business structuring, corporate compliance, taxation, and strategic advisory services. Extensive experience in guiding entrepreneurs through the complexities of establishing and managing successful businesses in Estonia.