Estonia: VAT Rates to be Reverted to Pre-COVID Rates

When the COVID-19 epidemic spread, many countries worldwide reduced the VAT rates on specific products and services to reduce the pressure on the national economy and the economic blow that the state and the citizens suffered. 

Estonia was one of those countries, and now, a couple of years later, it is ready to revert its VAT rates to pre-COVID rates.

Impact of the Decision

As of January 1, 2025, the VAT rate for accommodation and accommodation with breakfast services will be 13% instead of the current 9%. On the same day, the VAT rate for physical and electronic press publications will increase from 5% to 9%, thereby canceling the Decision from 2022, when the rates were lowered from 9% to 5%.

A transitional period is enabled for the users of the cash accounting of VAT until December 31, 2026. Users of the cash accounting of VAT will be allowed to continue paying a VAT of 9% for accommodation and accommodation with breakfast services until the set date in 2026 if the invoice for the service is issued and the service is provided until January 1, 2025.

Under the same conditions, the supplier of the press publications may apply a 5% VAT rate. This means the invoice must be issued and the goods, physical press publication, sent, or services, such as electronic press publication, provided before January 1, 2025.

Conclusion

Estonia increased its standard VAT rate to 22% at the beginning of this year and is now increasing its reduced VAT rates. Businesses, especially those providing short-term rentals and platforms facilitating such services, should take precautionary steps and determine how this increase in VAT rates affects their businesses.

Also, all businesses engaged in taxable activities affected by these changes should adjust their accounting software, invoices, and websites if the quoted prices include VAT.

Source: Estonian Tax and Customs Board