Tax updates - Estonia - 2024

1.     Changes to the Estonian Value Added Tax Act

From January 1, 2024, the standard rate of the VAT in Estonia will be 22% instead of the current 20%. The VAT Act contains two transitional measures:

• Only concerning the users of the cash accounting scheme, if the supply of goods and service, which are applicable to standard VAT, was made effective before 1 January 2024, the invoice issued may apply a 20% VAT rate.

• When dealing with long-term contracts connected to immovable property which are concluded before 1 May 2023, a taxable person will be entitled to apply the 20% VAT rate until 31 December 2023. This implies that the contract does not specify price adjustments from a possible change in the rate of VAT.

By increasing the tax rate from 20% to 22% it is estimated that the price of goods and services will rise 1.67%.

The reduced rates 9% and 5% affecting accommodation services and press publications remain unchanged for the year 2024, however, changes are planned for the year 2025, with the tax rates being 13% and 9% respectively.  

The Estonian Tax and Customs Board has provided examples of taxation related to the VAT rate change, which can be found here:

Conclusion

In tax legislation, the biggest change for the upcoming year is clearly the increased VAT rate. This will mostly impact consumers, as they are the ones who will be paying the increased rate. The main aim of the change is to balance the state budget by increasing the collection of tax revenue.