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VAT 24% from July 2025: key changes for companies in Estonia

From 1 July 2025, the standard VAT rate in Estonia will increase from 22% to 24%. This will affect all Estonian-registered companies (including those with foreign owners and e-residents) that issue VAT-inclusive invoices. The new rate will be added automatically to all goods and services subject to the standard rate. The increase in VAT by 2 percentage points will enable the budget to offset security costs. Although the increase was initially planned to be temporary, the decision to return VAT to 22% in 2029 has since been cancelled. Put simply, 24% is the new ‘norm’ until at least 2029.

It is important for companies to understand the changes in advance and prepare accordingly. These are not just ‘numbers’: the increase in the VAT rate will increase the taxable portion of the price of goods and services, meaning that prices for buyers will rise. According to experts, the VAT increase will affect food retail and trade the most, where prices are already rising. Therefore, entrepreneurs should review their price lists, update their accounting systems, and inform their customers of the upcoming change.

What needs to be done now?

  • Check price lists and invoice templates to ensure that, from 1 July onwards, all documents display a rate of 24%.
  • Configure ERP systems, cash registers, online cash registers and online stores, entering the new rates into the systems.
  • Inform customers and contractors about the new rate to avoid misunderstandings when making payments.

Examples of situations that have occurred with our customers:

  • Retail store. A small supermarket sold goods with 22% VAT in June, but each receipt has been 2% more expensive since July. According to ERR, since the introduction of the new rate, ‘prices in shops and cafés have risen’ and shoppers have become more careful about their spending. For example, a packet of sour cream that previously cost €1.22 (€1.00 + €0.22 VAT) now costs €1.24 (€1.00 + €0.24 VAT). This price difference should be explained to customers in advance to avoid dissatisfaction.
  • IT consulting or services. The company provides services from June to July and issues a total invoice after 1 July. In this case, all services provided in July will be subject to 24% VAT. However, if payment for the services is divided into two parts (for example, one part for June and one for July), services provided in June will be subject to the old rate of 22%, while those provided in July will be subject to the new rate of 24%. The same applies to advance payments: those received before 1 July are subject to 22%, while the final settlement after that date is subject to 24%. The main rule is to consider the date of delivery/service rather than the date of payment.
  • Long-term contract. For those who have previously signed a fixed-price contract including 20% VAT, a transitional rule applies. If the contract was concluded before 1 May 2023 and does not contain a price change clause, the 20% rate can be applied until 30 June 2025. However, after this date, all transactions under such contracts will be subject to 24% VAT. In other words, the ‘preferential’ 20% period is short; it will only last until the end of June 2025.

Key changes (summary table) 

Category of goods/services Old rate (until 1 July 2025) New rate (from 01.07.2025) Notes
Standard rate (most goods and services) 22 24 Increase by 2 percentage points; planned reduction to 22% cancelled.
Hotels, bed and breakfasts 9% (reduced rate) 13 Changed from 1 January 2025 (previously 9%).
Press and publications (paper/electronic) 5 9 Changed from 1 January 2025 (including electronic press) emta.ee.
Books and textbooks 9 9 The preferential rate of 9% remains unchanged.
Preferential and exempt goods (financial and insurance services, education, medicine, exports, etc.) 0% (exempt) 0 Not subject to VAT; rate remains unchanged.
Long-term fixed contracts 20% (until 30 June 2025 under old contracts) 24 Until 30 June 2025, 20% remains in force under the terms of the old contract, then 24%

 

The new 24% VAT rate is key tax news for businesses in Estonia in 2025. The sooner companies adapt to the changes (update their systems, recalculate prices and inform partners), the easier the transition period will be. Transparent communication with customers remains important: explaining price increases as being ‘due to a change in the law’ rather than ‘wanting to charge more’ will strengthen trust and maintain your reputation as a reliable partner.

FREQUENTLY ASKED QUESTIONS

From 1 July 2025. After this date, all taxable transactions (at the time of delivery/provision of services) will be taxed at 24%. Invoices and receipts issued after 1 July must contain the new rate. If the transaction was completed before 1 July (i.e. goods were delivered or services were provided), the old rate applies.

If the buyer made an advance payment before 1 July, VAT on this advance payment will be charged at a rate of 22%. Any remaining payments for goods or services falling in July or later are taxed at 24%. For example, if a partial advance payment is made in June, it is taxed at 22%, while the final payment made in August is taxed at 24%.  If the invoice covers the entire period after 1 July, the full amount is considered to have been delivered in July and is taxed at 24%.

From 1 January 2024, Estonia’s general rate has increased to 22%. After 1 July 2025, applying the “two per cent difference” to 20% will only be possible in special cases involving old contracts. For contracts concluded before 1 May 2023 with a fixed price, it will still be permissible to pay 20% until 30 June 2025. All other transactions from July onwards are subject to 24%.

Initially, a return to 22% from 2029 was discussed, but this reduction was cancelled by the new government. This means that the 24% rate will remain in place until at least the end of 2028. No further VAT reductions are currently planned.

Previously adopted changes will come into force on 1 January 2025: hotel services (including breakfast) will be subject to 13% VAT, and newspapers and books will be subject to 9% VAT. Other socially significant goods and services (e.g. financial and insurance services, education and medicine) remain exempt from VAT (0%). Exports and intra-EU supplies remain at the zero rate provided that the conditions are met.

Check that your accounting systems, cash registers and programmes are set to 24% rather than 22%. Update your invoice templates and price tags in online stores. If necessary, recalculate your prices to ensure your business remains profitable. Notify your customers of the change in advance to avoid misunderstandings. If you have any questions about accounting or the transition period, it is worth consulting a specialist.