Should I Add VAT to My Invoices?
The rule is quite simple and depends on the type of service your company offers and whether it is subject to VAT or not.
First of all, if your company is NOT subject to VAT, that is, it does not have a VAT number starting with EE, you will NEVER add VAT to your invoices.
Then, what if your company is subject to VAT (VAT liable)?. Let's see.
If your services require your direct intervention (eg software development, consulting, marketing, etc.) the following rules apply:
If your customer is a B2B (a company) in Europe, with a VAT number, you will not have to add VAT to the invoice (0%). Instead, you add a clause to your invoice like this: “The purchase is liable to Intra-Community supply 0%, Reverse charge”.
If your customer is B2C (individual), or B2B without a VAT number, you add Estonian VAT (22%) to the invoice.
Finally, if your customer is outside of Europe (eg. the United States), you do not add VAT (0%).
On the contrary, if your services do NOT require your intervention, that is, they are automated (for example, you have created a web application or a downloadable eBook), then you need to get a VAT number from the Estonian authorities and then apply to the OSS scheme as soon as your sales exceed 10,000 euros a year, but we recommend you to do it even before you start selling your products or services.
Then, these rules apply:
If your customer is a European B2B (a company) with a valid VAT number, you do not add VAT (0%) and write the same clause.
On the contrary, if your customer is B2B or B2C and does not have a VAT number, but is from Europe you add the VAT of the customer's home country. For instance, for a Spanish customer, this would be 21%.
Finally, if your customer is outside of Europe, you do not add VAT (0%).
IMPORTANT EXCEPTION: Remember that your company needs to add Estonian VAT (22%) to any invoice you make to another Estonian company (since it is an internal operation within the Estonian tax system).
In the table below, we provide a concise summary of this information:
You have more information about how Estonian VAT and taxes work here.
First of all, if your company is NOT subject to VAT, that is, it does not have a VAT number starting with EE, you will NEVER add VAT to your invoices.
Then, what if your company is subject to VAT (VAT liable)?. Let's see.
If your services require your direct intervention (eg software development, consulting, marketing, etc.) the following rules apply:
If your customer is a B2B (a company) in Europe, with a VAT number, you will not have to add VAT to the invoice (0%). Instead, you add a clause to your invoice like this: “The purchase is liable to Intra-Community supply 0%, Reverse charge”.
If your customer is B2C (individual), or B2B without a VAT number, you add Estonian VAT (22%) to the invoice.
Finally, if your customer is outside of Europe (eg. the United States), you do not add VAT (0%).
On the contrary, if your services do NOT require your intervention, that is, they are automated (for example, you have created a web application or a downloadable eBook), then you need to get a VAT number from the Estonian authorities and then apply to the OSS scheme as soon as your sales exceed 10,000 euros a year, but we recommend you to do it even before you start selling your products or services.
Then, these rules apply:
If your customer is a European B2B (a company) with a valid VAT number, you do not add VAT (0%) and write the same clause.
On the contrary, if your customer is B2B or B2C and does not have a VAT number, but is from Europe you add the VAT of the customer's home country. For instance, for a Spanish customer, this would be 21%.
Finally, if your customer is outside of Europe, you do not add VAT (0%).
IMPORTANT EXCEPTION: Remember that your company needs to add Estonian VAT (22%) to any invoice you make to another Estonian company (since it is an internal operation within the Estonian tax system).
In the table below, we provide a concise summary of this information:
| Do you have a VAT No.? | Customer Location | Customer Type | Is your involvement needed to distribute the service/product? | VAT Application |
|---|---|---|---|---|
| No | Any | Any | Indifferent | N/A (Not Applicable) |
| Yes | Estonia | Any | Indifferent | 22% |
| Yes | EU Country | B2B with VAT No. | Indifferent | 0% (Reverse Charge) |
| Yes | EU Country | B2B or B2C without VAT No. | Yes | 22% |
| Yes | EU Country | B2B or B2C without VAT No. | No | VAT of customer's |
| Yes | Outside EU | Any | Indifferent | N/A (Not Applicable) |
You have more information about how Estonian VAT and taxes work here.
Updated on: 20/08/2024
Thank you!