Do I Need a VAT Number for My Estonian Company?
Your company needs an intra-community VAT number if any of these conditions apply:
First, if your company offers services such as development, design, consulting, marketing, etc., to European customers, and its earnings exceed 40,000 euros a year.
Also, if you offer digital services or products (software or digital content) to European B2C customers (final consumers) from the first sale.
Finally, if you offer digital services or products (software or digital content) to European B2B customers (business to business) from the first sale, and you enter more than 40,000 euros a year.
Even if none of the conditions above applies, we recommend you obtain your VAT number if you are dealing with other European customers or business partners.
Why? Because there are more advantages and no disadvantages:
🤩 It allows you to operate more easily in the European Union. For starters, invoicing between European companies with VAT numbers implies adding VAT 0% to your invoice. That greatly simplifies invoicing and you avoid VAT payments back and forth.
🤩 In addition, the VAT number adds reliability to your company for your customers and suppliers.
🤩 It is also very useful to avoid having to always be aware of the different VAT of the different European countries.
If you plan to work with European suppliers who will issue invoices, keep in mind that if you don't have a VAT number, they will issue their invoice with VAT, and you won't be able to recover that percentage of money if you don't have a VAT number.
In the case of primarily working with clients in Estonia, it might not be advantageous to request a VAT number because that way, you won't have to include VAT on the invoice.
In any case, once your total revenue from European clients exceeds 40,000 euros, it becomes mandatory to obtain a VAT number.
To help you clearly understand whether requesting a VAT number is beneficial for you or not, here is a table that can serve as your guide.
First, if your company offers services such as development, design, consulting, marketing, etc., to European customers, and its earnings exceed 40,000 euros a year.
Also, if you offer digital services or products (software or digital content) to European B2C customers (final consumers) from the first sale.
Finally, if you offer digital services or products (software or digital content) to European B2B customers (business to business) from the first sale, and you enter more than 40,000 euros a year.
Even if none of the conditions above applies, we recommend you obtain your VAT number if you are dealing with other European customers or business partners.
Why? Because there are more advantages and no disadvantages:
🤩 It allows you to operate more easily in the European Union. For starters, invoicing between European companies with VAT numbers implies adding VAT 0% to your invoice. That greatly simplifies invoicing and you avoid VAT payments back and forth.
🤩 In addition, the VAT number adds reliability to your company for your customers and suppliers.
🤩 It is also very useful to avoid having to always be aware of the different VAT of the different European countries.
If you plan to work with European suppliers who will issue invoices, keep in mind that if you don't have a VAT number, they will issue their invoice with VAT, and you won't be able to recover that percentage of money if you don't have a VAT number.
In the case of primarily working with clients in Estonia, it might not be advantageous to request a VAT number because that way, you won't have to include VAT on the invoice.
In any case, once your total revenue from European clients exceeds 40,000 euros, it becomes mandatory to obtain a VAT number.
To help you clearly understand whether requesting a VAT number is beneficial for you or not, here is a table that can serve as your guide.
| Annual sales | Majority of customers in | Majority of providers in | Is it recommended to get a VAT number? | Notes |
|---|---|---|---|---|
| > 40,000€ | - (Indifferent) | - (Indifferent) | Yes | It is indeed mandatory. |
| < 40,000€ | Estonia | Outside the EU | No | Not having a VAT number will simplify your finances and your services will be cheaper for your customers. |
| < 40,000€ | Estonia | Inside the EU | Yes | Even though your customers are in Estonia and you will add VAT to your sales, having a VAT number will allow you to deduct the VAT from suppliers. |
| < 40,000€ | Europe | Outside the EU | No | Not having a VAT number will simplify your finances and your services will be cheaper for your customers. Your suppliers won't charge you VAT as they are outside the EU, so you won't need to deduct that VAT. |
| < 40,000€ | Europe | Inside the EU | Yes | Having a VAT number will allow you to deduct the VAT from suppliers, and you will issue your invoices to B2B customers in the EU with 0% VAT (reverse charge) |
| < 40,000€ | Outside the EU | Outside the EU | No | Not having a VAT number will simplify your finances, and your suppliers outside of the EU won't add VAT to their invoices. |
| < 40,000€ | Outside the EU | Inside the EU | Yes | You don't need to add VAT to invoices for your customers outside the EU, so your prices will not be impacted by VAT for them, and having a VAT number will allow you to deduct the VAT from your suppliers in the EU. |
Updated on: 11/12/2024
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