VAT on cross-border services, digital sales and the OSS

An Estonian company that sells services or digital products across borders must first find where each sale is taxed: in Estonia, in the customer's country, or nowhere in the EU. The answer depends on who the customer is (a business or a consumer), where the customer is, and what the service is. This guide covers business customers in the EU and outside it, VAT number checks in VIES, purchases from foreign suppliers, and the One Stop Shop (OSS) and Import One Stop Shop (IOSS) for sales to consumers.

In short

• A service to a VAT-registered business in another EU country carries no Estonian VAT. You write "pöördmaksustamine" (reverse charge) on the invoice and file the VD report. More
• A company that buys software, ads or consulting from abroad must self-assess Estonian VAT. If it is not VAT registered, it must register as a limited taxable person. More
• Check every EU customer's VAT number in VIES before you invoice without VAT, and keep the result. More
• Real estate, events, passenger transport, restaurants and short-term vehicle hire are taxed where they take place. More
• Digital services and distance sales of goods to EU consumers are taxed in the customer's country above 10 000 euros a year. The OSS lets you pay that VAT from Estonia. More
• Each country of consumption sets its own fines for a late OSS return. More

How do I invoice a service to a business in another EU country?

Charge no Estonian VAT. Under the general rule, a service to a business registered for VAT in another member state is taxed in the customer's country, and the customer pays the VAT there (VAT Act § 10 lg 4 p 9; VAT Directive Art. 44 and 196).

The invoice must:

• be issued by the 15th day of the month after the month of supply, not within the usual 7 days (VAT Act § 37 lg 2^1);
• show your Estonian VAT number and the customer's VAT number (§ 37 lg 7);
• carry the note "pöördmaksustamine" (§ 37 lg 8 p 2). This wording cannot be replaced by another. An English "Reverse charge" next to it is common and helpful;
• show the amount without VAT. A price in a foreign currency is converted at the European Central Bank rate of the day the supply is taxed (§ 29 lg 13).

The time of supply is the earlier of the service being performed or the payment. A continuing service is supplied at the end of each invoicing or payment period, and at least every 12 months (VAT Act § 11 lg 1 and lg 4).

Reporting:

• VAT return (KMD): the value goes in line 3 and line 3.1 (KMD form, regulation nr 17 of 10.06.2014, annex 1). There is no output VAT.
• VD report (ühendusesisese käibe aruanne): each customer's VAT number and the total value of services for the month, in whole euros, by the 20th of the next month. A credit note goes in the period of the credit note (VAT Act § 28).

You do not file the VD for services with a special place of supply rule (see below), or for a service that is exempt or zero-rated in the customer's country, such as most financial services. Those sales still go in KMD line 3 (EMTA: services on the VD report).

Common mistakes: you file the KMD but forget the VD; you put the invoice date instead of the supply month on the VD; you invoice a customer whose number is not valid in VIES; you use the reverse charge for a consumer or for a business with no VAT number.

From 01.01.2027 the VD report stops being a separate form. Its data move into a new data-based KMD, and the invoice rules and the reverse charge stay the same (VAT Act, text from 01.01.2027). EMTA says the data-based return can be filed from April 2027, so check with EMTA which form the VD data take for January to March 2027 (EMTA: the data-based VAT return).

Must my company pay VAT on services it buys from abroad?

Yes, in most cases. A VAT-registered company must self-assess Estonian VAT (reverse charge) on business services bought from a foreign business that is not registered in Estonia. It normally deducts the same amount in the same return, so the net cost is zero if all its sales are taxable (VAT Act § 3 lg 4 p 2, § 29 lg 3 p 3, § 31 lg 3 and lg 8).

On the KMD, the value goes in line 1, the VAT in lines 4 and 5, and the value also in line 6 (EU supplier) or line 7 (non-EU supplier) (KMD form, regulation nr 17 of 10.06.2014, annex 1). You do not need an invoice to deduct the VAT if other evidence exists.

A company that is not VAT registered has a different duty. When it receives an intangible service from such a foreign supplier, it must register as a limited taxable person (piiratud maksukohustuslane) from the day it receives the service. The application is due within 3 working days (VAT Act § 21 lg 1 and lg 3). It then files a KMD only for months with such purchases, pays the VAT by the 20th of the next month, and cannot deduct it (VAT Act § 25 lg 1, § 27; EMTA: limited taxable person).

The intangible services are listed in VAT Act § 10 lg 5: intellectual property licences, advertising, consulting, accounting, legal, IT and data processing, staff supply, hire of movable goods, telecoms and electronically supplied services.

A typical case: a young OÜ below the registration threshold pays for foreign SaaS tools and online ads. Each purchase triggers limited registration and a 24 percent VAT cost. Many founders compare this with voluntary full registration, which makes the same VAT deductible (VAT Act § 20 lg 2). See VAT registration.

Two more points:

• No reverse charge applies when the EU supplier uses the EU small business scheme and its VAT number ends in "EX" (VAT Act § 3 lg 7).
• Services you buy do not count towards the 40 000 euro registration threshold. Only your own sales count (VAT Act § 19 lg 1, § 19^1 lg 3).

A company that also makes exempt supplies, such as a holding that earns interest on loans to subsidiaries, deducts only in part, so the reverse charge becomes partly a real cost (VAT Act § 32 lg 1).

What if an EU supplier charges its own VAT?

Ask for a credit note and a new invoice with the reverse-charge note, if the service falls under the general business rule. The place of supply is Estonia, so you must self-assess Estonian VAT anyway. Foreign VAT charged by mistake is not input VAT in Estonia, and you cannot deduct it (VAT Act § 3 lg 4 p 2, § 29 lg 3). The same holds for an invoice that shows "Estonian VAT 24%" from a supplier with no Estonian VAT number.

Two cases are different:

• The supplier is registered for VAT in Estonia. If the invoice carries an Estonian VAT number and Estonian VAT, you treat it as a domestic purchase and deduct the VAT on the KMD (VAT Act § 31 lg 1). Check the number with EMTA's VAT number query. If the supplier's Estonian establishment does not take part in the supply, you are still liable under the reverse charge (VAT Act § 3 lg 3^1; VAT Directive Art. 192a and 196). Ask the supplier, and prefer a reverse-charge invoice when in doubt.
• The service is taxed where it takes place, such as a hotel, a conference ticket, a restaurant meal or local transport. The local VAT is then correct. You do not deduct it on the KMD. A company registered for VAT in Estonia can reclaim it through the refund application in e-MTA by 30 September of the next year, within the other state's own deduction limits (VAT Act § 34 lg 5; EMTA: refund of VAT paid in another member state). A limited taxable person or an unregistered company cannot, and the foreign VAT is then a cost.

A sudden 24 percent Estonian VAT on an invoice from a foreign supplier often means its system has classed you as a consumer. Keep your VAT number on the supplier account.

What if a customer's VAT number is not valid in VIES?

Then the business reverse charge does not apply, and a general-rule service is taxed in Estonia at 24 percent. The Estonian rule moves the place of supply abroad only for a customer "registered as a taxable person or a limited taxable person in another member state" (VAT Act § 10 lg 1 and lg 4 p 9). You may treat an EU customer as a business when it gave you its VAT number and you confirmed the number, name and address in VIES (Regulation 282/2011 Art. 18).

What to do:

• Check the number when you sign the contract, and at intervals for recurring customers. Save the VIES consultation number or a dated screenshot. EMTA links to the Estonian and VIES queries on its VAT number check page.
• Number invalid or not yet issued: charge Estonian VAT. When the number becomes valid for the date of supply, issue a credit note and a new reverse-charge invoice. Both parties record it in the period of the credit note (VAT Act § 29 lg 7, § 28 lg 3).
• Number deregistered after the supply: the sale stays a business sale if the number was valid on the date of supply.
• Electronically supplied services: while the customer gives no VAT number, you may treat it as a consumer, and the consumer rules below apply (Regulation 282/2011 Art. 18(2)).

The VD report is cross-checked with the customer's country. A number that fails in VIES can lead to a query from EMTA and an assessment of 24 percent VAT on the sale.

Watch out: the VAT Directive turns on whether the customer is a business, not on its registration, so a small business in another member state may be a business with no VAT number. The Estonian text requires registration. Document the customer's business status and get advice before you invoice such a customer without VAT.

How are services to customers outside the EU taxed?

To a business outside the EU, a general-rule service is not supplied in Estonia. You charge no Estonian VAT: the service is taxed at 0 percent (VAT Act § 15 lg 4 p 1). The invoice must say why, with a reference to that provision or another clear note, for example "0%, KMS § 15 lg 4 p 1, place of supply outside Estonia" (VAT Act § 37 lg 1^1, lg 8 p 1 and lg 8^1). Put the value in KMD line 3 (KMD form, regulation nr 17 of 10.06.2014, annex 1). You do not use line 3.1 and you do not file a VD (VAT Act § 10 lg 4 p 9). Keep evidence that the customer is a business, such as a certificate from its tax authority or a checked VAT or company number (Regulation 282/2011 Art. 18(3)).

To a consumer outside the EU:

• The intangible services of VAT Act § 10 lg 5, digital services included, are outside Estonian VAT.
• Services that a special rule places abroad are also outside Estonian VAT. A workshop held in the United States for US consumers is an example (VAT Act § 10 lg 4 p 1 to 8).
• Other services supplied from Estonia carry 24 percent Estonian VAT under the general rule (VAT Act § 10 lg 1).

Special rules always win: real estate, events, passenger transport and restaurant meals in Estonia are taxed in Estonia, even for a non-EU customer.

A consumer buying for personal use needs no invoice (VAT Act § 37 lg 3). Input VAT on costs for these sales stays deductible (VAT Act § 29 lg 1). Many non-EU countries, such as the United Kingdom, Norway and Switzerland, have their own registration rules for foreign digital sellers. Estonian law does not cover them, so check the customer's country before you sell to consumers there.

Which services are taxed where they take place?

These services are taxed where they physically happen, for businesses and consumers alike (VAT Act § 10 lg 2 and lg 4; VAT Directive Art. 47 to 57):

For consumers only, event services, goods transport, work on movable goods and intermediation also follow their own rules. None of these services go on the VD report.

What this means for you:

• Selling such a service abroad, for example a paid workshop in Germany, means the other country's VAT applies. You usually must register there, unless that country applies a local reverse charge to business customers. The OSS covers only services to consumers.
• Buying such a service abroad, the local VAT is correct. A company registered for VAT in Estonia reclaims it through the refund application, not the KMD (VAT Act § 34 lg 5). The refund route is closed for a period in which the company itself made supplies in that state, other than reverse-charged supplies or exempt transport. It then deducts the VAT in its local return there (Directive 2008/9/EC Art. 3). Sales declared through the OSS do not close the refund route (VAT Act § 43 lg 14).

When do digital sales to EU consumers need the OSS?

Electronically supplied services to consumers in other EU countries, such as SaaS, apps, downloads and pre-recorded courses, are taxed at the VAT rate of the customer's country once your EU-wide sales pass 10 000 euros a year. The OSS is not compulsory, but it is the practical way to pay that VAT from Estonia instead of registering in each country (VAT Act § 10^1 lg 6 to 9, § 43; EMTA: the OSS scheme).

The 10 000 euro threshold. The place of supply stays in Estonia while the company is established only in Estonia and its cross-border sales to EU consumers of electronic, telecom and broadcasting services plus distance sales of goods did not pass 10 000 euros in the previous year and do not pass it in the current year (VAT Act § 10^1 lg 7). Below it:

• a VAT-registered company charges 24 percent Estonian VAT;
• an unregistered company charges no VAT, but these sales count towards its 40 000 euro registration threshold.

From the sale that passes the threshold, the customer's country applies. You may also choose the customer's country below the threshold, for at least two calendar years (VAT Act § 10^1 lg 8 and lg 9).

What counts as electronically supplied. An automated service with minimal human involvement (VAT Act § 2 lg 4; Regulation 282/2011 Art. 7). A course where a teacher teaches live over the internet is not. It is an educational service.

Where the customer lives. You need two items of evidence that do not contradict each other, such as the billing address, the IP address, the bank country or the SIM country code. While these supplies stay at or below 100 000 euros in the current and the previous year, one item from a third party, such as the payment provider, is enough (Regulation 282/2011 Art. 24a, 24b and 24f).

How the OSS works (VAT Act § 43):

• Only an Estonian VAT-registered company can join. An unregistered company must register first, voluntarily if it is below 40 000 euros. See VAT registration.
• You apply in e-MTA. The scheme starts from the next quarter, or from the first supply if you apply by the 10th of the following month.
• It covers all your services to consumers that are taxed in other member states.
• You file a quarterly return and pay by the end of the month after the quarter, with each country's rate. You file a nil return when there were no sales.
• OSS sales do not go on the KMD. You still deduct your costs on the KMD.
• You keep the records for 10 years.

A consumer needs no invoice. If you issue one, it follows the Estonian rules and shows the customer country's VAT (VAT Act § 37 lg 1^2 and lg 3).

Watch out for live online courses and webinars sold to consumers. Since 01.01.2025 the VAT Directive taxes streamed educational and entertainment services where the consumer lives, with no 10 000 euro threshold (VAT Directive Art. 54(1) and 59c). The Estonian VAT Act has no express rule for them. Get advice before you sell live courses to EU consumers.

How are goods sold to EU consumers taxed, and what is the IOSS?

Goods you ship from Estonia to consumers in other EU countries are taxed with the destination country's VAT once the same 10 000 euro threshold is passed. Digital services and goods share that threshold. The OSS lets you declare this VAT quarterly in Estonia (VAT Act § 2 lg 9, § 10^1 lg 5 and lg 7 to 10, § 43 lg 1 p 4).

• New means of transport and goods installed or assembled for the buyer are not distance sales. Second-hand goods under the margin scheme stay taxed in Estonia.
• A distance sale declared through the OSS needs no invoice. A distance sale outside the OSS does need one (VAT Act § 37 lg 3; VAT Directive Art. 220(1)).
• Transport charged in the price is part of the taxable value.
• The OSS does not cover sales from stock already held in the customer's country, such as a fulfilment warehouse abroad. Those are local sales that need a local registration.

The IOSS covers goods imported from outside the EU in consignments worth up to 150 euros, other than excise goods (VAT Act § 43^1; EMTA: the IOSS scheme):

• The seller charges the destination country's VAT at checkout. The import is then VAT-exempt when the IOSS number is in the customs declaration (VAT Act § 17 lg 1 p 11).
• An Estonian VAT-registered seller can use it directly. A non-EU seller usually needs an intermediary established in Estonia.
• A marketplace that facilitates such sales is treated as the seller (VAT Act § 4 lg 1^2).
• The return is monthly, with payment, by the end of the following month. Records are kept for 10 years.

Without the IOSS, the carrier may collect the import VAT from the recipient (VAT Act § 43^2). Since 01.07.2026 each consumer parcel worth up to 150 euros, IOSS parcels included, also pays a fixed customs duty of 3 euros per item category in the parcel. There is no refund when the goods are returned. The IOSS covers only the VAT, so include the duty in the price you show the customer (Regulation (EU) 2026/382; EMTA: consignments from 01.07.2026). See also goods imports and customs.

Common mistakes: counting only goods towards the 10 000 euros (digital services count too), forgetting nil returns, and using the OSS for stock stored abroad.

What happens if an OSS return is late?

You still file the return with Estonia, and the country of consumption sets the fine. EMTA sends one electronic reminder on the 10th day after the due date. From then on, each country where your customers live handles further reminders, assessment and collection under its own law, and you pay interest and penalties directly to that country (Regulation 282/2011 Art. 60a, 63a and 63b; EMTA: OSS and IOSS questions and answers).

• The return and the payment are due by the end of the month after the quarter, nil returns included (VAT Act § 43 lg 10).
• After a country of consumption has sent its own reminder, you pay the VAT for that country directly to it.
• You correct an earlier OSS return in a later one, within three years of the original deadline (VAT Act § 43 lg 13).
• Exclusion: EMTA excludes a company that persistently fails. Examples are reminders for three quarters in a row with no return within 10 days of each, or three quarterly payment reminders in a row with VAT still unpaid. The exclusion bars every special scheme for two years, and you then settle VAT directly with each country, which usually means local registrations (VAT Act § 43 lg 18 to 21; Regulation 282/2011 Art. 58b and 58c).

A fine from another country comes in that country's language, with its own deadline. Reply within the deadline, and ask a local adviser if the amount is material.

How do I close the OSS when the business stops?

Tell EMTA in e-MTA that your OSS supplies have stopped, by the 10th of the month after the last supply. Then file and pay the final OSS return, and any late ones, to Estonia. EMTA ends the scheme from the first day of the next quarter (VAT Act § 43 lg 17 to 19; Regulation 282/2011 Art. 57h and 58; EMTA: ending the special scheme).

The steps:

1. Leave the OSS. If you still sell but want to leave, notify at least 15 days before the end of the quarter. You then settle VAT on later sales directly with each country (Regulation 282/2011 Art. 57g).
2. File the final return. Corrections found after the final return are settled directly with each country (Regulation 282/2011 Art. 61a). Close the OSS before you apply to delete the company, so no OSS duty stays open.
3. Transfer the business, if you do. A transfer of the business as a going concern is not a supply for VAT (VAT Act § 4 lg 2 p 1).
4. Leave the Estonian VAT register. You can apply only while your Estonian sales stay below 40 000 euros. Otherwise EMTA removes the company once its activity has ended. You file the KMD every month until then. Output VAT is due on unsold goods whose input VAT you deducted, and input VAT on fixed assets is adjusted (VAT Act § 22 lg 1 and lg 4, § 29 lg 10; EMTA: removal from the VAT register).
5. A successor outside the EU that takes over the consumers owes VAT in each customer's country. It may register for the non-Union scheme in one member state of its choice (VAT Act § 43 lg 1 p 3; VAT Directive Art. 358a and 359).
6. Keep the records for 10 years from the end of the year of the sale, and decide who keeps them after the company is deleted (VAT Act § 43 lg 15).

EMTA can assess Estonian VAT for three years from the return deadline, and for five years for intentional non-payment. A board member who breaches tax duties intentionally or with gross negligence can be personally liable (Taxation Act § 98 lg 1 and § 40 lg 1).

General information, not advice for your situation. The law as in force on 30.09.2026.