Input VAT, invoices, credit notes and the VAT return in Estonia

This guide covers the monthly VAT work of a small Estonian company that is registered for VAT. It explains what a VAT invoice must contain, when the company can deduct the VAT on its purchases (input VAT), and how credit notes, prepayment invoices and bad debts work. It also explains the VAT return (KMD), its invoice annex (KMD INF), corrections, refunds and payment. Registration and cross-border services have their own guides: VAT registration and cross-border services and OSS.

In short

• A VAT invoice needs ten mandatory items and is due within 7 calendar days of the supply or of a prepayment.
• You deduct input VAT only for business use with a valid invoice. A missing invoice never delays the return: deduct it in the month it arrives.
• A private cost invoiced to the company carries no input VAT.
• A credit note refers to one specific invoice and goes in the return of the month it is issued. It cannot fix non-payment.
• The KMD and the KMD INF are due by the 20th of the next month, every month, including nil returns.
• An error in a filed return is fixed by a corrected return for the original month, with interest of 0.06 percent per day on extra tax.

What must a valid VAT invoice contain, and by when must it be issued?

A VAT invoice must carry the mandatory items (rekvisiidid) of VAT Act § 37(7), and it must be issued within 7 calendar days of the supply.

The mandatory items are:

1. a sequential number and the date of issue;
2. the seller's name, address and VAT number (KMKR number, "EE" plus 9 digits);
3. the buyer's name and address;
4. the buyer's VAT number, when the buyer pays the tax (reverse charge, an intra-EU supply);
5. a name or description of the goods or services;
6. the quantity or extent;
7. the date of supply or of the prepayment, if it differs from the issue date;
8. the price without VAT, and any discount not already in the price;
9. the taxable amount per rate with the rate (24, 13 or 9 percent), or the exempt amount;
10. the VAT amount, in euros even when the invoice is in another currency.

Some invoices need an extra note (VAT Act § 37(8) and (8^1)): the legal basis of a 0 percent or exempt supply, "pöördmaksustamine" for reverse charge, the margin scheme notes, "endale arve koostamine" for self-billing, and "kassapõhine käibemaksuarvestus" for cash accounting.

The deadlines (VAT Act § 37(1), (2) and (2^1)):

• 7 calendar days from the supply, or from the end of the billing period for continuous supplies;
• 7 days from receiving a prepayment (see prepayment invoices);
• the 15th of the next month for an intra-EU supply of goods, and for a B2B service under the general rule to a business in another member state.

You need no invoice for a sale to a private person for personal use, except distance sales, new means of transport and tax-free exports (VAT Act § 37(3)).

A simplified invoice is allowed only up to 160 euros without VAT, for passenger transport and machine receipts such as parking or fuel terminals. The buyer adds its own name and VAT number to use it (VAT Act § 37(9) to (11)). An invoice can be on paper or, with the buyer's consent, electronic (VAT Act § 37(6)). A buyer registered in the Business Register as an e-invoice recipient can demand an e-invoice in the EN 16931 standard (Accounting Act § 7^1(3) and (7)). Keep invoices for 7 years (VAT Act § 36(1) clause 1).

Common mistakes: an old company name after a rename, the registry code in place of the VAT number, and a missing VAT amount. The EMTA page on VAT invoices explains the rules in Estonian. The rates are on the Estonian VAT rates page, and the VAT calculator adds or removes VAT.

When can you deduct input VAT, and what if the supplier invoice is missing?

You deduct input VAT on a domestic purchase when three conditions meet: the purchase serves taxable business, you hold a valid invoice, and you claim it in the right month. If the invoice has not arrived when the return is due, you file on time and deduct the VAT later, in the month the invoice arrives.

1. Business use. The purchase serves taxable supplies, including 0 percent supplies, not exempt supplies or private use (VAT Act § 29(1)).
2. A valid invoice. A purchase from another taxable person needs an invoice that meets § 37 (VAT Act § 31(1)). Reverse-charge acquisitions can rely on other evidence, and imports rely on the customs declaration (VAT Act § 31(2) to (4)).
3. The right month. The deduction belongs to the month of the supplier's tax point: delivery, performance or prepayment, whichever comes first (VAT Act § 31(8) and § 11(1)). If the invoice has not arrived when that month's return is filed, you deduct it in the month you receive it (VAT Act § 31(9)).

So a missing purchase invoice is not an error that needs an amended return. An invoice that arrived in time but was not entered is an error: amend the return of the correct month (VAT Act § 27(5)).

One exception: if the supplier uses cash accounting (its invoice says "kassapõhine käibemaksuarvestus"), you deduct only the part you have paid, in the month of payment (VAT Act § 31(10) and § 44).

A defective invoice is not a § 37 invoice. Examples: a wrong or old buyer name, the registry code in place of the VAT number, no VAT amount. Ask the supplier for a corrected invoice or a correcting document that refers to the original (VAT Act § 37(4)), and deduct when it arrives. Check that the supplier is VAT registered: only VAT payable to another taxable person is input VAT (VAT Act § 29(3) clause 1). The EMTA page on VAT calculation covers the timing.

Can the company deduct VAT on a private expense?

No. VAT on goods or services used for the owner's private purposes is not input VAT of the company, even if the invoice names the company and the company paid it (VAT Act § 29(1)). If a purchase serves both business and private use, only the business part is deductible (VAT Act § 29(4)).

What to do:

1. Leave the invoice out of the KMD and the KMD INF.
2. Have the owner repay the company.
3. Ask the supplier to invoice the owner personally in future.

If you already deducted the VAT, amend the return of that month (VAT Act § 27(5)) and pay the difference with interest of 0.06 percent per day (Taxation Act § 115(1) and § 117(1)).

If the company is not repaid, income tax follows. For a board member or employee, the paid private cost is a fringe benefit, taxed at 22/78 (Income Tax Act § 48), with social tax on top (Social Tax Act § 2(1) clause 7). Otherwise it is a non-business expense or a hidden profit distribution, also taxed at 22/78 (Income Tax Act § 50 and § 51). A long open receivable from a shareholder can be taxed as a hidden profit distribution (Income Tax Act § 50^2). For a company car, a special 50 percent limit applies: see cars and private use.

How do you split input VAT between taxable and exempt activities?

Deduct VAT in full on costs that serve only taxable sales, deduct nothing on costs that serve only exempt sales, and split shared costs by the ratio of taxable turnover to total turnover (VAT Act § 33).

Typical exempt activities of a small company are the rental of real estate (unless the company opted to tax a non-residential rental), sales of shares and securities, loans and other financial services, insurance and education (VAT Act § 16).

• The ratio. Turnover with a right of deduction, including 0 percent and foreign taxable supplies, divided by all turnover, rounded up to a whole percent. Sales of fixed assets and incidental financial or real estate deals are left out (VAT Act § 32(1) and (2)).
• During the year you use the previous year's ratio. At year end you recalculate with the actual ratio and put the difference in the last return of the year (VAT Act § 33(2)). In its first year, a company asks the Tax Board to set a forecast ratio.
• Fixed assets are adjusted over 10 calendar years for real estate and 5 years for other fixed assets (VAT Act § 32(4) to (5^1)).

Can you deduct VAT on entertainment, gifts and staff meals?

No VAT is deductible on goods and services used to receive guests or to feed or house your own staff (VAT Act § 30(1)). That covers business meals with partners, client events, and staff lunches or a Christmas party. Hotel stays of staff on a business trip are the exception (VAT Act § 30(2)).

Business gifts work differently. If you deduct the input VAT on goods you give away, the gift is a self-supply, and you charge output VAT on its cost (VAT Act § 2(6), § 4(1) clause 2 and § 12(6)). Samples, and advertising goods worth up to 10 euros, are not a supply, so their VAT stays deductible (VAT Act § 4(2) clause 6).

Income tax has its own limits. Reception costs are free of income tax up to 50 euros a month plus 2 percent of the month's payroll subject to social tax, and promotional items up to 21 euros without VAT are not gifts (Income Tax Act § 49(1) and (4)). A reception inside the income tax limit still has no deductible VAT.

How does a credit note work, and in which period does it go?

A credit note (kreeditarve) is a document that refers to one specific earlier invoice and changes it, for example a later discount, returned goods or a cancelled order. It counts as an invoice (VAT Act § 37(4)). When it is issued after the return of the original month was filed, both seller and buyer record it in the return of the month the credit note is issued (VAT Act § 29(7)).

• Content. Its own number and date, the parties, the number of the original invoice, and the reduced taxable amount and VAT at the rate of the original supply.
• One invoice only. A credit note may relate only to the invoice it names. One credit note "on account" for several invoices is not allowed (VAT Act § 29(7)).
• KMD INF. The credit note appears as a negative line in the month of issue.
• Before filing. If you change the invoice before the original month's return is filed, correct it in that return.

A credit note is for a change in the facts of the deal. It is not the tool for:

• an error in the original return, such as a wrong rate or a forgotten sale: amend the return of the original month (VAT Act § 27(5); see corrections);
• non-payment by the customer: § 29(7) expressly does not apply to a credit note issued because the invoice went unpaid. Use the bad debt rule.

The EMTA page on VAT corrections draws the same line between a change of facts and a declaration error.

Can you get back the VAT on an invoice the customer never pays?

Yes, but only under the bad debt rule of VAT Act § 29^1, and not earlier than 12 months after the due date. All of these must be true (VAT Act § 29^1(1)):

1. you issued a § 37 invoice;
2. you declared the VAT in the return of the supply month;
3. you did not sell or assign the claim;
4. at least 12 months and at most 3 years have passed since the due date (the 3-year limit does not apply to a claim with more than 30 000 euros of VAT that a final court judgment confirms, see point 6);
5. you wrote the claim off in the books because it could not be collected despite every effort, or because collecting it would cost more than it would bring;
6. if the VAT in the claim is over 30 000 euros, a final court judgment confirms the claim;
7. the buyer is not a related person under Income Tax Act § 8;
8. you told the buyer in writing, in the month of the write-off, about the write-off and the VAT amount.

You reduce the VAT in the return of the month of the write-off (VAT Act § 29^1(2)). If the customer pays later, the paid part is taxed again in the month of payment, and a buyer that gets the notice adds the deducted VAT back (VAT Act § 29^1(3) and (4)). Until the conditions are met, the VAT stays payable.

How do prepayment invoices work, and which rate applies after a rate change?

A prepayment received before the supply creates the tax point for the amount received (VAT Act § 11(1) clause 2 and (3)). The seller issues a prepayment invoice (ettemaksuarve) within 7 days of the payment (VAT Act § 37(2)) and declares the VAT in the month of receipt. The buyer deducts it in the same month, on the basis of that invoice (VAT Act § 31(8) and (9)).

• The final invoice shows the total, deducts the prepayment, and charges VAT only on the rest.
• An intra-EU supply of goods is the exception: a prepayment creates no tax point there (VAT Act § 11(2)).
• If the deal falls through and you return the prepayment without any supply, you may leave the VAT on it uncalculated (VAT Act § 29(9)). If that month's return was already filed, issue a credit note that refers to the prepayment invoice.

Rate changes. VAT uses the rate in force on the tax point day (VAT Act § 29(13)). The standard rate rose from 22 to 24 percent on 01.07.2025. A prepayment received in June 2025 kept 22 percent, and the rest, delivered or paid from July, took 24 percent. An invoice alone is not a tax point. A credit note uses the rate of the original supply. The rates are 24, 13 and 9 percent (VAT Act § 15), and the planned return to 22 percent was cancelled when the Security Tax Act was repealed (amending act, RT I, 08.07.2025, 1). No rate change is scheduled on 30.09.2026. See Estonian VAT rates for the history.

When is the VAT return (KMD) due, and what goes in the KMD INF annex?

The VAT return (käibedeklaratsioon, KMD) and its annex KMD INF for each calendar month are due by the 20th of the next month, and the VAT is payable by the same date (VAT Act § 27(1) and § 38(1)). If the 20th is a weekend day or a public holiday, the deadline moves to the next working day (General Part of the Civil Code Act § 136(8) with Taxation Act § 50(1)). The tax calendar shows the dates.

Nil returns. Every registered taxable person files, with no exception for empty months (VAT Act § 27(2) clause 1). The Tax Board may delete from the register a company that has not filed for six months in a row (VAT Act § 22(3)). A company can apply for deletion if its Estonian taxable turnover did not exceed 40 000 euros in the current or the previous calendar year and will not exceed it in the next 12 months (VAT Act § 22(1)).

Filing is electronic, in e-MTA or through software, once the company has been registered for 12 months or the annex lists more than five invoices (VAT Act § 27(1^1)).

KMD INF lists invoices one by one (VAT Act § 27(1^2) to (1^4); form instructions):

• part A lists sales invoices and part B purchase invoices with partners that have an Estonian registry code. Invoices to private persons and to foreign businesses without an Estonian code are not listed;
• only invoices with VAT at 24, 13 or 9 percent (on a credit note or correction, also an old rate). Invoices with only 0 percent or exempt amounts are not listed;
• only when the partner's total without VAT in the month is at least 1 000 euros, counted separately for sales and purchases. Once the threshold is reached, every invoice and credit note of that partner in the month is listed, each on its own line, with credit notes as negative amounts;
• part B lists only invoices whose VAT you deduct, so a defective or private invoice stays off.

Intra-EU supplies of goods and B2B services to other member states also need the VD report by the 20th, until 31.12.2026 (VAT Act § 28).

From 2027. Under the VAT Act version in force from 01.01.2027, the VD report is repealed and the KMD becomes one data set of invoice-level data (VAT Act from 01.01.2027). The Tax Board says the data-based filing is available from April 2027 (EMTA). Check with the Tax Board how to file January to March 2027.

How do you correct a filed VAT return, and how fast is a VAT refund paid?

You correct an error by filing a new KMD (and KMD INF) for the original month, not in the current return (VAT Act § 27(5)). This covers a forgotten sales invoice, a wrong rate, input VAT deducted without a valid invoice, and an invoice received in time but not entered. Only a change in the facts (credit notes) and a purchase invoice that arrived late (input VAT) go in the current month.

• If the error made the VAT too low, tell the Tax Board without delay (Taxation Act § 89(1)). The corrected return does that. Do not hold it back, for example until the annual report.
• Extra tax bears interest of 0.06 percent per day from the day after the original due date (Taxation Act § 115(1) and § 117(1)).
• A correction in your favour can wait, within the 3-year assessment period (Taxation Act § 98(1)).

Refunds. When input VAT is larger than output VAT, the excess is refunded (VAT Act § 34(1)). It first becomes a credit on the prepayment account and pays other taxes (Taxation Act § 105(3)). To get the money paid out, apply in e-MTA with your bank details. The Tax Board pays within 60 days of the application, or of the tax due date if you applied earlier (Taxation Act § 106(2) and (3)). If it has reason to fear that the money could not be recovered and it asks you or a third party for more evidence, it may extend that term by up to 60 days, 30 days at a time, by a reasoned decision (VAT Act § 34(2) and (3)). A late refund earns 0.06 percent per day (Taxation Act § 116(2)), and a refund of 10 euros or less is paid only on a separate request (Taxation Act § 106(6)).

How do you pay VAT through the prepayment account, and what if you pay late?

You pay all taxes into one prepayment account (ettemaksukonto) at the Tax Board, with the company's reference number. On each due date the Tax Board sets the declared taxes off against the balance, with no request needed (Taxation Act § 105(2) and (3)).

• The money must arrive by the 20th: the day of receipt counts (Taxation Act § 105(5)).
• The balance pays older debts first. An unpaid payroll tax due on the 10th is covered before the VAT due on the 20th (Taxation Act § 105(6)).
• A standing balance also covers later corrections of past months, because interest runs only on tax not paid by its due date (Taxation Act § 115(1)).

VAT not covered by the due date bears interest of 0.06 percent per day until payment (Taxation Act § 115(1) and § 117(1)). A company in temporary difficulty can apply for a payment schedule (Taxation Act § 111). File on time even when you cannot pay: while a return is missing, the Tax Board may hold back a refund (Taxation Act § 107(3^1)). See the EMTA page on paying VAT.

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