Higher VAT, excise duties take effect from Tuesday

TALLINN - A number of changes affecting both businesses and consumers in Estonia take effect on Tuesday, including an increase in VAT and several excise duties, along with a new right for buyers to demand e-invoices from sellers.

Starting from July 1, the standard VAT rate rises from 22 percent to 24 percent. Initially, the higher VAT rate was set to apply until the end of 2028, but the government recently decided to make the increase permanent.

The Value-Added Tax Act does not include transitional provisions for the higher rate. According to the explanatory note, businesses must factor in possible risks when signing contracts and take measures to minimize them.

Until the end of 2025, VAT-liable businesses were allowed to apply a 20 percent VAT rate if the contract was signed before May 1, 2023, and the agreement did not allow for price adjustments linked to VAT increases. That option no longer applies after July 1.

From July 1, accounting entities listed in the business register as e-invoice recipients can demand an e-invoice from the seller for purchased goods or services. Buyers may demand e-invoices from both private and public sector sellers, provided the buyer is registered as an e-invoice recipient in the e-Business Register.

Additionally, an amendment to the Accounting Act requires that e-invoices comply with the European e-invoicing standard. However, the law allows parties to agree on using another relevant standard. Thus, the Estonian e-invoice standard may continue to be used if both parties agree.

The main goal of these changes is to expand the use of e-invoices in private sector transactions.

Also from July 1, excise duties on unleaded gasoline, leaded gasoline, and aviation gasoline will increase by 5 percent. The combined effect of the excise duty and VAT increases amounts to 6.3 cents per liter. Gasoline excise duties will rise by an additional 5 percent in each of the next three years.

From July 1, excise duties on cigarettes, cigarillos, cigars, smoking tobacco, tobacco liquids, solid tobacco substitutes, and other alternative tobacco products will also increase by 5 percent.