As we shared in our 2024 regulatory guide, there are number of regulatory changes taking place in the coming year. One of the most crucial ones to take note of is the value-added tax (VAT) change. 

From 01.01.2024, the standard VAT rate in Estonia will be 22% instead of the current 20%. This means that turnover generated in 2024 will be taxed at 22%. Let us explain with some examples what you should take into account when calculating VAT from the new year.

1. Time of supply of goods

X sells goods to Y with the standard rate of VAT.

Scenario I: X issues an invoice for all the goods in 2023, which Y pays in 2023.

If Y pays for the goods in full in 2023, the turnover will occur in 2023 and the goods will be taxed at 20% VAT. This is also the case if Y pays in 2023, but X supplies the goods to Y in 2024. 

Scenario II: X issues a 50% advance payment invoice to Y in 2023. The remaining 50% must be paid by Y in 2024.

The part of the advance is taxed at 20% VAT. The remaining part of the turnover will occur in 2024 and will be taxed at a VAT rate of 22%.

Scenario III: X issues an invoice to Y in 2024 for the whole cost of the goods.

If Y pays the invoice in 2024, turnover will occur in 2024 and will be taxed at 22% VAT.

X issues an invoice to Y in 2023, but Y pays the invoice and receives the goods in 2024.

No turnover is generated by issuing an invoice. If Y pays in 2024, the turnover will also be in 2024, taxed at 22% VAT.

Scenario IV: X sells goods to Y in 2023. Y returns the goods in 2024.

When goods are returned, the previously issued invoice is credited. If the sales invoice has a tax rate of 20%, this also applies to the credit note.

2. Time of supply of services

X provides a service to Y between 11.2023 and 05.2024.

Scenario I: Y will pay for the whole period with an advance invoice.

If Y pays for the whole period in 2023, the turnover will occur in 2023 and will be taxed at 20% VAT.

Scenario II: Y pays for the entire service at the end of the period.

If Y pays for the whole period in 2024, the turnover will occur in 2024 and will be taxed at 22% VAT.

Scenario III: Y pays for each month separately.

In this case, the last transaction with a VAT rate of 20% will be in December 2023. Invoices from January 2024 onwards will have to indicate a VAT rate of 22%.

We hope you found these examples explanatory. If in need of further assistance, please don’t hesitate to contact us.