Estonia increases VAT rate to 22%

VAT is an indirect tax which is ultimately paid by the consumer. It is a consumption tax on the value added of goods and services. Companies add value at each step of the production process, resulting in an increase in value. Although companies pay and recover VAT, cannot recover the VAT, it remains an important source of revenue for the State.

Within the European Union the high VAT rates vary from 17% to 27%, depending on the country and sometimes even by type of product or service. Think of the discussions on the VAT rate on fruit and vegetables, for example.

Estonia will increase the high VAT rate from 20% to 22% on 1 January 2024.

Estonia has announced that the high VAT rate is rising from 20% to 22%, a substantial increase which will generate substantial additional revenue for the State. Until such time, for those who are relevant, "shopping or refueling' may still be carried out at the lower rate.

Does this change affect you?

Yes and no. In principle, little is changing for companies: they work VAT neutrally. The VAT you receive will be refunded, and the VAT you pay can be refunded. Tanking in Estonia is thus not more expensive for companies by the new rate.

However, you should take into account the following:

• The temporary pre-financing increases because you have to advance 22% VAT.
• You will receive this VAT from the Estonian tax authorities later. Thus, nothing changes to net costs in business, but your cash flow is temporarily taxed slightly more.