--- title: VAT Act Amendments 2025 date: 2024-09-26T11:10:45Z modified: 2026-09-14T17:05:58Z permalink: "https://grow.ee/kaibemaksuseaduse-muudatused-2025/" type: post status: publish excerpt: Next year, entrepreneurs will face several changes to the VAT Act. Read more about which ones. wpid: 14351 featured_image: "https://grow.ee/wp-content/uploads/2024/09/Kaibemaksuseaduse-muudatused-scaled.jpeg" timestamp: 2026-09-14T17:05:58Z tags: - Taxes --- ![](https://grow.ee/wp-content/uploads/2024/09/Kaibemaksuseaduse-muudatused-scaled.jpeg) Next year, entrepreneurs will face several changes to the VAT Act. **From 01.01.2025, VAT rates will change:** Accommodation services and accommodation with breakfast will be taxed at 13% instead of the current 9%. A transitional provision has been provided: until 31.12.2026, the user of cash-based VAT accounting may continue to calculate VAT at 9% if the invoice has been issued and the service provided before 01.01.2025; VAT on press publications will again increase to 9%. VAT may be paid on turnover occurring after 01.01.25 at the rate of 5% if the buyer was issued an invoice and a paper publication was sent or an electronic press publication was made available before 01.01.2025. **From 01.07.2025** the VAT rate will increase to 24% due to the addition of the 2% security tax. This summer, the Riigikogu has taken into consideration the amendments to the VAT Act initiated by the government, which are scheduled to be put on the plenary agenda in September and will come into force in 2025. ### Special scheme for small enterprises As a result of the amendments to the VAT Act, small enterprises will receive fairer treatment and their administrative burden will be reduced. The Small Business Scheme will be introduced in Estonia in connection with the amendment of European Union regulations. This will ease the rules for taxation of small enterprises abroad. According to the previous rules, a small enterprise whose turnover in its country of residence was below the permitted threshold was still obliged to pay VAT when selling goods and services to the end consumer in another Member State from the date of turnover. This has resulted in unequal treatment of small enterprises. To which small enterprises does the special scheme apply? A threshold has been established for this purpose: the company's total turnover in the Member States of the European Union must not exceed 100,000 euros per year. It must also be ensured that the volume of transactions in a Member State does not exceed the national threshold for the occurrence of tax liability. If a foreign company has business activities in Estonia, has been granted the right to use the special scheme for small enterprises in its country of residence and its turnover does not exceed 40,000 euros per year, then, equally to an Estonian company, it is not obliged to register as a VAT payer and can sell goods and services tax-free. This is identified by a registration number with the suffix "EX", which the small company receives from the tax authority of its country of residence. Therefore, a small company may not be obliged to declare and pay VAT in every Member State where it conducts business activities. Implementing the special scheme makes it easier and more cost-effective to expand its business activities to other Member States. **The special scheme for small enterprises is accompanied by restrictions on the deduction of input VAT.** If goods and services are purchased for the purpose of turnover for which there is no VAT liability, then the input VAT on such purchases may not be deducted either. **The reverse charge obligation will also be reduced in connection with the special scheme.** A taxable buyer who has so far calculated and paid VAT when purchasing goods and services from a foreign company will no longer be obliged to reverse charge if the seller of goods or services applies the special scheme for small enterprises. This information can be obtained from the registration number indicated on the buyer's invoice. A limited taxable person will also no longer have to pay VAT on purchases for which he has received an invoice with the corresponding note. ### Input VAT on real estate When purchasing real estate, the calculation of input VAT is based on the estimated ratio of taxable and tax-free turnover related to the real estate. However, if the actual use of the real estate differs from the initially planned one, then according to the currently valid rules, the input VAT deductible at the end of each year for 10 years is adjusted according to the actual use of the real estate. Thus, only 1/10 of the input VAT per year is subject to adjustment. The proposed amendment to the law provides for the adjustment of the entire input VAT amount in the first year if the actual initial use of the property differs from the planned one. For example, if instead of providing accommodation services, the premises are rented out, which generates tax-free turnover. Example: In 2025, construction of a building begins and is planned to be sold. 100,000 euros of the input VAT calculated on the turnover will be deducted from the construction costs. The building will be completed in May 2026, but the initial plans have changed and it will be put into operation in June 2026 to provide residential rental services. Since the purpose of use has changed, a recalculation must be made in terms of the input VAT deducted. Therefore, the input VAT deductible in the June 2026 VAT return will be reduced by 100,000 euros. ### Definition of a new building With the amendment to the law in 2025, the treatment of a new building will change. Section 16(2)(3) of the VAT Act provides that the sale of immovable property is a tax-free transaction. The exception is the sale of a building before its first use – this is a transaction subject to VAT. The definition of a new building needed to be clarified, because it is not always clearly defined. The question of when and how a new building becomes a used building has caused controversy. Therefore, and considering the fact that the European Union VAT Directive gives the Member States room for decision-making in this regard, the draft amendments to the VAT Act have been amended at the initiative of the Estonian Tax and Customs Administration: the sale of a building is also taxable if it takes place within the first year after its first use. Therefore, even though the building is already in use, it is still considered a new building for one year from a taxation point of view. The same applies to a renovated (over 10%) building: it is considered a new building for one year after it is put back into use. ### Rules on the place of origin of turnover for events When determining the place of origin of turnover for services related to events, special rules are important, which apply to services related to culture, sports, education, science, entertainment and other similar events (such as fairs, exhibitions, conferences). Such services are taxed in the country where the event takes place. The amendment to the law concerns services provided to a private individual via the Internet, in which case the turnover is considered to have occurred at the person's place of residence or location, and no longer at the place where the event takes place. The previous rules were already outdated, because many events today take place entirely or partially virtually. This amendment allows the use of the [OSS](https://grow.ee/wp-content/uploads/wp-mfa-exports/post/kuidas-oss-ja-ioss-maksumaksja-elu-muudavad.md) special procedure when declaring and paying VAT, which simplifies the fulfillment of tax obligations. However, if the seller's turnover to private individuals in the Community does not exceed 10,000 euros, he may declare the turnover of services on the Estonian VAT return. ### Calculation of the turnover threshold when registering as a VAT payer Under the current legal provisions, an entrepreneur is not obliged to register as a VAT payer if his entire turnover constitutes turnover with a rate of 0 %. The exception is 0% intra-Community turnover of goods and turnover of services in which the tax liability is on the foreign buyer (B2B). In 2025, this rule will become even simpler: there will be no obligation to register as a taxable person if the entire turnover of the entrepreneur constitutes tax-exempt turnover and turnover taxable at the rate of 0%, excluding intra-Community turnover of goods. However, it should be borne in mind that currently turnover in foreign countries is also taken into account in the threshold, but as a result of the amendment to the law, only turnover in Estonia will be taken into account. The sales of fixed assets are still not taken into account when calculating the threshold. The exception is real estate, the sale of which is included in the threshold – regardless of whether it is [recorded in the accounts](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/raamatupidamisteenus.md) as fixed assets or as investment property. If you would like help with VAT or other taxes, read more about our [tax advisory service.](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/maksunoustamine.md) ## Talk to our financial expert [ CONTACT US ](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/vota-meiega-uhendust.md)