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English translation of  Estonian original (https://www.emta.ee/ariklient/maksud-ja-tasumine/kaibemaks/kaibemaksukohustuslasena-registreerimine/piirmaara-arvestus-alates-01012025):

As of 1 January 2025, the €40,000 threshold for mandatory VAT registration will include:

  • Taxable turnover of goods and services, including turnover subject to a 0% VAT rate, excluding the sale of fixed assets;
  • Turnover from real estate transactions (as per VAT Act § 16 subsection 2 points 2, 3, and 6), excluding the sale of fixed assets and occasional transactions;
  • Turnover from insurance services (as per VAT Act § 16 subsection 2 point 1) and financial services (as per VAT Act § 16 subsection 21), excluding occasional services.

Only turnover with its place of supply in Estonia will count towards the threshold.

If a company’s entire turnover is exempt from VAT or taxed at 0% VAT (and does not include intra-community supplies), there will be no obligation to register for VAT regardless of the turnover amount.


Real Estate Transactions
Real estate transactions included in the threshold calculation encompass all transactions listed in VAT Act § 16 subsection 2 points 2, 3, and 6—such as sales transactions, rental and lease agreements, and, for example, membership in housing associations.


Insurance Services
Insurance services included in the threshold calculation also encompass reinsurance and insurance mediation services.


Financial Services
Financial services included in the threshold calculation refer to services specified in VAT Act § 16 subsection 21, such as:

  • Deposit transactions involving the acceptance of deposits and other repayable funds from the public;
  • Loan transactions, including consumer credit, mortgage loans, and other financing transactions for business activities;
  • Leasing transactions;
  • Payment services as defined in the Payment Institutions and E-Money Institutions Act, except for transactions involving commemorative coins as per EU Regulation No. 651/2012 or commemorative coins from non-EU countries that are not investment gold;
  • Issuance and management of non-cash payment instruments, such as electronic payment methods, e-money, travelers’ checks, and bills of exchange;
  • Guarantee and collateral transactions and other transactions that create binding obligations for the future;
  • Transactions involving negotiable securities and foreign currencies as specified in VAT Act § 16 subsection 1 points 1–7, including money market transactions such as transactions involving checks, bills of exchange, certificates of deposit, and similar instruments;
  • Transactions and activities related to the issuance and sale of the securities mentioned in point 7;
  • Brokerage activities;
  • Negotiation services related to the services mentioned in points 1–9;
  • Management of investment funds as specified in the Investment Funds Act and other investment funds subject to financial supervision in a contracting state of the European Economic Area, including services related to the delegation of fund management tasks to the fund.

To determine whether a financial transaction constitutes turnover under the VAT Act, attention should be paid to whether the service is provided as part of the independent economic activity of the company, i.e., whether the company has the ability to influence the price of their service. For example, deposit interest is essentially a fee paid to the bank for borrowed funds, but since the recipient of the deposit interest cannot determine the interest rate, it cannot be considered turnover under the VAT Act. If one business loans money to another, the interest is agreed upon, the service provider sets the price, and the transaction constitutes economic activity that generates turnover.

Thus, financial turnover includes, for example, the sale of various securities and interest earned from loans if these are not occasional transactions. Financial turnover does not include deposit interest or, for example, interest earned from bonds, dividend income, or bond redemption.


Other Exempt Services
Other VAT-exempt services, such as healthcare or education services, will continue to be excluded from the threshold calculation as of 01.01.2025.

Additionally, the sale of fixed assets and real estate, financial, or insurance transactions that are occasional will not count towards the threshold. Occasional transactions cannot be assessed solely by frequency, amount, or proportion. A transaction is generally considered occasional if a business has invested surplus funds, provided a loan, etc., but was established for other business activities.

The Ministry of Finance has clarified occasional transactions as follows:

“An occasional transaction occurs when the relevant transactions are not related to the main activity or daily business of the taxable company. For example, the sale of securities is an occasional transaction if the business had acquired them as an investment but does not engage in securities trading as its main activity, or if a loan is issued by a business that is not primarily engaged in lending activities. When determining whether a transaction is occasional, consideration is also given to the extent of input used for the transaction (C-378/15).”


Examples

Example 1
An Estonian business generates turnover of €42,000 in a year solely from leasing residential property.

Since the turnover is entirely VAT-exempt, there will be no obligation to register for VAT even from 2025.


Example 2
An Estonian business has VAT-exempt turnover of €38,000 from leasing residential property and taxable turnover of €2,500 from providing training services starting from the beginning of the calendar year.

The business has both taxable turnover and VAT-exempt turnover related to real estate (which is not an occasional transaction). From the day the calendar year’s total turnover exceeds €40,000, the business must register for VAT. Additionally, it must begin proportionate input VAT calculations.


Example 3
A company engaged in toy manufacturing generates €38,000 in turnover during the calendar year. The company has a surplus amount of money, which it loans out once and earns €3,000 in interest. The next year, the company plans to reinvest the returned loan and interest in developing its toy factory.

In this case, the financial transaction can be considered occasional. Although the threshold of €40,000 is exceeded with VAT-exempt turnover from interest, no registration obligation arises.


Example 4
A business engages in securities trading. Its VAT-exempt turnover from selling shares is €300,000, and its taxable turnover from consulting services is €1,000.

As of 01.01.2025, the business must register for VAT upon reaching the €40,000 threshold. If the business has only VAT-exempt turnover from the beginning of the calendar year, the registration obligation arises on the day taxable turnover occurs.


Example 5
A business provides VAT-exempt healthcare services amounting to €500,000 and also sells training services worth €2,000.

Even in 2025, there is no obligation to register for VAT, as healthcare services fall under social VAT exemptions that are not included in the threshold calculation.


Handbook Article Last Updated: 22.01.2025