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How does the VAT system work?

Last updated: September 25, 2025

VAT (Value Added Tax) is a consumption tax that is added to the price of most goods and services.

If your company is registered for a VAT number in Estonia, you must apply the Estonian VAT rate of 24% to your taxable sales. The VAT you collect from your customers does not belong to your company - it must be reported and paid to the Estonian Tax and Customs Board.

At the same time, you are generally entitled to reclaim the Estonian VAT paid on your company’s business-related purchases (known as input VAT). The amount you pay to the tax authority is therefore the difference between the VAT collected on sales and the input VAT deducted from eligible expenses.

If you believe your company may need a VAT number, please contact us at support@xolo.io, so we can assess your company´s need for the VAT number in Estonia.

The VAT number registration is available as an add-on service for €69 + VAT.

Once your company has a VAT number, Xolo Leap will handle all regular monthly VAT reporting in Estonia on your behalf.

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