Should You Register as a VAT Payer Already Today?

VAT often feels like an extra headache for entrepreneurs. Once your yearly turnover passes 40 000 €, becoming a VAT payer is no longer optional and you must register. But what should you do before you reach that limit? Should you register voluntarily or wait until the law forces you?

On one hand, VAT might look like extra paperwork and an added bookkeeping cost. On the other hand, it can help you save money if you use it wisely.

The right choice depends on who your clients are, what you spend money on every month and whether VAT works in your favour or not.

Who is a VAT payer?

A VAT payer is a company that is registered in the VAT register with the Estonian Tax and Customs Board.

If your company is a VAT payer:

• You add VAT to your sales invoices and declare it to the Tax Board every month.

• You can get back the VAT you paid on business-related purchases, for example laptops, office supplies, services or fuel.

💡 Keep in mind: the standard VAT rate in Estonia is 24 percent.

When is VAT registration mandatory?

When your yearly turnover passes 40 000 €, you must register. This is a legal requirement.

When does voluntary registration make sense?

Most entrepreneurs know that VAT registration becomes mandatory once your yearly turnover reaches 40 000 €. What many do not realise is that you can register much earlier, even from day one. In some cases this can save you money, in others it can make your prices higher. The right choice depends on your clients and your monthly expenses.

This is where a simple calculation helps.

VAT can be useful when:

• Your clients are other VAT-registered companies, because the added VAT does not make your price higher for them. They get VAT back.

• You have monthly expenses from which you could get VAT refunded.

💡 The main rule is simple: Check if the amount of VAT you regularly get back is higher than the time or cost of submitting the VAT declaration.

Example

• You buy goods and services worth 2 000 € each month (without VAT). 

• VAT on this amount is 480 €. 

• If you are a VAT payer, you can get that 480 € back. 

If your accountant charges around 50 € per month for handling VAT, this is worth it. But if your expenses are small and you only get back around 20 €, then taking on extra administration does not make sense. If you do the declaration yourself, count your time as a cost too. Once you learn the system, the monthly declaration becomes quick, and it can be a great way to keep expenses under control and get part of your money back.

Pros of registering

• You get back the VAT paid on your business purchases.

• If your clients are VAT payers (B2B), the VAT does not affect their final price.

• It can create a more professional and trustworthy image in B2B work.

Cons of registering

• You must submit monthly VAT declarations

• Some administrative work is required, either your time or an accountant’s time.

• If your clients are private individuals, your price becomes higher for them.

Common questions

Does a small OÜ need to register?

No. Only once you pass 40 000 € turnover.

Is it smart to register if my clients are only private individuals?

Usually not, because your price increases immediately by the VAT amount.

Can I cancel my VAT number later?

Yes. You can cancel it whether you registered voluntarily or after passing the threshold. If your turnover stays below 40 000 €, you can give up the VAT number again. The process is simple and does not take long.

Summary

If the law does not require it yet, VAT registration is not a black-and-white decision. It depends on your business model and who your clients are. 

• If you mainly sell to private individuals and you have few expenses, it is reasonable to wait before registering.

• If your clients are companies and you have monthly expenses where VAT can be refunded, voluntary registration might be a good move.

The main rule is easy: Check whether the VAT you get back is larger than the administrative cost of submitting the monthly declaration. If it is, registering early can be worth it.