Accounting for a private limited company (OÜ)
The private limited company (osaühing, OÜ) is the most common legal form in Estonia and, historically, the most recently created one, which also makes it the most practical in today’s conditions. Its advantages are simple and fast registration, a relatively low required share capital (2500 euros) and the absence of the shareholders’ personal liability for the company’s obligations.
Accounting in Estonia is accrual-based, which means income and expenses are recorded when they arise, not when the money moves:
- when the ownership of goods transfers or services are provided
- when an invoice is received or issued
Accounting for a company that is not VAT-registered
This suits a business whose:
- turnover is small (below 40 000 euros per year)
- activities include VAT-exempt turnover (Estonian VAT Act §16)
Required reports and declarations:
- if salaries or similar payments are made: the TSD declaration for the previous month, by the 10th of each month (to the Estonian Tax and Customs Board)
- once a year: the annual report (to the Estonian Business Register)
Accounting for a VAT-registered company
The accounting of a VAT-registered OÜ is more complex, and it is usually wise to leave it to an accountant.
Different VAT rates apply in Estonia (as of 2026):
- the standard rate of 24% (most goods and services)
- reduced rates (for example 9% for books, 13% for accommodation)
- 0% (export, VAT Act §15)
- VAT-exempt services (VAT Act §16)
Required reports and declarations:
- by the 10th of each month: TSD (to the Tax and Customs Board)
- by the 20th of each month: KMD, the VAT return (to the Tax and Customs Board)
- once a year: the annual report (to the Business Register)
When is it worth becoming VAT-registered?
There is no single right answer. Every business owner should ask themselves a few questions first: how much do you plan to sell, and to whom? Is the mandatory VAT registration threshold likely to be reached soon?
The mandatory VAT threshold
As a rule, you must register as a VAT payer when your annual sales turnover in Estonia exceeds 40 000 euros. You may also register voluntarily before reaching that threshold.
Who are your clients?
It is often worth registering for VAT right away when your business model is B2B and you provide services mainly to other companies. Assuming most of your business clients are VAT-registered, the input and output VAT can be offset: you can reclaim the VAT paid on your purchases from the Tax Board, and your clients do the same.
Being VAT-registered is usually not beneficial in a B2C model, where you serve mainly private individuals. A private person cannot reclaim VAT, so the advantage described above does not exist for them, and without VAT your service can be cheaper for the client. Keep in mind, though, that you then cannot reclaim VAT on your own purchases either, so your costs are higher. If there is little VAT to reclaim, because your purchase costs are very small (quite common for service providers), staying unregistered may be the sensible choice.
Other additional costs
Do not forget that VAT registration also brings extra costs: your time, and the cost of buying in an accounting service or hiring an accountant. A VAT-registered company must file the VAT return (KMD) for the previous month by the 20th of each month, which means a bit more paperwork and work for the accountant.
While a non-VAT-registered company’s accounting can be managed on your own with some effort, tax accounting can feel like rocket science. It pays to ask for a quote from an accountant who knows the Estonian nuances, saves your time and gives practical advice on optimising taxes. If you have questions, write to rmp@assistent.ee and we will be happy to answer!
If this article was useful to you, click “Like”, and if it could interest your friends as well, click “Share”. Thank you for your feedback!