Legislation

The Accounting Act states that eInvoice is mandatory upon transfer of goods or services to a public sector accounting entity (local authority, legal person in public law or accounting entity which is directly or indirectly under the dominant influence of said persons).

On 18 September 2024, the Estonian government passed amendments to the Accounting Act, which aim to standardise and simplify eInvoicing requirements set to begin on 1 July 2025. Starting from 1 July 2024 all businesses registered as eInvoice receivers in the business register (including all public sector entities) will be able to require suppliers to submit machine-readable electronic invoices. In that case and if no other format has been agreed upon between the parties, the European eInvoicing standard  (EU EN16931) will be used by default. However, the Head of the Financial Information Policy Department underscored that Estonia will neither prohibit the use of any existing eInvoice format (Estonian standard, a national XML-based standard) nor hinder the introduction of new ones.

Another key point of the approved amendment is that companies can now register to receive eInvoices directly, rather than solely through an eInvoice operator. Furthermore, the amendment to the Value-Added Tax Act, announced by the Ministry of Finance in the first week of December 2024, includes a set of measures aimed at improving VAT collection in Estonia. The plan also involves developing a draft amendment to the VAT Act considering:

• The abolishment of the 1.000 EUR threshold for declaring transactions
• The introduction of mandatory eInvoicing for all VAT subjected B2B transactions.

The amendments to the VAT Act are expected to be drafted in 2025, with implementation potentially occurring in 2027.

eInvoicing platform and management solutions

Estonia’s approach to processing eInvoices is decentralised whereby contracting authorities within the public sector receive eInvoices individually and not via a central platform. Consequently, several private service providers offer eInvoicing exchange services. Estonia’s private sector  eInvoicing service providers include: Billberry, E-arveldaja, Finbite, Telema, Unifiedpost.

All of them are linked by means of mutual agreements (the so-called roaming agreements), which allow for eInvoices to be sent from an accounting software or enterprise resource planning (ERP) solution of one operator to the software of the other operator. Additionally, a connection to Peppol is developed to simplify communication between eInvoice operators and to create more opportunities for companies for cross-border exchange of eInvoices[1].

The Estonian government does not mandate nor recommend any eInvoicing service providers and economic operators are free to choose their eInvoicing solutions. Because of the mandatory B2G eInvoicing, Estonian Ministry of Finance and RIK have agreed that businesses can use eFinancials free from charge. Only in the case that businesses use eFinancials to send eInvoice for the public sector. All entities invoicing electronically are registered in the RIK, which manages all information to transmit eInvoices to the registered companies and institutions.

Approach for receiving and processing

Economic operators must have an accounting software or ERP in place to generate eInvoices or can alternatively outsource the generation of eInvoices to different software providers.

The eInvoicing service providers mentioned above also provide eInvoicing management services including the creation of eInvoices. Economic operators are free to contract other private or public software providers such as Merit Tarkvara or the Centre of Registers and Information Systems (RIK).

RIK, a state agency working under the Estonian Ministry of Justice, offers an automated accounting software (eFinancials), helping entrepreneurs organise their accounting and allowing them to generate eInvoices. Unlike all service providers, RIK only charges for its services after one year, allowing the economic operators to use its eFinancials software free of charge during the first year. The Ministry of Finance and RIK agreed on the use of the eFinancials software free of charge from 2019 onwards. If a customer only uses eFinancials for sending eInvoices to public sector organisations, then there is no fee for the customer.

In all cases, the service and software providers are mandated to use a national standard based on XML, or the European standard on eInvoicing.

No electronic signature is needed for eInvoices and the archiving period for eInvoices amounts to seven years. While archiving abroad is allowed, it is conditional on a possible fast submission of eInvoices to the tax authority.

Within the B2G environment issuing of eInvoices is required for all suppliers to all public contracting authorities, while mandatory receiving applies to all public contracting authorities. For B2B eInvoicing is allowed, however not mandatory. No explicit requirements apply to the issuing of eInvoices, however, for the receiving of eInvoices in the B2B environment the buyer’s consent is required.

eInvoicing implementation in sub-central level contracting authorities

The implementation of the eInvoice Directive and EN standard are also mandatory at the sub-central level.

Status on the implementation of the European Standard on eInvoicing (EN)

Businesses can send eInvoices accordingly to the Estonian national standard and the European standard. Public sector organisations need to be able to process and receive both standards.

Digital reporting requirements

Estonia has introduced the obligation to report VAT transactional data by filling in the appendix to the VAT return (the KMD INF form). The obligation to submit the appendix to the VAT return applies to all taxable entities registered in Estonia for VAT, including non-resident businesses.

The scope of requirements is as follows:

• Transactions subject to standard or reduced VAT (except invoices issued under the special scheme), when the total amount of invoices per transaction partner in the taxable period is at least EUR 1 000, exclusive of VAT.
• B2B and B2G.
• Sales and purchases.
• Domestic transactions.

The reporting frequency is monthly or quarterly (i.e. the frequency of the VAT return). Information must be reported on a transaction-by-transaction basis since January 2016. The invoice information to be submitted include the following: Invoice date, Invoice number, Tax rate, Taxable amount, Total amount (in purchases list only), VAT amount payable (in purchases list only), Trading partner name.

Data can be submitted: (i) by entering data manually or uploading files in the XML or CVS format on the tax authority portal; (ii) via X-Road by means of machine-to-machine interface; and (iii) exceptionally, on paper[2].

Additional information

Significant changes are expected to occur in the Estonian eInvoicing system. On 2 May 2024, the government approved amendments to the Accounting Act. The purpose of these amendments is twofold: first, to establish consistent requirements for the formalisation of eInvoices, and second, to ensure that all businesses and economic operators registered as eInvoice receivers can request machine readable eInvoices from their suppliers. [3] [4]

More info may be found at the Ministry of Finance.

[1] (E-invoice specification Estonia, 2021), [2] (VAT in the Digital Age Report, 2022), [3] (Approbation of the amendments to the Accounting Act, Ministry of Finance, 2024), [4] (Intention to develop a bill to amend the Accounting Act, Ministry of Finance, 2024) 

Last updated: