For many e-residents, obtaining an EU VAT number is a key step in running a cross-border business through Estonia. It enables smoother invoicing, especially within the EU, and signals that your company is active and compliant.
In 2025, however, some e-resident companies have encountered challenges when applying for or maintaining their VAT registration. These cases are not due to sudden legal changes, but rather a more consistent application of existing rules by the Estonian Tax and Customs Board.
To qualify for VAT registration, a company must be liable to pay VAT in Estonia. This liability is assessed based on the company’s economic connection to Estonia, which may include having Estonian clients, suppliers, partnerships, employees, or other local operations. A physical presence in Estonia is not required, but it can be one of several indicators used to evaluate eligibility.
In this article, we’ll explore what these criteria mean in practice, why some companies may lose their VAT number, and how to approach VAT registration with confidence and clarity.
VAT Eligibility in Estonia
The Estonian VAT system is designed to ensure that companies registered for VAT are genuinely liable to pay it in Estonia. This principle hasn’t changed, but in recent months, the criteria used to assess VAT liability have been applied more rigorously, especially for companies founded through the e-Residency program.
According to the e-Residency’s official VAT guide, the Estonian Tax and Customs Board considers several factors when determining whether a company is liable for VAT in Estonia:
- Economic activity connected to Estonia, such as local clients or suppliers
- Partnerships or contracts with Estonian entities
- Employees or a contact person based in Estonia
- Physical office or operations (optional, not mandatory)
If a company’s business activities are primarily outside Estonia, it may not meet the criteria for VAT registration. In such cases, the company would need to determine where its VAT liability lies, which could be in another country, depending on its client base and operations.
This is why professional consultation is often recommended, especially for companies with international structures. At Unicount, we help e-residents navigate VAT registration and compliance by offering streamlined accounting services and forwarding official notices directly to your dashboard. If you’re unsure about your company’s VAT eligibility or obligations, our team is here to guide you.
Why VAT matters for e-Residents
For many Estonian e-residents, VAT feels like a distant concern until it isn’t. Whether you’re selling digital services across borders or working with EU-based clients, understanding VAT is essential to keeping your business compliant and credible.
If your company sells goods or services to customers in other EU countries, VAT rules can quickly become complex. You might need to register for VAT in Estonia or even in other EU member states, depending on your sales volume and customer type. For example, B2B services often fall under the reverse charge mechanism, while B2C digital services may require registration under the One-Stop Shop (OSS) system.
Beyond compliance, VAT registration can enhance your business’s reputation. Many European companies prefer working with VAT-registered suppliers, and having a VAT number signals that your company is serious and operating within EU regulations.
There’s also a financial upside. Once registered, your company can reclaim VAT paid on eligible business expenses, including software subscriptions, office supplies, and professional services. This can significantly reduce your tax burden, provided your accounting is accurate and up to date.
Failing to register when required, or misreporting VAT, can lead to penalties from the Estonian Tax and Customs Board. These may include fines, retroactive payments, and even complications with banking or licensing. That’s why Unicount helps e-residents stay ahead of these risks by forwarding official tax notices directly to your dashboard and offering access to professional accounting partners who specialize in cross-border VAT compliance.
Common reasons for VAT revocation in Estonia
Getting VAT registered is a milestone, but keeping that registration active requires ongoing compliance. The Estonian Tax and Customs Board (EMTA) monitors VAT-registered companies closely, and if certain conditions aren’t met, your VAT number can be revoked.
One of the most common reasons for revocation is inactivity. If your company doesn’t submit VAT returns or shows no taxable activity over a period of time, EMTA may assume the business is dormant and cancel the VAT registration.
Another frequent issue is non-compliance with reporting obligations. Late or missing VAT declarations, failure to respond to EMTA inquiries, or discrepancies in reported figures can all trigger a review. If the tax authority loses confidence in your company’s reliability, they may revoke your VAT number to prevent misuse.
Incorrect or misleading information during registration is also a red flag. If EMTA later discovers that your application included false data, such as inflated turnover estimates or misrepresented business activities, they have grounds to cancel your VAT status.
Finally, the lack of a real economic presence in Estonia can be problematic. While e-residents aren’t required to live in Estonia, your company must still demonstrate genuine business operations. This includes having contracts, clients, or transactions that justify VAT registration.
How to avoid losing VAT in the future
Once your company is VAT-registered, keeping that status active requires more than just submitting returns; it’s about demonstrating consistent, legitimate business activity. The Estonian Tax and Customs Board (EMTA) monitors VAT-registered entities closely, and revocation can happen if your company appears inactive or non-compliant.
To avoid losing your VAT number, here are key practices to follow:
- File VAT returns on time – even if there’s nothing to report. Inactivity without explanation can trigger revocation.
- Maintain accurate records of sales, purchases, and expenses. These support your declarations and prove your business is operational.
- Respond promptly to EMTA inquiries. Ignoring requests for clarification or documentation can lead to penalties or cancellation.
- Avoid dormant periods. If your company isn’t trading, consider voluntary deregistration rather than risking forced revocation.
- Work with a reliable accounting partner (like Unicount). Professionals can help you stay compliant, monitor deadlines, and flag potential issues before they escalate.
Unicount helps e-residents stay ahead of these risks by forwarding EMTA notices directly to your dashboard, offering access to experienced accountants, and monitoring your company’s status to ensure everything stays on track.
Conclusion
VAT registration is more than a formality; it’s a signal that your Estonian company is active, credible, and ready to do business across borders. But with that status comes responsibility. From registration to reporting, and from avoiding revocation to reclaiming expenses, staying VAT-compliant is essential for long-term success.
Unicount makes this easier by combining smart technology with expert support. Whether you’re just starting out or scaling your operations, we’re here to help you navigate Estonia’s tax landscape with confidence.
