VAT Reporting in Estonia — the KMD
Complete guide to the Estonian KMD (käibemaksudeklaratsioon) — how the monthly VAT return works, every row explained, input VAT reclaim, reverse charge self-assessment, nil returns, VAT refunds, and common errors that create EMTA back-assessments.
What the KMD Is and Why It Matters
The KMD (käibemaksudeklaratsioon) is Estonia’s monthly VAT return. Every OÜ registered as a käibemaksukohustuslane (VAT taxpayer) must file the KMD by the 20th of each month for the prior month — without exception. Nil returns are mandatory even when there are zero transactions.
The KMD deadline is the 20th of the month following the reporting period. A KMD for January is due by 20 February. EMTA imposes a fine of €200–2,000 for late filing and 0.06%/day interest on any unpaid VAT from the 21st. There is no reminder system — the deadline is your responsibility.
The KMD declares output VAT (22% collected from clients on sales) and input VAT (22% paid to suppliers on purchases). The net position — output minus input — is either paid to EMTA (if positive) or refunded from EMTA (if negative). This is the fundamental VAT accounting equation.
When you buy B2B services from EU companies (AWS, Google Workspace, Slack, etc.), the supplier issues a 0% invoice. You must self-assess the VAT — declaring it as both output (Row 6) and input (Row 6). The net cash effect is zero, but it must be declared. Omitting it is an EMTA compliance error.
Before issuing a zero-rated EU reverse charge invoice, you must verify the buyer’s VAT number on VIES. If the number is invalid and you applied 0%, EMTA can assess the full 22% on the invoice. We verify all EU client VAT numbers before every zero-rated invoice.
If your input VAT exceeds your output VAT in a month — common for businesses with large purchases, import-heavy months, or new capital expenditure — the KMD shows a negative balance. EMTA processes refunds typically within 30 days of a valid KMD filing.
The KMD is not just a payment mechanism — it is a reporting declaration. Even if you owe zero VAT, you must still file. Even if you have never issued a single invoice this month, you must still file. The obligation is to declare your VAT position, not merely to pay. Late filing fines apply regardless of whether any VAT is owed.
Section 1 — KMD Structure — Every Row Explained
What goes in each row of the Estonian VAT return and why
The KMD Row by Row
The KMD has nine significant rows plus the net VAT calculation. Each row corresponds to a category of supply or input. Understanding which row your transactions belong in is the core of correct VAT reporting. The VAT code column shows the Merit Aktiva/accounting software code used to classify each transaction.
| KMD Row | Name (Estonian) | Type | VAT Code | What Goes Here |
|---|---|---|---|---|
| Row 1 | Maksustatav käive 22% | Output VAT | KM22 | Net value of all sales at 22% standard rate to Estonian and applicable EU clients; output VAT = Row 1 × 22% |
| Row 1a | Maksustatav käive 9% | Output VAT | KM9 | Net value of sales at 9% reduced rate (accommodation, qualifying publications); output VAT = Row 1a × 9% |
| Row 2 | Ühendusesisene käive | Output — zero-rated | KM0 EU | Net value of zero-rated EU reverse charge supplies — services to EU VAT-registered businesses; goods to EU businesses |
| Row 3 | Eksport | Output — zero-rated | KM0 EX | Net value of exports outside the EU — goods physically leaving the EU; 0% VAT |
| Row 4 | Maksuvaba käive | Exempt — no VAT | Exempt | Net value of exempt supplies (financial services, insurance, residential rental) — appears here but no VAT charged or reclaimable |
| Row 5 | Sisendkäibemaks | Input VAT — reclaimable | V22 | Reclaimable input VAT on Estonian purchases from VAT-registered suppliers; this reduces VAT payable |
| Row 6 | Ühendusesisene soetamine + RC | Input VAT — reverse charge self-assessment | V RC | VAT self-assessed on EU B2B service purchases (cloud, SaaS from EU) and EU goods acquisitions; adds to output AND is simultaneously reclaimable input |
| Row 7 | Import | Input VAT — import VAT | Import | VAT paid at customs on goods imported from outside EU; reclaimable here |
| NET DUE | Tasumisele kuuluv KM | Payment / Refund | — | Row 1 × 22% + Row 1a × 9% − Row 5 − Row 6 − Row 7; positive = pay to EMTA; negative = refund from EMTA |
The Reverse Charge Self-Assessment (Row 6) — In DetailRow 6 (ühendusesisene soetamine ja muu käibemaks) is the most commonly misunderstood KMD row. It covers two types of transactions: (1) goods acquired from other EU member states (intra-EU acquisitions), and (2) B2B services received from EU or non-EU suppliers where the Estonian OÜ is the recipient. In both cases, the buyer self-assesses the VAT — meaning the same amount appears as both output VAT and input VAT. The net cash effect is zero, but both entries are mandatory.
Reverse Charge — Row 6 Self-Assessment Example
October: Estonian OÜ receives invoice from AWS Ireland for cloud hosting
AWS invoice amount: €1,000 net (no VAT shown — AWS applies reverse charge)
AWS is an EU VAT-registered company; supply is B2B service
KMD entries required for October:
Row 6 — output (self-assessed VAT): €1,000 × 22% = €220 (adds to output)
Row 6 — input (simultaneous deduction): €220 (reduces VAT payable)
Net VAT effect on KMD: €220 output − €220 input = €0 net
Cash impact: ZERO — but both entries must appear on the KMD
If you OMIT Row 6 (common mistake):
Output VAT understated by €220
Input VAT understated by €220
Net VAT is still zero — but EMTA sees an underdeclared EU acquisition
EMTA can assess for the omitted Row 6 output VAT (€220) even though the input VAT offsets it, because the declaration was incomplete
* Always declare EU B2B service purchases in Row 6 — even when the net effect is zero
* Common suppliers triggering Row 6: AWS, Google, Microsoft, Stripe, Slack, Zoom, Adobe
Section 2 — Input VAT Reclaim
What you can reclaim — and the restrictions that apply
Input VAT Eligibility Reference
Input VAT (sisendkäibemaks) is the VAT paid on your OÜ’s business purchases. Under the Käibemaksuseadus §30, input VAT is reclaimable when: the purchase is used for your taxable business activities, you hold a valid VAT invoice addressed to your OÜ, and the supplier is VAT-registered in Estonia or the EU. Several restrictions apply — particularly for cars, entertainment, and personal use items.
| Purchase Type | Input VAT? | VAT Code | Notes / Conditions |
|---|---|---|---|
| Invoice from Estonian VAT-registered supplier | ✓ Full | V22 | Supplier invoice must show their EE VAT number; your OÜ must be VAT-registered; invoice addressed to OÜ |
| SaaS/software subscription from EU company (B2B) | ✓ Full (RC) | V RC | Reverse charge: you self-assess VAT on the purchase; adds to Row 6 as output AND as input — net VAT effect = zero |
| Cloud hosting from non-EU provider (B2B service import) | ✓ Full (RC) | V RC | Import of services outside EU also triggers reverse charge in Estonia under Käibemaksuseadus §10 |
| Business travel — flights (Estonian carrier, Estonian destination) | ✓ Where VAT charged | V22 | Many transport services are zero-rated; reclaim only where supplier shows VAT on invoice |
| Business meals and entertainment | ✗ 50% limit | V22 | Only 50% of input VAT on meal/entertainment expenses reclaimable; §30(4) Käibemaksuseadus |
| Fuel for company car (100% business use, logged) | ✓ Full | V22 | Fuel card receipt or tax invoice required; 100% reclaim if car is 100% business use with mileage log |
| Fuel for company car (mixed personal/business use) | Partial | V22 | Only business-use proportion reclaimable; corresponds to business % from mileage log |
| Personal expenses paid through OÜ by mistake | ✗ None | — | Personal expenses are not business purchases; no input VAT reclaim; treat as deemed distribution |
| Purchase of a passenger car (sõiduauto) | ✗ Restricted | — | Input VAT on purchase of passenger car (≤ 3 tonnes) is generally not reclaimable under §30(3); exceptions for car rental, dealer, taxi |
| Computer / laptop for business use | ✓ Full | V22 | 100% business use: full input VAT; mixed use: document business proportion and reclaim accordingly |
| Office rent from non-VAT-registered landlord | ✗ None | — | Residential landlord not VAT-registered; no VAT on invoice; nothing to reclaim |
| Accounting fees from Company for Business | ✓ Full | V22 | Professional services for business = fully deductible input VAT; our invoices include 22% VAT |
Partial Input VAT — Mixed Business and Personal Use
When an asset or service is used for both business and personal purposes, only the business proportion of input VAT is reclaimable. The most common examples are company cars used for personal journeys and home internet used partly for work. The business proportion must be documented — a mileage log for vehicles, a usage agreement for home expenses.
| Mixed-Use Asset | Documentation Required | Business Proportion Reclaimable | How to Determine the Proportion |
|---|---|---|---|
| Company car — fuel and running costs | Monthly mileage log showing business vs personal km per journey | Business km ÷ total km × input VAT on fuel/costs | Log every journey: date, destination, km, business purpose |
| Company car — purchase price | Mileage log showing expected business use | Note: §30(3) generally disallows input VAT on passenger car purchase regardless of use | Exception: car dealer, rental company, taxi; most OÜs cannot reclaim car purchase VAT |
| Home internet used for business | Written usage agreement between OÜ and owner; estimate of business vs personal usage | Business proportion (e.g. 50%) of internet bill input VAT | Keep billing evidence; note business usage percentage in the agreement |
| Office portion of rent | Written usage agreement; floor area calculation | Business floor area ÷ total floor area × rental VAT (if applicable) | Residential rent usually exempt — landlord not VAT-registered; often no input VAT to reclaim |
| Mobile phone — business and personal | None required for standard business phone | 100% reclaimable if primarily a business tool; personal share is fringe benefit | If significant personal use, split and declare private portion as fringe benefit (erisoodustus) |
Section 3 — How We Prepare Your Monthly KMD
The process from document collection to EMTA submission
Monthly KMD Preparation Process
Bank statements, sales invoices, purchase invoices, expense receipts — all in Merit Aktiva by the 7th. EU supplier invoices tagged for reverse charge review.
Every transaction assigned the correct VAT code: KM22 for standard sales, V22 for input, V RC for reverse charge. EU client invoices checked via VIES before posting at 0%.
Every EU B2B invoice where 0% is applied — client VAT number verified on VIES at the time of posting. Result documented. Invalid numbers flagged and 22% applied.
Merit Aktiva generates the KMD directly from the posted transactions. All rows auto-populated. We review the totals against the underlying ledger before finalising.
KMD submitted electronically by the 20th. Submission reference number retained. VAT payable transferred to EMTA’s account by the same deadline.
VIES Verification — What It Is and How to Do It
VIES (VAT Information Exchange System) is the EU’s online database of VAT-registered businesses in all EU member states. Before applying 0% VAT (reverse charge) to any invoice issued to an EU company, you must verify their VAT number is valid on VIES. The check is free and instant at vies.ec.europa.eu.
| VIES Check Result | Meaning | Action on Invoice | KMD Treatment |
|---|---|---|---|
| Valid — company name and address match | The buyer is a VAT-registered business in their country | Apply 0% reverse charge; note ‘VAT — reverse charge (Art. 196)’ on invoice; record the VIES confirmation | Row 2 — zero-rated EU supply |
| Valid — name not shown (some countries) | The VAT number is active even without name confirmation | Acceptable — apply 0% if you have other evidence the buyer is a business (contract, correspondence) | Row 2 — zero-rated EU supply |
| Invalid — number does not exist | The number entered is wrong or the company is not VAT-registered | Do NOT apply 0%; charge 22% Estonian VAT; contact buyer to confirm correct VAT number | Row 1 — standard rate; correct when valid number obtained |
| Unknown — VIES unavailable | The VIES system is temporarily down (rare) | Document the attempted check with timestamp; recheck next business day before finalising invoice | Do not apply 0% until valid check obtained |
Section 4 — Common KMD Errors
The mistakes that create EMTA back-assessments — and how to avoid them
Errors That Trigger EMTA Interest and Back-assessments
The KMD errors below are the most frequent causes of EMTA contact with Estonian OÜs. Each error has a specific EMTA consequence and a correction method. The consequence column is highlighted in red because each of these errors carries real financial cost — interest at 0.06%/day plus potential fines.
| Common Error | Row Affected | EMTA Consequence | Correction Method |
|---|---|---|---|
| EU reverse charge purchase not self-assessed (e.g. AWS subscription omitted) | Row 6 understated | EMTA sees import of services not declared; potential VAT assessment + interest | Add the purchase to Row 6 in the correct month; self-assessed VAT adds to output and input simultaneously — net effect is zero but must be declared |
| EU B2B sale posted to Row 1 (22%) instead of Row 2 (0%) | Row 1 overstated; Row 2 understated | VAT overcollected from client (22% charged when should be 0%); EMTA sees discrepancy | Issue a credit note to the client; issue corrected invoice at 0%; file amended KMD correcting Row 1 and Row 2 |
| Input VAT claimed on purchase invoice not addressed to the OÜ | Row 5 overstated | EMTA can disallow the input VAT; require repayment + interest | Only claim input VAT on invoices addressed to your OÜ’s name and registration code; ask supplier to reissue if addressed incorrectly |
| Claimed 100% input VAT on car fuel without mileage log | Row 5 overstated | EMTA back-assesses the personal-use proportion of fuel VAT + interest | Maintain monthly mileage log; claim only business % of fuel VAT; amend prior KMDs where overclaimed |
| Nil KMD not filed in months with zero transactions | No return filed | Late filing fine €200–2,000 even if VAT due is zero; daily interest on nil = zero but fine applies | File nil KMD immediately; pay late filing fine if assessed; set up monthly calendar reminder |
| Input VAT claimed on business meals at 100% instead of 50% | Row 5 overstated | EMTA back-assesses 50% of meal VAT claimed + interest; §30(4) limit applies | Amend prior KMDs; claim only 50% of food/entertainment VAT; code meal expenses with partial VAT flag |
| KMD filed but VAT payment not made by 20th | Payment only | 0.06%/day interest on unpaid VAT from 21st; no fine for the declaration itself | Pay immediately to stop interest; EMTA portal shows exact balance including accrued interest |
VAT Refunds — When You Are Owed Money Back
If your input VAT for the month exceeds your output VAT, the KMD shows a negative balance — EMTA owes you a refund (enammakstud käibemaks). This is common for businesses with significant EU B2B purchases, large capital expenditures, or businesses that export most of their output (zero-rated exports mean output VAT is zero, but input VAT is reclaimable in full).
| Refund Scenario | Why Input Exceeds Output | Refund Processing Time | EMTA Action |
|---|---|---|---|
| Month with large equipment purchase | Equipment VAT (22% of purchase price) creates large input; small regular sales create small output | 30 days from KMD filing if no EMTA query | EMTA may verify the purchase before paying large refunds — have invoice ready |
| Export-heavy month (goods exported outside EU) | Exports are zero-rated output (Row 3) so no output VAT; all input VAT on purchases is still reclaimable | 30 days standard; up to 60 days if EMTA queries | Export documentation (CMR, customs declaration) required if queried |
| Company with all EU B2B clients (zero-rated Row 2) | All sales are 0% reverse charge — zero output VAT; all purchases generate input VAT | 30 days standard | Consistent negative KMDs may trigger EMTA review; maintain complete VIES records |
| First months after VAT registration (start-up) | High start-up costs with VAT; minimal initial sales | 30 days standard | EMTA expects refund claims from new registrants — not unusual; document all start-up purchases |