In 2014, a supplementary form was added to VAT declarations for more detailed invoice reporting, which increased tax revenue by over €100 million. Removing the €1,000 threshold is the next step toward obtaining a clearer picture of transaction volumes and preventing unfair competition, the Ministry of Finance stated, adding that businesses can now use automated solutions for reporting.

"The invoice reporting system brings nine-figure sums to the budget annually by reducing unfair competition. The €1,000 threshold was initially a compromise with critics of the system, but there are no longer compelling reasons against including all transactions [in the reporting obligation]," said Finance Minister Jürgen Ligi (Reform).

The ministry estimates that the volume of transactions below the threshold is currently significant. For example, as of December 2023, approximately 90,000 taxable entities reported €327 million in input VAT annually from transactions below the threshold, which were therefore exempt from reporting.

Another issue highlighted by the ministry is discrepancies between buyer and seller-reported data, which require the Tax and Customs Board's intervention. In 2023, corrections to VAT declaration errors resulted in an additional €25 million in VAT being collected. Most errors arose from manual data entry.

To address these issues, the ministry's draft legislative intent proposes two measures: eliminating the €1,000 threshold so that all invoices must be reported in VAT declarations, and introducing a mandatory e-invoicing requirement for VAT-registered businesses. These measures are expected to increase annual VAT revenue by approximately €16.6 million.

Currently, only 7 percent of VAT-registered entities in the Commercial Register indicate that they accept e-invoices. The ministry also noted that e-invoicing is being addressed at the European Union level, where it will become mandatory for cross-border transactions starting July 1, 2030.

Unlike paper invoices or email attachments, e-invoices involve automated, machine-readable communication between accounting systems. However, the potential requirement for e-invoicing has raised concerns among small businesses. Ille Nakurt-Murumaa, president of the Estonian Association of Small and Medium Enterprises (EVEA), stated in September 2023 that this could significantly increase the need for paid accounting services. "Many small businesses still manage their accounting in a relatively simple way. While they may no longer use pen and paper, their methods often require only minimal external accounting support. They may only outsource VAT declarations or the preparation of annual reports, as hiring additional services represents an added cost," Nakurt-Murumaa told ERR at the time.

The Ministry of Finance circulated the draft intent to amend the VAT Act this week. If approved, the legislation is expected to take effect in 2027. The same topics were discussed by the government slightly over a year ago.

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