Saldo Accounting: Think VAT only starts at €40,000? It can actually start with your first expense

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Building a startup comes with enough surprises already - taxes probably shouldn’t be one of them. Together with Saldo Accounting, we’re breaking down common accounting and financial topics founders often discover a little too late.

This time: a common misconception about VAT that catches many startups off guard.

Most founders know the €40,000 rule in Estonia. Once your revenue crosses that threshold, you need to register for VAT.

Simple enough.

But this is where things get misleading. That threshold only applies to sales. In practice, VAT obligations often start much earlier and from a place most people don’t expect: expenses.

If you’re buying services from abroad, the rules change. This includes very normal things like software subscriptions, tools, or services from US-based companies. In many of these cases, the invoice comes without VAT. It looks clean, simple, and easy to book.

But that’s exactly where the hidden obligation sits.

Instead of the seller charging VAT, you are expected to account for it yourself in Estonia. This is called reverse charge. And to do that properly, you need to be registered - not as a full VAT payer, but as a limited VAT liable person. The important part: this has nothing to do with the €40,000 threshold. It can apply from the very first transaction.

Here’s a simple example: You’ve just started your company. No revenue yet. You subscribe to a US-based SaaS tool you need to run your business. It costs €50 per month. The invoice comes without VAT.

Nothing about this feels like a tax issue. It’s a small expense, everything looks normal. But technically, that first invoice already creates a VAT obligation. You should be registered for limited VAT, calculate Estonian VAT on that €50, and declare it.

If that step is missed, nothing dramatic happens immediately. That’s part of the problem. It stays invisible. Until one day it doesn’t. At that point, you’re no longer dealing with a €50 subscription. You’re looking at months - sometimes years - of transactions that need to be corrected retroactively.

The misunderstanding usually comes from focusing only on revenue. Founders track how close they are to €40,000 and assume that until they hit it, VAT is not relevant. Meanwhile, small recurring expenses from abroad quietly create obligations in the background. This is especially common in startups and international setups, where almost all tools and services come from outside Estonia.

The fix is not complicated, but the timing matters. This is one of those areas where being slightly early saves you from being very late.

If you’re not sure whether this applies to your company, it’s worth taking a quick look before it becomes a bigger issue.

At Saldo, we regularly help founders review their setup, check whether any VAT obligations have already been triggered, and fix things early while it’s still simple.

You can reach out via www.saldo.ee and we’ll take a look together.