An Estonian company invoices a Latvian business for a machine part. A Latvian billing address sounds like a cross-border sale, but the VAT result depends on where the goods actually travel. The part might stay in Estonia, leave the EU, or already sit in a warehouse abroad. Each route has a different tax question. For an ordinary sale from Estonia to an EU business, the invoice, buyer's VAT status, delivery evidence and monthly returns have to tell the same story. This guide follows one EUR 2,400 sale from dispatch to KMD and VD.
I am Dmitri Schmidt of AccRes. In accounting work I start with the physical route and the buyer's VAT ID before deciding the invoice rate. The example here assumes standard commercial goods located in Estonia at sale and a VAT-registered buyer in another member state. Consumer distance sales, goods installed abroad, call-off stock and chain transactions need separate treatment.
Check the buyer and the physical movement
Under VAT Act § 7(1)(1), ordinary intra-Community supply requires goods to move from Estonia to another member state and the buyer to be a VAT payer or limited VAT payer there. § 15(3)(2) and (3¹) condition 0% VAT on a valid VAT number in the other state and inclusion in the intra-Community supply report, VD. Goods exempt under § 16 do not become zero-rated merely because they travel across a border.
Verify and save the buyer's VAT number before invoicing. If the buyer lacks a valid number for this ordinary transaction, do not use the 0% example. A sale from inventory already held in another member state is also not automatically an Estonian intra-Community supply.
Distance sales to consumers and goods installed in another state are among § 7(2)'s exclusions from this ordinary goods-supply classification.
Keep evidence that the goods left Estonia
EMTA’s goods-transfer guidance calls for documents showing both transfer and transport to the other member state. Match the order and invoice to the dispatch note, carrier document, destination and receipt confirmation where available. If the customer arranges collection, agree on how arrival evidence will reach you before releasing the goods. An invoice cannot establish the route on its own.
Do not assume transport from the customer's registered address. When the route or buyer status remains unclear, resolve the facts before approving a 0% invoice. Keep the evidence with the exact transaction so that a later KMD and VD review can trace it.
The practical file is the invoice, VAT-ID check and goods-movement evidence linked by order or shipment reference.
A EUR 2,400 sale to Latvia on KMD and VD
Assume an Estonian VAT payer dispatches ordinary goods worth EUR 2,400 to Latvia on 2 October 2026. The Latvian buyer gives a valid Latvian VAT number, the goods arrive there and the seller includes the sale on VD. An invoice issued on 5 October shows both VAT numbers, the 0% rate and the basis in VAT Act § 15(3)(2) or Article 138 of Directive 2006/112/EC. § 37(8¹) also permits another clear, unambiguous notation instead of the statutory reference.
EMTA’s reporting example places EUR 2,400 in KMD fields 3, 3.1 and 3.1.1. VD shows Latvia's country code, the buyer's VAT number and the EUR 2,400 goods value. Estonian output VAT on this qualifying sale is EUR 0. The three KMD fields break down the same sale; they are not three separate revenues.
| Record | Illustrative entry | Purpose |
|---|---|---|
| Invoice | EUR 2,400 at 0% | Both VAT IDs and the legal basis |
| KMD 3 / 3.1 / 3.1.1 | EUR 2,400 | Intra-Community goods value |
| VD | LV, buyer VAT ID, EUR 2,400 | Buyer-level report |
Report the sale in the right month
VAT Act § 11(2) generally places intra-Community goods supply on the invoice date when that invoice is issued before the 15th of the month following dispatch; otherwise it arises on that 15th. Dispatch on 2 October and invoicing on 5 October put this example in October. Under §§ 27 and 28, October KMD and VD are normally due by 20 November.
Compare the values and buyer number across the current KMD and VD forms. If an invoice is cancelled or a credit invoice issued, § 28(3) has correction rules; do not silently erase the original sale. Missing VD reporting also affects eligibility for 0% under § 15(3¹).
This timing rule follows dispatch and invoicing, not simply the date the customer pays.
A saved VAT-ID check and transport document beside the invoice make the month-end decision testable: did these goods leave Estonia for the registered EU buyer?
The ordinary EU business-to-business goods sale uses 0% VAT only when the buyer, journey and VD report meet the conditions. In the EUR 2,400 example, one sale appears in KMD fields 3, 3.1 and 3.1.1 and by buyer on VD. Check the goods' location, VAT number and transport file before locking the invoice; do not extend this workflow automatically to consumer sales or installation contracts.
If your company is beginning regular EU goods sales, send a representative invoice and delivery arrangement through the AccRes contact form. We can review the KMD and VD process before the next filing.