An Estonian VAT-registered company sells a local business customer a service at a net price of USD 110. The service is completed on 28 October, the invoice is issued on 29 October, and payment arrives in November. Which exchange rate belongs in the VAT calculation? Using the November bank rate can put a different euro amount on the invoice and the October KMD.
I am Dmitri Schmidt, CEO of AccRes. This example assumes an ordinary domestic service subject to the 24% rate, no advance payment, and no special VAT scheme. To make the arithmetic visible, I use a fictional rate of EUR 1 = USD 1.10. It is not the actual ECB quotation for 28 October 2026; a real invoice must use the applicable published rate for its taxable-event date.
Start with the taxable-event date
For an ordinary service, VAT Act § 11(1) generally places the taxable event on service completion or the earlier receipt of all or part of the price. Here the service was completed on 28 October without an advance. That date determines the conversion for VAT. The 29 October invoice date and November settlement do not replace it.
An advance creates turnover for the amount received when it arrives. Continuous services and cross-border supplies may have other timing or place-of-supply rules. Check those facts before carrying this domestic example over to another invoice.
Convert the VAT base, then apply the rate
For non-import transactions, VAT Act § 29(13) requires the ECB euro exchange rate applicable on the taxable-event date when VAT data are in a foreign currency. EMTA explains the same rule. At the illustrative rate of EUR 1 = USD 1.10, USD 110 net equals EUR 100. The ordinary 24% rate produces EUR 24 VAT. This is a worked calculation, not a claim about an actual historical ECB rate.
The contractual payment can still be USD 136.40: USD 110 net plus USD 26.40 illustrative VAT. Show the required VAT amount separately as EUR 24. Do not use the later bank conversion to recalculate October VAT. Imported goods follow customs valuation exchange-rate rules instead, so this example excludes imports.
Put euro VAT on the invoice and retain the rate
VAT Act § 37(7)(10) says that VAT payable must appear in euros where VAT is required. The same subsection requires the invoice number, issue date, parties, service description, taxable amount and rate. The service date differs from issue date, so include 28 October too; EMTA lists the invoice fields.
Retain the rate date and conversion calculation beside the invoice. Accounting Act §§ 5–7 require documented entries supported by source records. Reconcile the EUR 100 taxable base and EUR 24 VAT to the KMD. If the November bank credit has a different euro value, reconcile cash to the receivable separately; do not reprice October VAT at the payment-date rate.
Before choosing an exchange rate, I check whether any advance arrived. An early payment can move the taxable event for that portion of the price.
For a domestic foreign-currency sale, identify the taxable event before choosing an exchange rate. Apply the ECB euro rate for that date, calculate the euro VAT base, and state VAT due in euros on the invoice. Keep the foreign-currency price and conversion record together. Advances, imports and cross-border sales need separate analysis.
If foreign-currency invoices and bank receipts do not reconcile with the KMD, contact AccRes. We can check the rate basis and the declared amounts.