Running short-term rentals through Airbnb has become one of Estonia’s most popular property investment models.
But when operating through a company, VAT structure becomes a key factor that can significantly impact your total ROI, cash flow, and tax efficiency.
Below are the three main VAT schemes used by property investors in Estonia, along with their pros, cons, and ROI differences.
🧩 Scheme 1: Owner Provides the Accommodation Service (VAT-Registered)
How it works:
The owner’s company buys the apartment with VAT (24%) and directly provides the accommodation service (Airbnb, Booking.com, etc.).
Guests are billed with 13% VAT, which the owner declares and pays to the Tax Board.
VAT effects:
- The owner can reclaim the 24% VAT from the purchase price.
- All related expenses (cleaning, maintenance, marketing) are VAT deductible.
Pros:
✅ Full VAT refund on purchase
✅ Clean structure for smaller investors
✅ Full control over income and reporting
Cons:
❌ Owner must handle all hosting operations
❌ Higher administrative workload
🏢 Scheme 2: Owner Rents the Apartment to a Management Company (Operator)
How it works:
The owner leases the apartment to a management company, which then operates it on its own name and collects Airbnb revenue.
VAT impact:
- If the lease is VAT-exempt residential rent, the owner cannot reclaim VAT from the purchase.
- If the lease is VATable commercial rent, the owner can reclaim input VAT.
Pros:
✅ Passive income model – the operator handles everything
✅ Possible VAT refund if the lease is VATable
Cons:
❌ No VAT refund for VAT-exempt leases
❌ Owner’s ROI depends on operator performance
⚙️ Scheme 3: Owner is VAT-Registered and the Operator Provides Service on Behalf of the Owner
How it works:
The owner remains the official accommodation provider, while the management company provides operational services on behalf of the owner — cleaning, check-ins, pricing, guest communication.
All Airbnb revenue is received by the owner’s company, which pays 13% VAT to the state.
VAT impact:
- Owner reclaims 24% VAT from purchase
- Also reclaims 24% VAT from the operator’s service invoices
- All activities remain fully VAT-eligible (no correction period issues)
Pros:
✅ Full VAT refund on purchase and management fees
✅ Owner retains full financial control
✅ Professional management reduces workload
Cons:
⚠️ Requires a formal service agreement with clear VAT and responsibility clauses
📊 Summary Table
| Scheme | Who provides service | VAT refund on purchase | VAT 13% to state | VAT refund on costs | Suitable for |
|---|---|---|---|---|---|
| 1️⃣ Owner provides service | Owner | ✅ Yes | Owner | ✅ Yes | Small investors |
| 2️⃣ Lease to management firm | Operator | ❌ No (if VAT-free rent) | Operator | — | Passive investors |
| 3️⃣ Owner + VAT management service | Owner (via operator) | ✅ Yes | Owner | ✅ Yes | Professional investors |
💬 Sample Contract Clause (for Scheme 3)
§ Accommodation Service Provided on Behalf of the Owner
The Operator provides the accommodation service on behalf and for the account of the Owner.
Guest payments are treated as the Owner’s company revenue, subject to 13% VAT.
The Operator issues a monthly invoice to the Owner for management services, subject to 24% VAT.
The Owner uses the property exclusively for taxable accommodation activity and is entitled to deduct input VAT in accordance with §29(1) of the Estonian VAT Act.
✅ Conclusion
When an apartment is purchased under a company and used for short-term rentals (Airbnb), the correct VAT structure can improve profitability by 10–15% or more.
The most efficient model is Scheme 3 – Owner is VAT-registered and hires a management partner, since it allows full VAT recovery and financial control, while keeping operations outsourced.
