Taxpayers know how to use the VAT reverse-charge system

Tax Administration Bulletin, 6/21/2012

Business companies and accounting firms have good knowledge of the requirements of reverse charge VAT. Reports of 'no problems' or 'almost no problems' have arrived from more than half of the surveyed taxpayers who deal with VAT accounting and payments. Statutory interpretation had caused some questions to be raised especially in spring 2011 when the new VAT rules came into force. This is shown by the results of a survey, conducted in cooperation with the Federation of Finnish Enterprises and Association of Finnish Accounting Firms and commissioned by the Tax Administration.

The Finnish words of the Act governing VAT Reverse Charge leave some room for interpretation - a factor that has caused problems for both taxpayers and the Tax Administration. Examples include the definitions of 'construction services' and 'unit of real estate' as well as the 'main' and 'secondary' delivery and the concept of 'regular basis', which are not always precise.

– To make sure of correct interpretation the tax officers have had to become familiar with the standard business customs in the construction industry. For this reason, just after the new VAT rules had come into force it often took us a long time to give answers to the questions asked by some telephone callers, says Eira Karppinen, Communications Manager at the Tax Administration.

At the present time, our taxpayer guidance units no longer receive as many enquiries on the subject of reverse charge. The Tax Administration has completed its instruction and guidance program with ample materials after the new VAT Act came into force. If necessary, the Tax Administration can still expand its guidance effort further, however, at this stage there seems to be no need to do so.

There has been some criticism in the media against the Tax Administration because some taxpayers who are due a refund of VAT must wait a long time. However, approved amounts of negative VAT are normally shown on the taxpayer's Tax Account statement in a few days after the filing date of the Periodic tax return form.