FAQ - Value added tax

Frequently asked questions in VAT handling new business and VAT registration, international trade and EU trade.

If you estimate that your company's turnover for the financial year (12 months) will be less than EUR 10,000, the company does not have to be registered in the VAT register. The estimate should be done carefully, because if your turnover for the financial year is higher, you may have to pay VAT afterwards. If you find out later that the turnover exceeds EUR 10,000

  • register in the VAT register immediately
  • pay the value added tax for the entire financial year, including possible late penalty charges and interests.
  • report self-assessed taxes for the full year.

If your business involves a lot of acquisitions that include VAT, you can voluntarily register in the VAT register. When registered in the VAT register, you may deduct VAT included in purchases made for business purposes.

If you have chosen monthly period then you have to file and pay VAT monthly. The general due date is the 12th day of the second month following the return period (For example 12.4.2019 for February 2019). Other report and payment options are quarterly (4 times a year) and yearly. Yearly and quarterly reporting options have turnover limits. Payment is calculated by adding VAT on sales and deducting VAT from business related costs.

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If you sell services or goods in Finland, you have to pay 24 % VAT for your total income. Note that you add VAT to your commercial invoices and maximum amount of VAT what you are obliged to pay to the tax administration is that amount what you get from your customer. Usually business operators have purchases for their business purposes. Those purchases include deductible VAT, which reduces total payable VAT. 

Main rule is that paying VAT and deducting VAT is possible when your company is registered for VAT. In case you have made acquisitions for business purposes before registration for VAT you can make so called opening stock deduction when your registration for VAT is ready. Detailed instructions in a link in Finnish (chapter 6.3.5)

Opening stock deduction:

When starting a taxable business in VAT, a taxable person may, subject to certain exceptions, deduct VAT on goods or services which he has acquired or manufactured for business purposes.

The taxable person shall be entitled to deduct the tax which was included in the purchase price of the goods or paid at the time of importation, intra-Community acquisition or manufacture of the goods. The tax may be deducted in proportion to the value at the time of deduction. The purchaser must have the original invoice of the goods and a note for the purposes of deduction.

You can deduct your initial storage and equipment you are using in your business if you have the purchase invoices. However, if the value of the storage and equipment is now less than at the time of purchase you have to take that into consideration. There is no time limit for opening stock deduction.

You need to submit only the electronic VAT return in MyTax. No other documents are needed but usually in case of a refund and in the beginning of the business activity the tax administration may ask for proof for the deductions in VAT. Upon request you are obliged to show necessary documents.

International trade and EU trade

There is no VAT in international flights. When the journey includes a domestic flight (from Helsinki to Lapland) you may sell the whole journey without VAT if the flight ticket is sold and written to the final destination (from abroad via Helsinki to Lapland) and the passenger transfers directly into the connecting flight.

Essential in VAT is to understand what is the place of sale of the service. When selling to business operators, the place of sale of the service is Finland if the service has been delivered to a fixed establishment in Finland. If the service has not been delivered to a fixed establishment, the service is being sold in Finland if the domicile of the buyer is in Finland. This is the general rule in selling services.

If the seller is not liable for VAT in Finland and does not have fixed establishment in Finland, reverse charge is applied. This means that liable for VAT is the buyer , not the seller as usual. To prove that your transaction is intracommunity trade you need buyer's VAT id.

A Finnish company A sells consulting service to a Finnish company B. Place of sale of service is Finland. Liable for VAT is the seller. The seller sends an invoice with Finnish VAT. Most services are sold with VAT.

Essential in VAT is to understand what is the place of sale of the service. When selling to business operators, the place of sale of the service is Finland if the service has been delivered to a fixed establishment in Finland. If the service has not been delivered to a fixed establishment, the service is being sold in Finland if the domicile of the buyer is in Finland. This is the general rule in selling services.

If the seller is not liable for VAT in Finland and does not have fixed establishment in Finland, reverse charge is applied. This means that liable for VAT is the buyer , not the seller as usual. To prove that your transaction is intracommunity trade you need buyer's VAT id.

A Finnish company A sells consulting service to a foreign company C. Place of sale of the service is NOT Finland. The buyer is liable for VAT. The seller sends an invoice without Finnish VAT.

Essential in VAT is to understand what is the place of sale of the service. When selling to business operators, the place of sale of the service is Finland if the service has been delivered to a fixed establishment in Finland. If the service has not been delivered to a fixed establishment, the service is being sold in Finland if the domicile of the buyer is in Finland. This is the general rule in selling services.

If the seller is not liable for VAT in Finland and does not have fixed establishment in Finland, reverse charge is applied. This means that liable for VAT is the buyer , not the seller as usual. To prove that your transaction is intracommunity trade you need buyer's VAT id.

A foreign company C sells consulting service to a Finnish company A. Place of sale of the service is Finland. Liable for VAT is the buyer. The seller sends an invoice without Finnish VAT.

The above mentioned rules are so called main rules and they are being applied generally to services. However, there are some exceptions.

  • Services related to real estate are sold in Finland if the real estate is situated in Finland
  • Passenger transportation service is sold in Finland if the transport is carried out in Finland
  • Short time rent of a vehicle is sold in Finland if the vehicle is in Finland when starting the rent period
  • Selling tickets to education, science, culture, entertainment and similar events are sold in Finland if the event is in Finland
  • Restaurant and catering services are sold in Finland if the services are arranged in Finland
  • Travel agent services are sold in Finland if the travel agent works in Finland

You don´t pay VAT when you sell service outside EU. The goods have to be exported through customs clearance. Export has to be reported also in the VAT return. 

Selling goods from Finland to another EU-country is an intra-community supply. You sell without VAT. The seller and the buyer have to be in local VAT register. You have to report the sales in your VAT return and separately you have to report the sales for each buyer in a recapitulative statement. Deadline issuing the recapitulative statement differs from the deadline reporting VAT.

Selling goods to export outside EU is without VAT. Customs clearance and export documents prove the export. VAT return has to be filled accordingly.

Purchasing goods from another EU-country to Finland is an intra community acquisition. Liable for VAT is the buyer in Finland. Seller and buyer have to be business operators and in VAT register. Intra community acquisition has to be reported as such in the VAT return.  When buying for business purposes, payable VAT is also deductible.

Importing goods outside EU to Finland: The competent authority dealing with import is the Finnish Customs which issues the clearance decision and levies customs duty and other fees excluding VAT.

As a VAT registered business operator your competent authority in VAT is the tax administration. You count and report VAT on import in your VAT return.