Termination of VAT liable activities
If you end your business operations, you must submit a notification of termination of business to the Business Information System. You can remove your company from the VAT register, the prepayment register and the register of employers with the same notification.
If you are self-employed or an operator of agriculture or forestry, you can notify the Tax Administration of the termination of your operations in MyTax. However, if your company is in the trade register, you must submit the notification of termination to the Business Information System.
You will receive a written notification when your company is removed from the VAT register. After this, you cannot add VAT to your invoices or claim VAT deductions.
When must the notification of termination be filed?
You can file the notification of termination as soon as your business operations have ended.
We will remove your company from the VAT register starting from the date when you state your VAT liable activities have ended. Alternatively, you can file the notification of termination after all your business assets have been sold. In this case, we consider your VAT liable activities to continue as long as you are selling your business assets.
If your company has voluntarily registered for VAT, we will remove the company from the register on the date when the notification of termination arrives at the Tax Administration.
If your company has registered for VAT for renting the right to use real estate, we will not remove the company from the register until the prerequisites for VAT liability have lapsed for all the rented units.
If you are a taxpayer group, you are removed from the VAT register on the date when the notifications of termination filed by business operators who belong to the group have arrived at the Tax Administration.
Remember to file final VAT returns on time
Also remember to file a VAT return for the tax period when the registration ended, even if the company no longer had any actual activities during the period. If you have an extended VAT period, i.e. you have filed VAT returns every 3 months or once a year, you may have to file the last VAT return earlier than usual.
You must file a VAT return and pay the VAT no later than on the 12th day of second month following the end of the operations. If your tax period has been the year and your operations end in December, file and pay VAT as normal by the end of the next February.
File VAT on final inventory
If some of your company’s business assets remain in the company’s possession at the time of termination, calculate VAT for this final inventory in the same way as for assets taken into private use. Report this VAT in the VAT return that you file for your company’s final month. Include in the final inventory all the goods and services that are in your possession when VAT liability ends.
If the company has invested in the construction of new buildings or improvements, the deductible taxes may have to be re-evaluated in connection with the end of operations.
Example: Your VAT liable operations ended on 31 March 2019. You keep a tractor for private use. The tractor’s purchase price was €50,000, including VAT. The tractor’s undepreciated acquisition cost is €8,000 at the time of termination. The tractor’s probable selling price (fair market value) is €12,400 (including VAT of €2,400).
In VAT assessment, the tax basis is the product’s purchase price or its probable selling price, whichever is lower. In this case, the probable selling price is lower than the purchase price. The tax basis is the selling price without VAT (€12,400 – €2,400 = €10,000). You will have to pay €2,400 of VAT on goods that you have taken into your private use. You must include this on the VAT return for your final VAT period (March 2019).
How bankruptcy affects VAT liability
If your company is declared bankrupt, its assets and debts are transferred to the bankruptcy estate. The bankruptcy estate can choose to either continue the VAT liability of the bankrupted company until the company’s business assets have been realised or end the VAT liability on the date when the company was declared bankrupt. The bankruptcy estate can also carry on with the business and register for VAT independently.
The administrator of the estate is responsible for the reporting obligations of the bankrupted company together with the bankrupt. These obligations include filing VAT returns as well as recapitulative statements on the sales of goods and services to other EU Member States.