VAT refunds to travellers in tax-free sales

Goods may be sold tax-free to people from outside the EU who visit Finland. This is known as tax-free sales to travellers. It means that the VAT included in the sales prices can be refunded to the traveller if they export the unused goods to countries outside the EU.

A new Act lays down the provisions that define the obligations of a business paying out cash refunds (250/2015: "Act governing the responsibilities of a business that pays VAT refunds in cash in Tax Free Sales to Travellers" — Laki matkailijamyynnistä suoritetun arvonlisäveron käteispalautustoimintaa harjoittavan velvollisuuksista). It comes into force 1 July 2015, and for this reason, the end date of currently valid authorisations is 30 June 2015. Application for a new authorisation must be submitted by 31 August 2015.

Sellers may

  • refund the VAT to the travellers themselves
  • engage the services of an authorised cash refund business
  • engage the services of other refund businesses.

Sellers may use the tax-free sales scheme on a voluntary basis.

Businesses that must apply for an authorisation (cash refund business)

The operator of a cash refund service must have an authorisation. Authorised refund businesses must monitor the travellers so as to ensure that the goods are transported outside the EU.  The cash refund business needs an authorisation because the monitoring of exports is an officially supervised activity. Authorisation applications must be addressed to the Tax Administration.

A cash refund business pays the refunds to the travellers in cash or by a comparable method of payment when travellers leave Finland for a destination outside the EU carrying the goods in their personal luggage.

Example: Mr Z, a traveller from Russia, buys goods from 'A', the seller.  'A' and 'C', an authorised cash refund business, have an agreement that 'C' pays out all the VAT refunds.  When Mr Z leaves Finland to go back to Russia, he shows his passport, the purchased goods and their sales receipt at 'C' s office at the border-crossing station. 'C' confirms that the goods were transported from Finland unused.  'C' refunds the VAT included in the sales price of the goods, net of 'C's service charges, to Mr Z.

Businesses that are not required to apply for an authorisation (other refund businesses)

Businesses do not have to apply for an authorisation if the refunds they handle are based on sales receipts stamped by Customs.  Such receipts must show that the goods were transported out of the EU. Refund businesses with no authorisation may pay VAT refunds by virtue of Customs-stamped receipts, sent to them by the travellers after they have left the EU.

Example: Mr X, a traveller from India, buys goods from 'B', the seller.  'B' and 'D', a non-authorised refund business, have an agreement that 'D' pays out all the VAT refunds.  'D' pays the refund on the condition that Mr X shows them a Customs-stamped sales receipt from 'B'.  'D' do not need an authorisation.

Businesses that are not required to apply for an authorisation (seller/retail company)

Sellers don't have to apply for authorisation when they themselves refund the VAT included in the sales price to travellers. In this case, the travellers must send the sales receipts stamped by Customs to the seller afterwards.

There is no requirement that the sellers that are customers of a refund business should apply for an authorisation.

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