VAT for small business – a small-scale operation is exempted from VAT

A number of VAT relief arrangements are available to small businesses. Examples:

  • If your turnover for the accounting period (12 months) is less than €10,000, you are not under the obligation to register for VAT. Note: If you are a foreign company that does not have a permanent establishment in Finland, you must register for VAT in any case.
  • If you apply for VAT registration, you can be granted a VAT relief for small businesses
  • In some circumstances, your VAT period can be extended.

Should I enter my company in the VAT register?

If your turnover is more than €10,000: VAT registration is required

All businesses with sales of goods or services that exceed €10,000 per accounting period (12 months) must register as VAT taxpayers.

How to register for VAT

If your turnover is less than €10,000: VAT registration on a voluntary basis

Businesses with sales under €10,000 can request entry in the VAT register voluntarily. This may be beneficial for you if you habitually buy a considerable amount of VAT-liable goods or services for your VAT-taxable business operation. If your company is VAT-registered, you can usually deduct the VAT included in the purchases of the goods or services.

How to enter in the VAT register on application

Note: the €10,000 threshold does not concern Finnish municipalities, joint municipal authorities, and the foreign companies that are treated as not having a permanent establishment in Finland.

How to adjust the turnover if your first accounting period is not 12 months

You must estimate the future sales of your business and perform the necessary calculations yourself.

You must calculate a turnover value for an accounting period of 12 months. If the actual accounting period is shorter or longer than 12 months, its turnover must be adjusted in order to simulate 12 months of business activity.

First make an estimate for your annual turnover, then multiply it by 12 and divide the result by the number of actual months of business activity.

Example: Your company’s first accounting period is 20 September 2018 − 31 December 2018. During that period, you sell goods and services for €2,600. Because the first period is shorter than 12 months, you must adjust the turnover for a period of 12 months as follows:

Turnover for the accounting period: €2,600

Full months in the period: 3 (October, November and December – September is not a full month).

Adjusted turnover for 12 months: €2,600 × 12 months / 3 months = €10,400

This means that your company’s adjusted turnover exceeds the €10,000 threshold. You must ask for VAT registration, effective from the first day of activity (20 September 2018).

What must be included in the turnover?

You must include the following in your estimation:

  • Sales of goods and services subject to VAT.
  • VAT-exempt sales of goods and services listed in the VAT Act, such as export sales and intra-Community supply.

Do not include the following:

  • The proceeds from any sales of the fixed assets of your business.  In other words, do not include any selling of the assets or property that had been bought for your production or work. For example, if you operate an earthmoving company and you sold one of its excavators to an outside buyer, you should not include this sale in the turnover because the excavator had been part of the company’s fixed assets.
  • Certain selling of financial services and insurance services in situations where the selling is related to other sales. 
  • Most sales not subject to VAT, such as services related to social welfare, healthcare services, and medical services.

Frequently asked questions

The estimate of the total amount of sales for the accounting period must not be too low. If you do not register for VAT and you exceed the threshold of €10,000 in turnover, you will have to pay VAT retroactively for your entire accounting period. You may also have to pay late-payment charges in addition to the tax.

If you notice that you exceed the €10,000 threshold during the accounting period:

  • Sign up for the VAT register immediately.
  • Pay the VAT for the entire accounting period.
  • File VAT returns for the entire accounting period.

When the Tax Administration registers a business retroactively as a VAT taxpayer, it usually records the start date of the accounting period as the start date of registration.

Note: if you had agreed that your tax period is going to be the month or the quarter, your VAT returns and payments may already be late. You can take account of this when you first have your business entered in the VAT register: if possible, select a longer tax period.

When your business enterprise is registered for VAT, do the following:

  • Always add VAT to the price of all goods and services you sell.
  • Give the buyer an invoice with all the details required by the Value Added Tax Act.
  • Deduct the VAT on the goods and services you have purchased for the purposes of your business from the VAT total on your sales.
  • If your turnover for the accounting period (12 months) is less than €30,000, you may request a relief for the VAT to be paid.
  • File and pay VAT to the Tax Administration regularly. The deadline dates for VAT depend on your tax period (for the majority of VAT taxpayers, this means once a month).
    • Start filing VAT returns as soon as you register as a VAT taxpayer.
    • File for each tax period – even if you have not started your operation yet or even if you have not had any sales during the accounting period.