How to calculate your VAT relief

You must calculate the amount of your VAT relief yourself.

If your company's turnover is €10,000 or less, your relief equals all the paid-in VAT for the entire accounting period. In this case, you do not need to calculate the relief.

However, not all paid-in VAT counts towards the relief. For example, the VAT paid on EU purchases (=intra-Community acquisition) cannot be included in the VAT relief calculation. In the same way, the reverse-charged VAT paid by the buyer for purchases in the building, construction, and scrap metal sectors cannot be included. However, VAT deductible from EU purchases, and VAT deductible from purchases under the reverse-charge scheme are taken into account.

If your turnover is between €10,000 and €30,000, you can use this Excel worksheet to calculate your VAT relief.

You will need the following information to calculate the relief:

company turnover for the accounting period (not including VAT)

amount of VAT included in the accounting period's sales

amount of VAT included in the purchases made by the company during the accounting period (only purchases relating to business activity)

the length of the accounting period (if necessary, adjust the turnover to correspond to a 12-month accounting period)

Calculation formula

If your turnover is more than €10,000 but less than €30,000, you receive a partial relief.

If you file your VAT and relief in MyTax, it will calculate your VAT relief automatically for you.

You will only need to use this formula if you file on paper:

tax – (turnover – €10,000) × tax
                    €20,000

The threshold amount of turnover that entitles companies to VAT relief was changed on 1 January 2016. Before 2016, the threshold was €22,500. Turnover of €8,500 or less qualified for full VAT relief.

The previous threshold of €8,500 applies to any accounting period that started prior to the 2016 calendar year. If your company turnover was €8,500 or less during such an accounting period and you are liable to pay VAT, you will receive a relief equal to the period's VAT in full, i.e. the amount of taxes on sales with the taxes on purchases deducted. In this case, the relief is not calculated with the formula below.

If your turnover is more than €8,500 but less than €22,500, you will receive a partial VAT relief. The relief amount is determined by this calculation formula:

tax – (turnover – €8,500) × tax
                     €14,000

Examples of VAT relief calculations

The annual turnover of a physical therapist consists of VAT-exempt physical therapy (for €20,000) and VAT-liable zone therapy (for €15,000 without VAT). Tax-exempt sales are not included in the calculation of VAT relief. Therefore, the turnover that qualifies for relief is €15,000.

Example: A company's domestic net turnover amounts to €11,000 (VAT not included). The 24% VAT of that is €2,640. The VAT included in the company's deductible purchases is €150. Additionally, the company must pay €250 of VAT due to a tax liability arising from the reverse-charge VAT scheme. In other words, total deductible VAT equals €400 for the accounting period: the reverse-charged €250 and the deductible VAT for domestic purchases, €150.

The turnover that qualifies for relief is €11,000.

The amount of VAT that qualifies for relief is the difference between taxable domestic sales (€2,640) and deductible VAT for the year (€400) i.e. €2,240.

VAT relief calculation:

€2,240 – (€11,000 – €10,000) x €2,240 = €2,128
                       €20,000

The amount of the relief is €2,128.

Example: Your qualifying turnover for the 1 Jan – 31 Dec 2018 accounting period was €11,500 on which the 24% VAT is €2,760. The deductible VAT from business activities was €3,060. This amount includes VAT €1,500 deductible for forestry. The forestry operation did not entail any VAT to be paid.

The resulting VAT for the accounting period is a negative €300. For purposes of the calculation formula, the turnover entitling you to the relief equals €1,200: the VAT on sales, €2,760, minus the VAT that must be deducted, outside of forestry, €1,560. The amount of the relief is €1,110.

€1,200 – (€11,500 – €10,000) x €1,200 = €1,110
                              €20,000

 

Example: In the middle of the year, Niina starts up business as a self-employed consultant in the construction industry. Niina registers for VAT. Niina's first accounting period is 1 September – 31 December 2018, or four months. In this time, she gets €25,400 in turnover.

Since Niina's accounting period is not 12 months, her turnover for purposes of determining the VAT relief must be adjusted to correspond to a 12-month period. Multiply the turnover by 12 and divide the result by the number of full calendar months in her accounting period (€25,400 × 12 / 4 months). This way, Niina's adjusted turnover for 12 months equals €76,200.

Niina's turnover for 4 months is less than €30,000, but her 12-month turnover would be more than €30,000. In other words, Niina cannot receive a VAT relief.

 

Avoid common mistakes

Mistake:Turnover exceeds €10,000, but the amount of VAT relief has not been calculated with the formula. Instead, the difference between the VAT on sales and VAT on purchases has been filed as the relief in its entirety.

Further information: You will only receive full VAT relief if your turnover is less than €10,000. If it is higher, the VAT calculation formula must be used. In this case, the easiest way to calculate your VAT relief is to use the calculator (excel) as it applies the formula automatically.

Mistake: The accounting period is shorter or longer than 12 months, but the turnover entitling for relief has not been adjusted accordingly, to correspond to 12 months.

Further information: If the accounting period is not 12 months, the turnover for the purpose of calculating the VAT relief must be adjusted so as to correspond to 12 months.

First, multiply the turnover by 12 and divide the result by the number of full months in your accounting period. For example, if your accounting period is 12 September – 31 December, you must multiply your turnover by 12 and then divide by 3.

Mistake: The amount filed as the relief is more than the amount of VAT payable for the accounting period.

Further information:The amount of VAT that entitles for the relief cannot be more than the amount payable for the accounting period.

If your turnover is between €10,000 and €30,000, the relief amount is easiest to determine with the calculator (excel).

Mistake: Company files the VAT relief in the wrong year's income taxation.

Further information: The income from a VAT relief is taxable in income taxation. The relief income must be entered in the books as income for the period when the company received the right to the relief.

An exception from this rule are the operators of business whose tax period is the month or the quarter, i.e. they actually pay some VAT during the tax year. For them, the relief income is considered to be received in the year when the Tax Administration pays it to them in the form of a refund.

The income must be reported in the tax return's section for grants and subsidies received.

It is considered to be received from the same income source as the income for which the relief has been granted. For example, VAT relief for a business operation is considered income from a business source, and VAT relief for agriculture is income from agriculture.

For more information, see the detailed guidance on VAT relief in income taxation (in Finnish and Swedish).