Value-added taxes in the financial sector
From the perspective of value-added taxation, actors in the financial sector include those in banking, insurance and finance that provide financial services as per § 42 of the Act on value-added tax, which are essentially not subject to VAT. The above list is not exhaustive, and there are other financial actors that provide services such as described above. For example, the actors liable to insurance premium tax can include other actors besides insurance companies.
VAT-related news released in the Newsletter for the financial sector
In 2019, the Tax Administration paid extra attention to the value added taxation of services sold by insurance intermediaries. The services include, for example, insurance intermediation. It has not been clear how VAT should be applied to the insurance intermediaries’ sales and purchases.
The VAT treatment of services provided by insurance intermediaries depends on the content of the service. The fact that the service is sold by an insurance intermediary does not in itself mean that the sale would be exempt from VAT.
Insurance intermediation service provided by an insurance intermediary for an insurance company is exempt from VAT. However, the insurance intermediary can also sell other services and goods. Whether these other services and goods are subject to VAT must be determined separately.
If the insurance intermediary has sales subject to VAT, the insurance intermediary must register for VAT. However, they do not have to register for VAT if their turnover for the accounting period is less than €10,000. The turnover also includes VAT-exempt fees for insurance intermediation services.
If the insurance intermediary has registered for VAT and has sales subject to VAT, they have the right to deduct input VAT. This right concerns goods or services bought insofar as they are directly associated with the insurance intermediary’s sales subject to VAT. If the goods or services bought are associated with the insurance intermediary’s activities that are not subject to VAT, the intermediary cannot deduct the VAT included in the purchase price.
The insurance intermediary can request written guidance or an advance ruling from the Tax Administration on the VAT treatment of the services they provide, if the situation is not clear.
The Tax Administration will send a guidance letter about this matter to insurance intermediaries at the turn of February/March.
On 3 October 2019, the EU Court of Justice issued a ruling in case C-42/18, Cardpoint GmbH, regarding cash point administration service. The service included cash point maintenance, such as transportation of cash and loading cash into cash points (ATMs). The service did not include implementation of bank transfers. The EU Court of Justice ruled that cash point administration is a service subject to VAT.
The Finnish Tax Administration holds that other cash management services, such as cash-in-transit and cash counting services, are also subject to VAT in cases where they are not associated with implementation of bank transfer. Such services must be treated as being subject to VAT as of 1 January 2020.