When do light entrepreneurships give rise to VAT?
If you receive trade income from your invoicing service company for more than €15,000 a year, you become liable to pay VAT, value-added tax. You must submit an application for VAT registration in MyTax or through our other services for taxpayers.
When the Tax Administration processes your application, a Business ID is issued to you unless you already have one.
If you already have a Business ID, your application for VAT registration is more straightforward: you simply have to make some changes to your business registration in MyTax.
When you begin working under an arrangement where an invoicing service company pays you, we recommend that you make a realistic estimate of the trade income that you will be getting. If your estimate shows that you are going to go over the threshold of €15,000 a year, you must submit an application for VAT registration. Otherwise, you would have to pay the entire year’s VAT retroactively if your trade income exceeds €15,000 mid-year. If this were to happen, you would also have to pay a late-filing charge in addition to the retroactive taxes.
Are you receiving trade income or wages?
If the money you get from your invoicing service company is classified as wages, you have no VAT liability. Accordingly, the need for VAT registration and VAT payments is linked to trade income only.
We recommend that you re-read the contract you signed with the invoicing service to check whether the amounts paid to you are classified as wages, or whether they are classified as trade income (työkorvaus) instead.
File and pay the VAT
- After you have become registered for VAT, you must begin to file and pay VAT for every tax period. You are expected to submit VAT returns in order to inform the tax office of the amount of VAT on all your sales of goods and services in Finland.
- By virtue of your VAT registration, you are entitled to deduct the VAT that has been included in the price of the work-related goods and services you buy. You must send a VAT return for each tax period — even if you had been inactive, i.e. with no VAT activities during the period.
Adjusting for the 12-month period (in the case of a mid-year startup)
If you begin your work, i.e. the “light” entrepreneurship, in the middle of the year, you must perform a calculation in order to adjust your sales figure. The period must reflect your sales/turnover for 12 months, as it were.
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: Sari begins her work in September. Accordingly, the first accounting period starts 14 September 2024 and ends 31 December 2024. Because the first period is shorter than 12 months, Sari has to adjust the sales figure to simulate 12 months of activity as follows:
Turnover for the first accounting period: €4,200
Full months in the period:
3 (October, November and December – September is not a full month).
Adjustment, to simulate a 12-month period: €4,200 × 12 months / 3 months = €16,800
After the adjustment, Sari’s sales go over the €15,000 threshold. She must submit an application for VAT registration, effective from Sari’s first day of work (14 September 2024).
Read more about VAT for small business (in Finnish and Swedish)
Remember to file an income-tax return for business operators and self-employed persons
After you have reached the threshold for VAT registration and become a self-employed person operating a trade/business, you must comply with several new obligations. You must keep books. When the year is over, you must submit a “business tax return”. The deadline for the return is during the spring season following the tax year. If you get your registration mid-year, you must enter any amounts paid to you as trade income as business income on your tax return, if you received amounts of money before your registration.
Frequently asked questions
The estimate of the total amount of sales for the accounting period must not be too low. If you have not submitted an application for VAT registration and you exceed the threshold of €15,000 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 €15,000 threshold during the accounting period:
- Submit an application for VAT registration as soon as you can.
- 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 has been registered for VAT, do the following:
- Always add VAT to the prices of the goods and services you sell.
- When you issue an invoice to the buyer, include all the details required by the Value Added Tax Act. See detailed guidance on invoice requirements.
- Deduct the VAT on the goods and services you have bought for your VAT-liable business operations from the VAT total on your sales.
- If your turnover for the accounting period (12 months) is less than €30,000, you can request a VAT relief for small businesses.
- File and pay VAT to the Tax Administration regularly according to your tax period (usually once a month).
- Start filing VAT returns immediately as you register your company for VAT.
- File a return for every tax period, even if you have not started your operations yet or have not had any sales during the period. Instructions for filing and payment.