Tax border between Åland and Mainland Finland – import of goods

The Åland Islands are not part of the EU VAT and excise territory. Due to the special status of Åland, there is a tax border between the Åland Islands and the EU VAT territory. The tax border means that imports between Åland and Mainland Finland are subject to the provisions of the Value Added Tax Act.

Importers that have registered for VAT must present and declare to Customs any goods that are transported across the Åland tax border. 

VAT-registered importer: how to report import VAT on the VAT return

VAT-registered importers must themselves calculate the basis for import VAT and the amount of VAT to be paid and submit the information to the Tax Administration on the VAT return.

Note: Customs does not confirm the customs value of the imported goods; the importers must assess and calculate the value themselves.

How to allocate import VAT to a tax period on the VAT return

If you import goods from the Åland Islands to Mainland Finland or vice versa, report the import VAT details on the VAT return you file for the tax period during which the liability to pay VAT on imports arises. As a rule, liability to pay import VAT arises when the customs declaration is approved. The date the customs declaration is approved is indicated at “Approval date” on the decision on the first customs clearance issued by the new customs clearance system.

You can declare imports to Customs using either a one-step declaration method or a periodical two-step declaration method. The method you choose determines the tax period and thereby the VAT return on which the imports must be reported to the Tax Administration.

If you use the one-step method to declare the imported goods to Customs, allocate the import VAT details to a tax period (month, quarter-year or year) according to the approval date indicated on the decision on the first customs clearance when you file the VAT return.

If the imported goods are used for a purpose that qualifies for a deduction, report the deductible VAT on the VAT return for the same tax period.

Example: Customs issues a customs clearance decision to the importer, and the approval date is 12 February 2022. The importer submits details on the import VAT to the Tax Administration on the VAT return it files for February. February’s VAT return must be filed by 12 April 2022.

Enter the import VAT and the tax basis in the following fields:

  • Imports of goods from outside the EU.
  • Tax on import of goods from outside the EU.

If the imported goods will be used for a purpose that entitles you to a VAT deduction, indicate the deductible VAT under “Tax deductible for tax period” on the same VAT return.

 

In the two-step declaration method, the periodical declaration is used. If you use the two-step method to declare the imported goods to Customs, allocate the import VAT details to the tax period (month, quarter-year or year) for which the periodical declaration was submitted to Customs (not to the tax period according to the approval date indicated on the decision on the first customs clearance).

The importer receives a customs clearance decision on each periodical declaration submitted to Customs. The importers must themselves calculate the basis for import VAT and the amount of VAT, and report the combined amount on the VAT return for the tax period for which the periodical declaration was submitted to Customs.

If the imported goods are used for a purpose that qualifies for a deduction, report the deductible VAT on the VAT return for the same tax period.

Example: The importer submits a periodical declaration for February to Customs on 25 March 2022. The importer submits details on the import VAT to the Tax Administration on the VAT return it files for February. February’s VAT return must be filed by 12 April 2022.

Enter the import VAT and the tax basis in the following fields:

  • Imports of goods from outside the EU
  • Tax on import of goods from outside the EU.

If the imported goods will be used for a purpose that entitles you to a VAT deduction, indicate the deductible VAT under “Tax deductible for tax period” on the same VAT return.

 

Read more about reporting import VAT: Tax border of the Åland Islands for VAT purposes (2.5.4 and Annex 2) (available in Finnish and Swedish, link to Finnish).

If the principal has an indirect representative

If the customs declaration is submitted by an indirect representative, the tax liability is usually carried by the principal.

However, in exceptional cases, the indirect representative may be liable for VAT when goods are imported between the Åland Islands and Mainland Finland. In such a case, Customs will collect VAT on imports, and the imported goods need not be reported to the Tax Administration on the VAT return.

The indirect representative has tax liability when the principal is

  • a private individual and the imports are not related to any business operated by the individual
  • a legal person who is not in the VAT register.

Indirect representatives include online shops and other suppliers that are not registered tax-border customers of Customs and that act as agents for private individuals in imports between the Åland Islands and Mainland Finland.