VAT on international supply of services

In the supply of services, the place-of-supply rules determine which country’s VAT provisions are applied to the sale.

The place of supply is determined on the basis of either the general rule or a special rule applicable to the service in question. If there is no special rule on the supply of a service, the general rule is applied. The place of supply of most services is determined by the general rule.

The place of supply of a service is often determined differently depending on whether the service is sold to a business or to a consumer.

To be able to determine the place of supply, you need to know

whether you are selling the service to a consumer or to a business
what service you are selling
whether the service is supplied to the buyer’s fixed establishment or supplied from the seller’s fixed establishment.

When is Finland the place of supply?

The place of supply is Finland when the service is sold in Finland. In this case, Finnish VAT must be paid on the sale unless the law prescribes that the service is exempt from VAT. The VAT is usually paid by the seller unless the reverse charge mechanism is applied.

The following questions help you determine the place of supply of the service.

If there is no special rule on the sale of a service, the place of supply is determined by the general rule. If you do not know which services are governed by special rules, read more at "What services do you sell?"

General rule on the sale of services to a business

When you sell services to businesses, the place of supply is determined by the buyer's fixed establishment or place of establishment of a business. Under the general rule applicable to businesses, the place of supply is the country where the fixed establishment receiving the service is located.

When you sell a service to a business, the service is regarded as being sold in Finland if

it is supplied to the buyer’s fixed establishment located in Finland
the service is not supplied to a fixed establishment located in Finland or abroad, but the buyer’s place of establishment of a business is Finland.

When is the buyer a business?

In the supply of services, “business” is understood in the broad sense. Businesses include all companies engaged in VAT-liable activities, even if their activities are limited or they sell only services that are not subject to VAT, such as financial or insurance services.

For example, a non-profit association that has both VAT-liable activities and non-profit activities is a business. Also, a municipality conducting sales activities subject to VAT as well as acting as a public authority is regarded as a business.

General rule on the sale of services to a consumer

When you sell a service to a consumer, the place of supply is determined by the seller's fixed establishment or place of establishment of a business. Under the general rule applicable to consumers, the place of supply is the country where the seller’s fixed establishment that sells the service is located.

When you sell a service to a consumer, the service is regarded as being sold in Finland if

it is supplied from the seller’s fixed establishment located in Finland
the service is not supplied from a fixed establishment but the seller’s place of establishment of a business is Finland.

When is the buyer a consumer?

If the buyer is not a business operator, they are a consumer. Consumers include private individuals who buy a service for private consumption. Consumers also include non-profit organisations that do not conduct VAT-liable supply of services, and businesses that buy services only for their own or their employees’ private consumption.

To determine the place of supply, you often must ascertain whether the service has been supplied to the buyer’s fixed establishment or supplied from the seller’s fixed establishment, and in what country the fixed establishment is located.

A fixed establishment is, for example, a fixed apartment or fixed business premises where a company can conduct business on a regular basis. In addition, the fixed establishment must have a sufficient amount of staff and appropriate information technology, machinery or equipment to allow the establishment to receive or supply services.

If the buyer has several fixed establishments and it is not possible to determine which is the one to which the service is supplied, then the place of supply of the service is the country where the buyer has established its place of business. The place of establishment of a business is the place of the company's central administration.

The place of supply of a service depends on the type of service you are selling. The place of supply of most services is determined by the general rule, but some services are governed by special rules. If there is no special rule applicable to a service, the general rule is applied.

Some special rules concern the sale of services to all buyers, i.e. it is irrelevant whether the buyer is a business or a consumer. Other special rules only apply when services are sold to consumers.

The following services are subject to special rules regardless of the type of buyer:

services related to real estate
passenger transport services
admission fees
restaurant and meal services
short-term rental of means of transport.

The supply of travel agency services to businesses is subject to a special rule, whereas their sale to consumers is governed by the general rule. In this case, however, the rules are similar in content, so when the country of supply is determined, it is irrelevant whether the buyer is a consumer or a business.

The following services are subject to special rules only when sold to consumers:

goods transport
services related to goods transport
valuation of a movable object, and work related to a movable object
long-term rental of a means of transport or a pleasure craft
brokerage services
sale of immaterial services to non-EU countries
radio and TV broadcasting services, electronic services, and telecommunications services.

Who pays the VAT: the seller or the buyer (reverse charge)?

When a service is sold in Finland, Finnish VAT must be paid unless the law separately prescribes that the sale is exempt from VAT.

The VAT is usually paid by the seller unless the reverse charge mechanism is applied. The reverse charge means that the buyer pays the VAT on the seller’s behalf.

The reverse charge is applied in all EU countries when a business sells a service governed by the general provision to a business established in another EU country. In Finland, the reverse charge is also applied to many services that are not governed by the general provision.

When the VAT is reversed to the buyer in Finland, the buyer reports the VAT they pay on the seller’s behalf on the VAT return. This VAT is deductible to the buyer if the general requirements of deductibility are met.

How to report sales and purchases

Report details on the sale and purchase of services on the VAT return. Also file a VAT Recapitulative Statement on such sales of services on which the buyer is liable to pay VAT in another EU country (services subject to the general rule). Note that the deadlines for the VAT Recapitulative Statement and the VAT return are different.

More information about reporting:

Need further instructions?

You can contact our taxpayer service on Monday–Friday, 9 am–4 pm

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Page last updated 5/16/2024