Value added taxes for businesses providing social services

Service providers of the private sector can sell these services without VAT only if their business operation is supervised by a public authority.

Services in this category may be:

• care of children and teenagers
• care of the elderly
• care of the disabled plus other services and support
• substance abuse services
• other activities comparable with the above

Social services also include interpretation services – either based on legal provisions or partially paid for by the state of Finland – for the hearing impaired or for persons with a combined vision and hearing impairment or speech impairment.

When can social services be sold exempt from VAT?

Service providers of the private sector can supply these services with no VAT only if the business operation is supervised by the social authority, and only if the services are sold to a person who is in need of them. The local public authority in charge of social welfare can conduct an appraisal of the person’s circumstances to establish that the person or patient has such a need.

References to a “person who is in need of social welfare services” are generally related to impaired functional capacity due to age, illness or the like. The social authority does not need to have issued a specific decision for every individual or patient, but at least the following requirements must be fulfilled:

1. The provider (i.e. supplier, seller) of the service, including the provider company’s unit that produces the services, has to be on the register called Soteri. This official register is maintained by the Finnish National Supervisory Authority for Welfare and Health — Valvira. If you are a company providing social welfare services, your exemption from VAT can only concern the specific social services Valvira had recorded upon your registration.
2. To give a social service to someone is either based on the relevant public authority’s decision on the matter, or based on a written contract between you the service provider and the individual recipient or patient.
3. You need to have a service plan or a comparable plan that you and the individual or patient have established in co-operation. When you are in the role of a private service provider selling social services based on a public authority’s decision, responsibility for making and establishing the service plan will fall on that public authority.
4. You as a service provider need to have a self-monitoring plan.

However, the above list of requirements is not applicable on service providers of interpretation services for the hearing impaired, or for persons with a combined vision and hearing impairment or speech impairment. To sell interpretation services is exempt from VAT when the service is based on legal provisions or partially paid for by the state of Finland.

Support services provided as a VAT-exempt social welfare service

Service providers can sell support services without VAT on the condition that the above requirements are satisfied, qualifying their support service as VAT-exempt.

The Social Welfare Act (1301/2014, section 19) contains definitions of the support services exempt from VAT. “Support services” are a category of services that help create and maintain favorable circumstances in the home, so that the individual service recipient can function independently. Support services may additionally be related various forms of personal wellbeing. Taking account of the individual’s or patient’s needs, this category of services may consist of meal delivery, laundry service, house cleaning, running errands, and help with the individual’s interaction with others.