Refund of value added tax to foreign businesses established outside the EU
- Date of issue
- - 3/28/2017
This page concerns the refund procedure of VAT when the applicant is a business established outside the EU.
Foreign businesses which are not liable to pay tax on sales in Finland and which do not have a permanent establishment in Finland may apply for a refund of the VAT included in the price of goods and services purchased here. VAT paid in connection with the import of goods is refundable.
The right to a refund corresponds to that of businesses liable for VAT in Finland. The refund is paid on condition that the purchase in question concerns the applicant’s taxable business operations abroad - outside the EU – which entitles to deduction. The right to a refund is not reciprocal, that is, it also applies to businesses from countries without a corresponding refund system.
By the country of establishment is meant the country where the business has its domicile or permanent establishment from where the business carries out transactions.
Foreigners engaged in intra-Community supplies or acquisitions in Finland are subject to a notification duty. This means that they must register and submit the periodic tax return and recapitulative statement even when they have no fixed establishment in Finland and do not wish to apply for VAT liability. Further information is provided in page VAT registration of foreigners in Finland.
What qualifies for a refund?
The following taxable purchases, among others, entitle a foreign business to a VAT refund: meetings, goods samples, exhibitions, fairs, training, office supplies, photocopies, maps, professional literature, hotel accommodation, transportation within Finland, fuel and lubricants for cars, car maintenance, repair and parts, car hire and parking.
The VAT refund is subject to the following conditions:
- The purchase must concern the applicant’s business operations abroad which, if carried out in Finland, would be taxable or
- the purchase must concern the applicant’s business operations abroad which, if carried out in Finland, would entitle the applicant to a refund according to the VAT Act or
- supply of certain exempt transport services of goods in Finland and services ancillary thereto VAT or
- the purchase must concern sales of goods and services by the applicant in Finland for which the buyer is liable to pay tax (what is called reverse charge). The reverse charge is applied when the seller is a foreigner who does not have a permanent establishment in Finland and who has not applied for tax liability here. VAT is also refundable when the buyer is the Finnish government.
In item 2) above, the operations which entitle to a refund according to the VAT Act are as follows
- A business is entitled to a refund of the tax paid in connection with the purchase of goods or services if relating to the applicant’s operations which are subject to the what is called zero tax rate. Such operations include tax-exempt international trade and the sales of subscribed newspapers and journals, editions of a membership newsletter of a non-profit association, tax exempt ships or the sales of maintenance services for such ships, and the sale of gold to the central bank.
In addition it is provided that the VAT should have been deductible.
In addition, a business is entitled to refund, if the purchase relates to sale of financing services and insurance services or sale of bank notes and coins when the buyer is a business who does not have a domicile or permanent establishment within the EU, or if the sale is connected with goods intended for direct export from the EU.
If the country where the business is established has a value added tax system it is required that to be eligible for a VAT refund the foreign business has purchased the goods and services used for transactions giving rise to a right of deduction in the country of establishment. In such case if the business in the country of establishment carries on both VAT liable and VAT exempt business transactions the purchase is eligible for refund only to the part that it is used for the business that gives a right to deduction.
Refund for VAT on goods and services that a VAT liable permanent establishment in another EU-country of a business established outside the EU has incurred in Finland is applied by using the electronic portal in the country of establishment. Whether it is possible for the permanent establishment to submit the refund application through the electronic portal should be asked from the tax authority in the EU-country of establishment.
The refund referred to in item 4) above is not payable on purchases which are connected with sales of goods and services by a foreigner in Finland for which the foreigner is liable to pay tax according to the VAT Act (that is, the reverse charge does not apply). As the seller, a foreigner is liable to pay tax in the following cases:
- The buyer is a foreigner who does not have a permanent establishment in Finland and who has not been entered in the VAT register.
- The buyer is a private person.
- The sale is the distance sale of goods from another member state to a private person or a corresponding party in Finland (see page VAT regulations concerning distance selling to Finland).
- The sale is passenger transportation services.
- The following services performed in Finland: teaching, scientific services, cultural entertainment and sports events and other such services, and services directly connected with their provision.
If the acquisition relates to a foreigner’s activities in Finland subject to the zero tax rate, the foreigner is not entitled to a refund of VAT under the refund system for foreign businesses. To be eligible for a refund of the VAT included in purchases, the foreigner must register as VAT-liable in Finland. The refund is then paid as to other VAT-liable parties. In such cases the foreigner need not appoint a tax representative in Finland (direct registration).
A business is entitled to a refund of the VAT included in the price of goods and services when the acquisition relates the business’s sales of taxable investment gold, gold material or semi-manufactured gold products in Finland or abroad and when the reverse charge procedure is applied on the sale. A condition for the refund is that the business’s business activity abroad would entitle to option for taxation if carried out in Finland.
The right to a refund concerns also the taxable goods and services which have been acquired for the purposes of taxable intermediary services concerning investment gold.
For the purposes of tax exempt sales of investment gold, the business is entitled to a VAT refund for
- tax paid on taxable investment gold supplied by a supplier liable to tax;
- tax which is included in the acquisition of gold which shall be transformed by the business
or at the request of the business into investment gold;
- tax paid on services for the transforming of the investment gold or other gold in respect of
form, weight or purity.
If the goods or services are acquired for sale of tax exempt investment gold, a business that produces investment gold or transforms investment gold or any gold into investment gold is entitled to a VAT refund of the tax which is included in the acquisition of goods or services linked to the production or transformation, which would entitle the business to a VAT deduction, if the activity would be taxable in Finland.
A business is entitled to a refund for the tax included in the above mentioned acquisitions, also for sale of investment gold abroad, if the acquisition relates to activity when carried out in Finland
would entitle to a refund. A foreign business that sells investment gold in Finland and that has not opted for the taxability of the sale must register as VAT-liable in Finland.
How is the right to a refund restricted?
The restrictions on the VAT-liable’s right to deduction stipulated by the VAT Act also apply to VAT refunds paid to foreigners. Following purchases, among others, are not eligible for a VAT refund:
- Purchases intended for the private consumption of the business entrepreneur or his personnel. Such a purchase is breakfast and pay-tv in connection to hotel accommodation
- Purchases for representation purposes, such as restaurant expenses, business gifts, etc
- Purchase of a passenger car and purchase of goods and services related to passenger cars (e.g. fuel, lubricants, maintenance, repair, parts) when the passenger car has not been purchased for purely tax deductible use. For example the VAT included in the rental costs of a passenger car is refundable when the car is used solely for business purposes. The applicant must enclose a written explanation, for example driving diary, by which the applicant can reliably show, that the car has been used solely for business driving.
- Goods and services bought from other businesses by a foreign travel organizer for the direct use of travellers. Due to the marginal taxation applied to travel agency services, the tax included in the prices of such goods and services is not VAT deductible and is, therefore, non-refundable.
- Expenses linked to the sale of tax-exempt investment gold.
Tax-exempt purchases, such as international flights, do not qualify for a refund.
Refund is not paid when the invoice should be VAT exempt but it wrongly includes VAT. If the supplier
mistakenly has invoiced his sale including VAT although it according to the provisions in the VAT Act is exempt, the buyer should turn to the seller and ask him to refund the mistakenly charged amount.
To which application period should the invoice be related
The VAT included in the acquisition is related to the application period during which
- the goods was supplied or the service was rendered, or the consideration or a part of it was paid before the goods was supplied or service was rendered
- the goods or service was invoiced depending on which took place later.
An application cannot be submitted only on the basis that the applicant has received the invoice. In addition is required that the goods has been supplied or service has been rendered or the consideration has been paid.
VAT on imported of goods are related to the month when the customs clearance was done
How is a refund application made?
The refund should be applied for in writing from Uusimaa Corporate Tax Office. The application should be made in Finnish, Swedish or English using the form approved by the Tax Administration. Application forms are available on the website www.tax.fi.
The person who signs the application declares that the given information is correct. The signer should have the right to sign for the applicant. The applicant must declare that the information in the application is correct and the signer should have the right to sign for the firm.
Contact details to the Tax Office:
Uusimaa Corporate Tax Office
P.O. Box 34
Tel. + 358 20 697 063
Fax + 358 9 7311 4895
The visiting address for the Uusimaa Corporate Tax Office client service is Opastinsilta 12 C, 00520, Helsinki
The application must cover a period of at least three consecutive months within a calendar year, but not more than the full calendar year. An application can cover less than three months if this is all that remains of the calendar year.
The applicant’s tax reference number in home country
In the box marked with an asterisk * the applicant shall state the value added tax identification number or tax reference number issued by the tax authority in the applicant’s home country and which is shown on original certificate that should be attached to the application. If the applicant e.g. according to authority practice in the applicant’s home country has not such a tax reference number, the applicant should state the number corresponding to the trade register number. In such case an original extract from the trade register should be attached. It is mandatory to state the tax reference number in home country. In any later application the same number must be used.
If the applicant in the Member State of establishment is a member of a VAT group the application is filed at VAT group level. However, if the individual entity has been issued an own VAT number it may make an application for its own purchases. Thus the earlier practice is changed when earlier it was required that the application were to be made by each individual entity. An application already filed will not be rejected due to the changed practice.
What documents should be enclosed with the application?
Invoices/receipts and import documents
The original invoice or corresponding document from the seller and/or original customs clearance decision and related documents must be enclosed with the application. Each invoice/customs decision should be specified in section 10 on the application form. The specification in section 10 may be given on separate paper. Original invoices and customs clearance decisions are returned to the applicant.
An invoice should show the name and addresses of the seller and buyer, the seller’s Business ID, date of issue of the invoice, a sequential number, the quantity and nature of the goods and the extent and nature of the service, the date on which the goods or services were supplied when it is not the same as the date of the invoice, the price exclusive of VAT per rate of VAT, displaying the unit price and any rebates, discounts and credits if not included in the unit price, the VAT rate and the VAT payable. If the invoice is an amended invoice it should show a reference to the earlier invoice.
If the total amount of the invoice is no more than 250 euros (e.g. taxi) or the seller is a retailer (e.g. a department store) or similar shop where almost all the buyers are private individuals, simplified arrangements apply. Invoices issued under simplified arrangements should show the seller’s name and Business ID, date of the issued of the invoice, identification of the type and quantity of the goods and the type of services and the VAT payable specified by VAT rate or the price exclusive of VAT per VAT rate.
Transport company’s (haulier) refuels paid with payment card issued in the applicant’s home country
It has been possible to apply for refund for the summary invoice issued by the petroleum company in the applicant’s home country when the invoice showed that the refueling had taken place in Finland. The company that issues the summary invoice has not paid the VAT on the supply of petrol to the Finnish Tax Administration. The VAT has been paid by the Finnish fuel supplier. Therefore the earlier
practice is changed, and refund is applied for on the basis of the receipts issued by the Finnish fuel supplier, or the receipts printed out from the fuel vending machine. An application already filed will not be rejected due to the changed practice.
Specification of invoices (section 10 of the application)
If the applicant in his home country carries out both transactions giving rise to a right of deduction and transactions not giving rise to a right of deduction only the proportion that is attributable to the deductible business is refundable. The applicant has in the specification (section 10) of application for each purchase in percentage state the proportion that is used in transactions giving rise to deduction and this proportion of the VAT amount in euro. The specification in section 10 may be given as separate enclosures.
A certificate issued by the tax authority in the applicant’s home country, stating the turnover tax liability and the nature of the applicant’s business operations. The certificate must be original. The certificate is valid for one year from the issue date.
When the applicant is a seller of taxable investment gold, the certificate, issued by he tax authority in the applicant’s home country, attached to the application must show that the applicant is a supplier of taxable investment gold in his home country.
Power of attorney
If a representative is used in applying for the refund, the applicant must enclose an original power of attorney given to the representative. A continuous power of attorney is accepted. You can find a model of such a power of attorney for this refund on the website www.tax.fi.
What is the last date to apply for refund?
The refund must be applied for within six months of the end of the calendar year to which the period relates. The last day to send the application is 30.6. If the time period is exceeded, the application will not be taken into consideration.
What is the minimum amount of a VAT refund?
If the refund application covers the full calendar year or its remaining part, no refund is paid if the refundable sum is less than EUR 50. The remaining part of a calendar year refers to its last three months. Otherwise, the minimum sum is EUR 400.
How is the refund paid?
The VAT refund is paid to the applicant or to a payee designated by the applicant. The refund is paid either to a bank account in Finland stated by the applicant, or to a bank in another EU member state. It is vital that the applicant provides the complete bank details, that is, the full name of his bank, the IBAN bank account number and the BIC code. The refund is always paid in euro.
Reclaim of refund
If undue or excessive refund is paid because of insufficient or incorrect information given by the applicant, the Corporate Tax Office may order the applicant to repay it. The Corporate Tax Office must make the debiting decision within three years of the end of the calendar year in which the period the defective refund decision relates falls. Under the Tax Collection Act, the debited amount may be deducted from the tax refund paid to a foreigner. Tax increase can be calculated on the debited amount and interest can be charged.
How is an appeal against the rejected decision made?
Refund and debiting decisions may be appealed against by lodging a written complaint to the Helsinki Administrative Court. The appeal brief should be addressed to the Helsinki Administrative Court but sent to the Uusimaa Corporate Tax Office. The brief must be in either Finnish or Swedish.
The original invoices including the specification should be attached to the appeal brief. The euro amount that the applicant wishes would be refunded and the banking connection should be stated in the brief. If the applicant uses a representative an original power of attorney should be attached.
In so far as the Corporate Tax Office does not correct its decision the matter is processed as an appeal and Corporate Tax Office assigns the appeal petition to the Helsinki Administrative Court for decision. An appeal cannot be made concerning purchases not included in the original application.
The appeal must be made within three years of the calendar year of the period the refund decision concerns. However, the appeal period is always at least 60 days from receiving notification of the decision, excluding the notification date.