VAT on subscriptions of newspapers and magazines
- In force until further notice
This is an unofficial translation. The official instruction is drafted in Finnish and Swedish languages.
The VAT rate on subscribed newspapers and magazines, minimum subscription being for one month, was raised as of 1 January 2012 by an amendment of the Finnish VAT Act (Act no 1202/2011) that covers the selling (=supply), intra-Community purchase and import of subscriptions.
The rate of VAT is now 10 % (§ 85 a, subsection 1.8, VAT Act). Previously, during 1 January 2012 – 31 December 2012, it was 9 % and prior to 1 January 2012 it was 0 %, so VAT was not charged.
VAT must be paid on the selling of single copies of newspapers and magazines at newsstands and the standard VAT rate is 24 %.
2 Definitions of a 'newspaper' and a 'magazine'
There are no definitions of a newspaper or a magazine in the VAT Act. However, the Finnish taxation practice and the case law established by the Finnish courts have used the definitions found in the Act on the Exercise of Freedom of Expression in Mass Media (460/2003) and in the historical Freedom-of-the-Press Act (1/1919). Accordingly, newspapers and magazines are issued in a series of at least four per year, they must have an editor-in-chief who has certain responsibilities, and the format and structure of the paper-bound publication must be generally identifiable as a newspaper or a magazine. A further requirement set out by the Act on the Exercise of Freedom of Expression is that the publisher must appoint an editor-in-chief for directing and supervising editorial work and for deciding the contents of the newspaper, magazine, journal, periodical etc.
The reduced VAT rate (10 %) does not apply if an entire edition of a subscribed newspaper or magazine is being sold in circumstances where the seller is a publishing house and the buyer is the publisher. Such a transaction (i.e. a supply of production services) is liable to the standard VAT rate of 24 %.
This interpretation is based on the decision no T 4119 by the Finnish Supreme Administrative Court (KHO), dated 31 December 2013: the publisher of a magazine, who bought the printing and production services for it from a publishing house, could not be qualified as a 'subscriber', and the invoice for these services could not be regarded as a 'subscription fee'. Consequently, the VAT to be charged could not be the reduced rate.
In the Supreme Administrative Court´s decision on 31 Dec 2013, no T 4119: 'A Oy' is a business that published a number of magazines for customers of certain companies and for the members of certain associations. 'A Oy' was the publishing house for a customer magazine that served the interests of 'B Oy'. The magazine was issued four times a year and distributed free of charge to all customers and other people within the 'B Oy' group. It was agreed that 'A Oy' is in charge of the necessary printing, distribution, editorial work, layout and design, proofreading and pre-press services. 'A Oy' bought the printing and distribution from certain third-party contractors. 'B Oy' was the publisher and therefore responsible for the contents of the magazine.
According to the decision, the agreement between 'A Oy' and 'B Oy' was not regarded as a sale of a newspaper or a magazine subscription for a period of at least one month. This way, 'B Oy' who bought the printing and production services from 'A Oy' could not be qualified as a 'subscriber', and A's invoice was not a 'subscription fee invoice'. Consequently, the transaction was not a sale of a newspaper or a magazine subscription for at least one month where the buyer would get a magazine from its publisher, pay a subscription fee, and receive the printed issues of the magazine to a specified delivery address. The reduced VAT rate could not be applied.
For more information (in Finnish or in Swedish) on the decision of the Supreme Administrative Court, see "KHO:n päätös 31.12.2013 T 4119: lehden valmistustyön myynnin arvonlisäverotus".
3 The requirement of a subscription
The reduced VAT rate of 10 % is not applied to other newspapers and magazines than those subscribed by subscribers. This requires that the newspaper/magazine is distributed to the readers directly: copies of an issue must be sent to the delivery addresses of the subscribers. According to the taxation practice, it is acceptable for the lower rate to apply that a publishing house agrees to provide an association or similar body a complete membership magazine service, including delivery of copies to the members for the entire year. In these circumstances, it is required that the publisher takes care of the distribution directly to the readers.
The reduced VAT rate only applies to goods: this means subscriptions of paper-bound, printed newspapers/magazines, not their electronically provided versions, other e-publications, or e-zines. Selling digital, electronically provided newspapers or magazines is treated as a supply of services. Under the Finnish Supreme Administrative Court's decision no T 2505 on 4 October 2007, the reduced rate could not be applied to the selling of an e-version of a newspaper together with its printed version, because there were two separate supplies.
4 Subscriber´s right to recover the input VAT
The question of whether the buyer may recover the input VAT in a subscription fee of a newspaper/magazine falls under the general provisions of VAT deductibility, as defined in the VAT Act (§ 102). Subscribers can recover the input VAT if they buy the newspaper/magazine for a business. This interpretation is in line with the usual taxation practice, applied to the purchases of single issues bought at newsstands. This taxation practice has been in force already before the amendments of the legal rules that changed the VAT treatment of the subscriptions. The subscriber cannot deduct the input VAT if he buys the newspaper/magazine for other that business purpose or if there are other restrictions to recover the input VAT.
If a business buys subscriptions of a number of newspapers/magazines for their office premises in order to let customers or employees read them, this is regarded as being for a business purpose, and the input VAT can be recovered.
Newspapers/magazines subscribed for delivery at a home address are treated as being part of private consumption. However, the input VAT can be recovered in cases where an employer has subscribed a professional newspaper/magazine for an employee with home delivery. The requirements for a recovery include that the subscription relates to the employee's job duties and a good reason for having the magazine delivered at home. The subscription contract must indicate the employer as the invoice recipient and the contracting party. In other words, no recovery is available in an arrangement where the employer simply pays the employee´s subscription fee invoice.
(1) A company operating as a barber-hairdresser has bought a few subscriptions of newspapers and magazines for its shop so the customers can read them.
The subscriptions are treated as having been bought for a business purpose: the company can recover the input VAT.
(2) A telecommunications company gives for its employee a paid subscription of a daily newspaper to be delivered to his home.
The company cannot recover the input VAT because the subscription is bought for a private consumption.
5 VAT charged on the own use
The VAT rules regarding the own use are also applied on supplies of newspapers and magazines where applicable.
If a taxable person takes goods that are acquired originally for business purposes to private use or to other than business use that entitles to a recovery of input VAT, the taxable person has to pay VAT on the own use. In these situations, VAT is payable provided that the input VAT of the goods have been recoverable or the goods were manufactured in the course of a business subject to VAT (§ 21, VAT Act).
Giving away samples is not taxed as own use (§ 25, VAT Act). If samples of newspapers/magazines are delivered to a group of people free of charge, whether for subscription or for purchase of single copies at newsstands, or if a publisher offers its prospective customers a trial subscription, these situations are not treated as own use. Similarly, if a publisher hands out copies of the publications to freelance editors or other people who are involved with the production of the publications, this is not treated as own use.
The VAT rules on the own use apply where companies buy subscriptions of newspapers/magazines for their employees without compensation, or for parties with whom they cooperate, and the recipients do not use the copies for business purposes. Similarly, the VAT rules on the own use apply if subscriptions of newspapers/magazines are given to people who use them for private purposes in connection with a marketing or sales campaign and the newspapers/magazines are not samples (they are e.g. prizes in a competition). The rules on the own use apply when companies buy subscriptions of newspapers/magazines for their employees without compensation, and there is no minimum amount in this regard. The minimum amount that applies to marketing and sales campaigns is €35.00 according to the guidance of the Tax Administration (Verohallinnon ohje Oman käytön ja alivastikkeellisten luovutusten arvonlisäverotus, KHO 3.10.2006 T 2532).
Certain type of newspapers and magazines are distributed to the readers for free; they are either delivered to their homes or can be picked up at grocery stores, on the street or on public transportation vehicles. In other words, they are not sold. They are treated as publications without value from the perspective of the readers or recipients. Consequently, the rules governing the own use are not applied. These newspapers/magazines normally generate income from the selling of advertising space, which for VAT purposes is treated as a supply of intangible services subject to the general VAT rate. If compensation is paid for this kind of newspaper/magazine, for example in circumstances where they are free for a reader who picks them up in a shop or elsewhere but are offered for home delivery against a subscription fee, the normal rules apply for the subscription and it is subject to a reduced VAT rate of 10 %.
The basis for VAT in the case of own use is defined in the provisions of § 74 of VAT Act. If the copy of a newspaper/magazine is bought from an outside seller, the taxable basis is the purchase price or the probable selling price, whichever is lower. If the copy of a newspaper/magazine is produced by the taxable person, the taxable basis is the direct and indirect production costs. The production costs must not contain any amounts that are outside of the production, such as sales and marketing expenses. In many publishing companies, the sales work of subscriptions is closely related to the sales work for advertising contracts, including the provision of advertising space and other advertising services. When calculations are made in order to work out the VAT to be paid for own use, any expenses relating to advertising sales must not be included in the production costs.
6 International and cross-border subscriptions
If deliveries of newspapers/magazines are made from Finland to other countries or from other countries to Finland, VAT rules on international supply and acquisition of goods apply. For more information, see the Letters of guidance of the Tax Administration: Rules and procedures regarding distance selling to non-taxable persons and VAT, Taxation of goods traded within the EU (Arvonlisäverotus EU-tavarakaupassa; Mervärdesbeskattning i EU-varuhandeln), VAT taxation of exports (Vientikaupan arvonlisäverotus; Mervärdesbeskattningen i exporthandeln).
7 Newspapers and magazines transported from the Åland islands
From 1 January 2015, the supplies of newspapers/magazines from the Åland islands to the continent of Finland have become taxable despite of the tax border. Starting 1 January 2015, if a newspaper or magazine is issued once a week or less frequently, it is taxed as a domestic supply of goods although it may be transported, forwarded or re-sent via the Åland islands to another destination in Finland. This means that contrary to earlier taxation practice, such arrangements are no longer treated as exempt exports of goods. The new rules concern both subscribed and single-copy newspapers and magazines.
The amendment is written in the new § 8 a (statute no 1092/2014) of the Act governing VAT and excise taxation on the Åland islands. The provisions in § 8 a defines an exception from the VAT exemptions defined in § 70, subsection 1, lines 1 and 2, if a newspaper/magazine is transported from the Åland islands to other parts of Finland. The amended legislation aims at preventing any artificial transport arrangements via the Åland islands where the only reason for the arrangement has been the avoidance of VAT.
Selling is not, however, subject to VAT if VAT was paid on the importation of the newspaper/magazine from the Åland islands to the continent of Finland. In this situation no additional VAT is collected on the sale of the newspaper/magazine. This provision prevents double taxation in situations where the exemption for certain low-value goods (under § 94, subsection 1, line 24 of VAT Act) or the minimum amount for a VAT payment (under 101 b, subsection 1) cannot be applied.
The rules regarding the transportation from the Åland islands apply to supplies whose tax point (time of supply) is after 1 January 2015 i.e. after the amended legislation came into force. The changed rules do not apply on any advance payments that the seller may have received prior to that.
8 Discounts, bad debts and other adjustments
For discounts, bad debts, and other adjustments the same VAT rate applies as was in force when the subscribed newspapers/magazines were delivered — or in the case of an intra-Community acquisition, the rate that was in force when the acquisition was made. If an adjustment concerns an advance payment, the VAT rate applicable is the one that was in force when the advance payment accrued.
Example: A subscriber signed a subscription contract for a magazine for one year, starting from November 1, 2012. The seller granted a discount for a promptly signed deal. The subscriber paid the invoice in 2013. Deliveries of the magazine were made both in 2012 and in 2013. The 9-% VAT rate must be applied on the discount that relates to the deliveries during 2012 and the discount for deliveries in 2013 is subject to 10 %.
9 Transitional rules
The selling of subscriptions of newspapers/magazines is subject to 10-% VAT if the newspaper/magazine was delivered, taken into own use or imported on 1 January 2013 or later or intra-Community acquisition was made after 1 January 2013.
The selling of subscriptions of newspapers/magazines is subject to a 9-% VAT if the newspaper/magazine was delivered, taken into own use, or imported 1 January 2012 - 31 December 2012 or intra-Community acquisition was made between 1 January 2012 and 31 December 2012. Any advance payments accruing between 1 January 2012 and 31 December 2012 are subject to a 9-% VAT.
The zero rate (0% VAT) applies if the newspaper/magazine was delivered, taken into own use or imported before 1 January 2012 or intra-Community acquisition was made before 1 January 2012. Any advance payments from before 1 January 2012 are also subject to a zero rate.
The VAT rate to be applied depends on the date of delivery or on the period when an advance payment was accrued. Accordingly, e.g. the date of the invoice for a subscription is not relevant.
Invoices must include all the different VAT rates applicable (as defined in the provisions of § 209 e, VAT Act). If the seller issued an invoice for a subscription under the 10-percent VAT rate for newspapers/magazines to be delivered 1 January 2013 or later but received payment during 1 January 2012 – 31 December 2012 and the subscriber is a taxable person, the seller must issue a new invoice and use the correct VAT rate of 9 %. Buyer who is a taxable person cannot recover the input VAT if the invoice contains a wrong VAT rate, and similarly, a seller must always pay the correct amount of VAT to the tax authority regardless of any wrong information on the sales invoices.
Example: A customer subscribed a newspaper for a year. The subscription started on15 November 2012. The seller issued the invoice on 20 November 2012 specifying two instalments that cover six months each (15 November 2012 - 14 May 2013 and 15 May 2013 - 14 November 2013). Due date of the first instalment was 28 December 2012, and the second, 28 June 2013.
Scenario (a) The customer pays up both instalments 22 December 2012.
Because the seller receives the entire amount prior to 1 January 2013, the VAT rate to be applied is 9 %. If the seller had indicated on the invoice 10 % VAT for the period of 15 May 2013 - 14 November 2013 and the customer is a taxable person, a new invoice must be issued with 9 % VAT rate.
Scenario (b) The customer pays the first instalment on 3 January 2013 and the second on 28 June 2013.
Because the seller receives payment on 1 January 2013 or later, he must issue an invoice for the period that belongs to 2012(15 November — 31 December 2012) with 9 % VAT, and for the period that belongs to 2013 (1 January — 14 May 2013) with 10 % VAT rate. If the buyer is a taxable person, the seller must issue a new invoice correct VAT rates. This invoice must include 9 % VAT rate for the period of 15 November - 31 December 2012 and 10 % VAT rate for the period of 1 January 2013 - 14 May 2013. As for the second instalment, the entire amount is subject to 10 % VAT.
The subscriptions of newspapers/magazines bought as intra-Community acquisitions made on January 2013 or a later period are subject to 10 % VAT. The calendar month where intra-Community acquisitions must be booked is the month following the month of the tax point. The tax point is when a purchase is made. The date when a purchase is made is when goods are delivered or, in the case of own use, the date when goods are taken for the own use. If the buyer is issued an invoice during the month when goods are delivered, the intra-Community acquisition is deemed to be made on that month.
Example : A business company subscribed a magazine from Sweden for one year. The seller issues an invoice in January 2013 for deliveries of the magazine made in December 2012. The 10 %VAT rate applies to the intra-Community acquisition in this case because the acquisition was made in January 2013. If both delivery and invoice date are in December 2012, the 9 %VAT rate applies.