Tax-free sales to travellers in Finland

Validity
4/7/2014−8/18/2015
This is an unofficial translation. The official instruction is drafted in Finnish and Swedish languages.

This guidance is intended for travellers from outside the EU who visit Finland and for Finns living outside the EU who buy goods in Finland and export the unused goods in their personal luggage outside the EU.

The guidance has been clarified by adding that the cash register receipt issued by the seller is a part of the tax-free receipt and has to be shown to the Customs. Furthermore is clarified that the text on the Customs red stamp describes observations made by Customs. Conclusion how the sale is taxed cannot be drawn from the stamp.  In situations where the conditions for tax-free sales are not met the retailer cannot enter the receipt under tax-free sales in the bookkeeping.

1 Introduction

Value Added Tax (VAT) normally concerns the goods and services that are intended to be consumed in the country where they are bought. When you buy goods in Finland, their selling price usually includes the Finnish VAT. Under this general rule, selling goods to travellers is taxable.

When travellers living outside the EU purchase goods in Finland but intend to use them only outside the EU, they are entitled to a refund of the VAT included in the selling price (tax-free sales). In addition, those travelling to destinations outside the EU may purchase goods either VAT-exempt by using the normal export procedure, or at tax-free shops at airports. Special rules apply to travellers from Norway, these are explained in section Supplying goods to travellers who are permanent residents of Norway.

2 Exports procedure

In the most typical exports procedure, the retailer files an export declaration in their own name and transports the goods themselves (or an independent transport company transports them on the retailer’s or the buyer's request) outside the EU customs territory, where the buyer receives them. These kinds of exports are always VAT exempt. That is, the buyer does not take possession of the goods in Finland. The buyer’s nationality has no relevance as to the goods being tax-free or not. Since no tax is to be paid, the buyer only pays the price without VAT at the time of the purchase. The Value Added Tax Act, section 70 contains provisions on the export procedure in different situations.

3 Tax-free sales to travellers

Under international practice, goods can be sold to travellers without tax in the form of tax-free sales. This means that the buyer takes possession of the goods immediately and exports them in their personal luggage from the country where they were purchased. The buyer pays VAT at the time of the sale but receives a VAT refund later.

Selling tax-free to travellers is a voluntary service. The retailer is therefore not obligated to engage a licenced VAT refund company or to refund VAT themselves to travellers.

3.1 Requirements for tax-free sales to travellers

3.1.1 Requirements on the buyer

Tax-free sales require that the buyer must be a traveller domiciled outside the EU or Norway. The buyer is considered domiciled outside the EU or Norway if they are not living or staying continuously in an EU country or Norway. If the stay is for at least six months, it is in most cases considered continuous. Those having a residence permit in Finland are deemed to be living in Finland even if they are domiciled outside the EU.

A Finnish citizen living permanently outside the EU or Norway may, when visiting Finland, buy goods on which the provision on tax-free sales is applicable. The provision on tax-free sales to travellers may also be applied on purchases which a Finnish citizen makes during the last 14 days before moving, for at least six months, to a place outside the EU or Norway. The Finnish citizen must present the retailer a work or residence permit to prove that they are living in or moving to a country outside the EU. In order to qualify for tax-free sales to travellers, the buyer must export the goods themselves outside the EU.

3.1.2 Value of sales

To be eligible as tax-free sales to travellers, the total value of the purchased goods must be at least 40 euros. It can include several items. The aggregate value of several goods may be used only if all those goods are included on the same invoice issued by the same retailer supplying goods to the same customer. The sum includes VAT.

3.1.3 Export of unused goods within three months

The goods must be unused when they are exported from the EU territory in the buyer’s personal luggage. Exportation must take place within three months from the month in which they were purchased. Tax-free sales are not applicable if the goods have been taken into use, even partially, within the EU.

3.2 Refunds to buyer

Retail companies supplying goods to travellers can use two different methods of VAT refund. They refund the VAT themselves including getting the necessary documentation or use authorized VAT refund service companies. While these two methods are not different as to the legal requirements of tax-free selling, they are slightly different.

3.2.1 Procedure when the retailer refunds the VAT

3.2.1.1 Buyer’s domicile

For tax-free sale to travellers, the retailer must confirm the buyer’s domicile by checking the buyer’s passport or any residence permit or work permit in it. Those who have a residence permit in Finland are deemed to be living in Finland even if they are domiciled outside the EU. If the buyer is a Finnish citizen living in another country for longer than six months, they must show the retailer their residence or work permit for that country. These permits are often stamped in the passport.

3.2.1.2 Sales receipt

The retailer sells the goods including VAT.

An invoice or other verification must be given to the buyer.

If the retailer has a cash register and the cash receipt shows all the required information required for tax-free sale the cash receipt is used as tax-free receipt. However, if the cash receipt doesn’t contain all the information required for tax-free sale the retailer should add a document (tax-free receipt) to the cash receipt. The retailer enters the information lacking in the cash receipt in the tax-free receipt. The tax-free receipt completes the cash receipt.

The details on the sales receipt must be given at least in Finnish or Swedish. If the details are insufficient or missing, the Customs will not stamp the receipt. A receipt which a Customs has stamped serves as documentation showing that the goods have left the EU territory, and the retailer may enter the supply under their tax-free sales in the bookkeeping.

The retailer must enter the following details in the invoice or other verification:
1. Buyer’s name, domicile, passport number, permanent address and signature

The buyer purchasing the goods to export them in their personal luggage outside the EU must show the retailer their passport at the time of the sale. The retailer must write the passport number on the receipt. The buyer must confirm their own details by signing the receipt.

2. Retailer’s name, postal address and Business ID
3. Quantity and quality of goods

The goods must be described in such detail that they can be identified and itemised.

Example:

“Clothes” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “coat, shoes or children’s wellington boots”.
“Sports gear” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “slalom skis, ice hockey stick or skateboard”.
“Jewellery” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “bracelet, ring, necklace”.
”Accessories” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “key ring, scarf, pendant, tie or wallet”.
“Electronics” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “mobile phone and its IMEI code, computer or system camera”.
“Tools” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “hand drill, hammer, axe, electric milling machine, or electric grinder”.
“Car parts” is not a sufficient description. Instead, the goods must be itemised in the receipt as for example “engine bonnet, brake pads or bumper”.

4. Tax basis (the consideration paid for the sale of goods without VAT) by VAT rate, the VAT rate applied, amount of tax to be paid in euros and the total price liable to VAT.

At the time of the sale, the retailer debits the buyer the whole price including VAT.

5. Possible costs debited from the buyer and the amount to be refunded to the buyer
6. Delivery date of goods

The delivery date of goods is the day when the retailer hands over the goods in the possession of the buyer.

Example:

The till receipt from the retailer’s cash register contains the following details:

  • retailer’s name, address and Business ID
  • quantity and quality of goods
  • tax basis by VAT rate, the applied VAT rate and amount of VAT to be paid in euros
  • delivery date of goods

The retailer makes a separate verification (tax-free receipt) with the following details:

  • buyer’s name, domicile, permanent address and passport number
  • possible charges to be debited from the buyer
  • amount to be refunded to the buyer

The cash receipt is stapled to the tax-free receipt. Together they comprise the document that the traveller shows to the Customs when leaving the EU.

The retailer asks the buyer to sign the document. By signing the document, the buyer confirms that their personal details are correct.

The traveller must not enter or add any details in the document. Instead, all entries in the document must be made by the retailer at the time of the sale. The original document given to the buyer and the copy which remains in the retailer’s accounting must be identical.

3.2.1.3 Retailer seals the goods

The goods must be exported from the EU unused. Therefore the retailer seals the goods before handing them over to buyer. The seal may consist of for example adhesive tape which bears the retailer's logo or name. If the retailer has no such tape, the goods may be packaged in a plastic bag which bears the logo or name. The bag is then closed by stapling so that it cannot be opened without stapler marks being left on the bag.  

Because the goods are now in a sealed package, the Customs will be able to see that the goods have not been used at the time of export from the EU.

3.2.1.4 Stamping the receipts at Customs office

When travellers leave the EU territory, they must request that the sales receipts on the goods be stamped at the Customs office and then send the stamped copy of the receipts back to the retailer. Travellers who will not leave the EU immediately upon leaving Finland but will travel to some other EU country must request the receipts to be stamped at the Customs office via which they leave the EU.

When leaving the EU territory, travellers must request that the sales receipts be stamped at the Customs office. They must show their passport, the goods and the receipt to a Customs officer.

The Customs officer will make a comparison of the passport holder and the buyer on the receipt to ensure that they are the same person, and that the receipt is similar to the receipt under 3.2.1.2. In addition, the Customs officer will compare and check that the goods are the same as in the receipt and that the value of the goods is over 40 euros. The Customs officer also checks that the goods are unused and that the seal is intact. Also the deadline for exporting the goods is checked.

Even when a traveller must file an export declaration with the Customs, the sale is considered tax-free sale if the conditions laid down in section 70 b of the VAT Act concerning tax-free sales and section 8 of the VAT Decree are met. It is irrelevant whether the traveller exports the goods from the EU territory for private or business use. The confirmation of exit concerning export for commercial purposes issued by the Customs is not considered a proof under the VAT Decree of the goods being exported outside the EU. Instead, even in this case the Customs will stamp the tax-free receipt from the retailer in order to confirm that the goods are being exported from the EU territory. Customs press release 31 August 2012 A traveller may also have to submit an export declaration (tulli.fi/en).

When a traveller exits the EU territory and a Customs officer notices some defects in either goods or receipts, they may stamp the receipt with a “red stamp”. The print on the stamp describes the observations made by Customs. In a situation when from the red stamp can be concluded that the conditions for tax-free sales are not met the retailer cannot enter the receipt under tax-free sales in the bookkeeping.
  
The most common situations when the retailer may not enter the sale as tax-free are

  • goods are not presented at Customs when leaving the EU
  • goods were used in the EU
  • goods were sold VAT-exempt
  • goods are presented in Customs by another person than the one entered as buyer on the sales receipt and whose passport was referred to.
3.2.1.5 Refunding the VAT to the buyer

The traveller must return the receipts which the Customs has stamped to the retailer for example by post. When the retailer receives the verification (a proof that the goods have been exported outside the EU), they refund the VAT minus possible fee to the buyer. The refund can be paid to the buyer’s bank account.

3.3 Procedure when a VAT refund company refunds the VAT

3.3.1 Tax-free form and sealing of goods

If the retailer uses the services of a refund company that has a licence to operate in Finland, they fill in the tax-free form when supplying the goods and confirm that they have checked the information of the buyer by signing the form. The traveller fills in only their personal details. In addition, the traveller confirms the details by signing the form. All markings are made at the time of the sale.

The retailer attaches the invoice or similar verification to the tax-free form. The verification can be a till receipt printed out from the retailer’s cash register system. The description of goods must be so precise that the goods can be identified and itemised.

The traveller pays the retailer the full price including VAT. The retailer seals the goods with an adhesive tape that bears the retailer’s logo. The traveller gets the goods from the retailer in a sealed package and the buyer’s copy of the tax free form.

3.3.2 Traveller exits the EU and has the tax-free form stamped

3.3.2.1 Traveller exits the EU from Finland

When travellers leave Finland for a country outside the EU, they show their passport, the goods and the tax-free form at the refund company’s desk at the port or in the airport departure hall. The VAT refund company issues a written affirmation on the tax-free form that the goods are unused at the time of exportation from the country. The VAT refund company will then refund the VAT amount minus its commission to the traveller.

Travellers exiting the EU from Finland when refund companies offices are closed can have their tax-free forms stamped by the Customs. They must show their passport, the goods and tax-free form to a Customs officer, who ensures that the passport holder is the same person as the buyer on the form. The Customs officer compares and checks that the goods are similar to the ones marked on the form and the cash register receipt. They also check that the goods are unused at the time of exportation and that the seal is intact.

After leaving the EU the traveller sends the refund company the stamped tax-free form and his contact details. The VAT refund company will then refund the VAT to buyer’s bank account. The traveller may choose to present the stamped tax-free form at any of the refund company’s offices. This must be done within five months from the purchase. A refund can be paid only if the goods were exported from Finland within three months of the date when the tax-free form was filled in.

3.3.2.2 Traveller exits the EU in another EU country

If the traveller exits Finland via Sweden or Denmark, the exit from the EU will be verified and the VAT will be refunded at the refund company’s office in Sweden or Denmark. In all other respects, the procedure is no different from that at the office of the VAT refund company in Finland.

If the place where the buyer exits the EU has no refund company office, there are a number of ways to request for a VAT refund. The traveller must always obtain an exit stamp on the tax-free form at the Customs office upon leaving the EU. The Customs will check the traveller’s passport, goods and the tax-free form. After leaving the EU the traveller sends the refund company the stamped tax-free form, a copy of their passport and visa, and contact details. The VAT refund company will then refund the VAT to the buyer’s bank account. Alternatively, the traveller can present the stamped tax-free form at any of the refund company’s offices. This must be done within five months from the purchase. The refund company will refund the VAT if the goods have been exported from Finland within three months of the date when the form was filled in.

4 Sales at airports

Those travelling to destinations outside the EU may purchase tax-free goods in airport departure halls. In order to prove that they are travelling to destinations outside the EU, they must present the retailer their boarding cards for an international flight.

5 Supplying goods to travellers who are permanent residents of Norway

Even though Norway is not an EU country, there are limitations as to what can be sold tax-free to travellers who are domiciled in Norway. Travellers domiciled in Norway may purchase tax-free goods only when they will be taking the goods immediately to Norway in their luggage and will pay the VAT when importing the goods there. The sale is taxable until the traveller has proved (by showing a Norwegian Customs decision) that the VAT has been paid in Norway. After having received the proof the retailer may enter the supply as tax-free in the bookkeeping and refund the VAT to the traveller.  In addition, the selling price of the goods or a customary set of goods exclusive tax is at least 170 euros.

To those domiciled in Norway may at airport departure halls (bonded warehouse or tax warehouse) VAT-free only be supplied alcoholic beverages, tobacco, chocolate, sweets, perfumes cosmetic products and toiletries.


Päivi Taipalus
Senior Tax Specialist

Iris Kavonius
Senior Adviser