Tax-free sales to travellers - Guidance for retailers

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 retailers who sell goods in Finland to travellers from outside the EU visiting Finland and to 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. The sealing of the goods has been amplified. Furthermore is clarified that the text on the Customs red stamp describes observations made by Customs. Conclusions 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

Under international practice, goods may be sold tax-free to visitors from outside the EU. Buying tax-free means that travellers take possession of the goods and export them from the territory of the EU in their personal luggage. In this guidance you will find a description of the procedure which retailers must follow so that the sale can be considered tax-free.  The previous guidance has been completed and specified.

Tax Administration guidance Ahvenanmaan veroraja arvonlisäverotuksessa (The Åland Islands not forming part of the EU VAT area) discusses tax-free sales in the Province of Åland or to a traveller who is domiciled in the Province of Åland.

Selling tax-free to travellers is a voluntary service. Retailers are therefore not obligated to engage a licenced VAT refund company nor to refund VAT themselves to travellers.

2 Buyer’s domicile

Tax-free sales to travellers concern sales of goods to travellers who are domiciled outside the EU or Norway. Travellers are private persons. At the time of purchase, they pay the full price including VAT for the goods.

The retailer must verify the traveller’s domicile by checking their passport or their residence or work permit shown on it, or other documents which prove the domicile in a reliable way. 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. Individuals who have a residence permit in Finland are deemed to be living in Finland even if they are domiciled outside the EU. The nature of their stay in Finland can be checked from their visa or residence permit.

Travellers who have a green sticker, a visa, on their passport are eligible for tax-free purchases. Travellers who have a red sticker, a residence permit, on their passport are eligible for purchases within the last 14 days of the permit period. Anyone leaving Finland earlier must provide a notice from their employer stating that the employment ended earlier than the date entered on the permit.

Finns living permanently outside the EU or Norway may, when visiting Finland, buy goods on which the provision on tax-free sales is applicable. Likewise, when Finns move abroad to a place outside the EU or Norway for at least six months, the provision on tax-free sales to travellers is applicable on purchases they make during the last 14 days before their departure from Finland. They must present the retailer a work or residence permit to prove that they are living in or moving to a country outside the EU. These permits are often stamped in the passport.

In order to qualify for tax-free sales to travellers, buyers must export the goods themselves outside the EU.

3 Minimum sales value and exportation of goods from the EU

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.

The goods must be unused when they are exported from the EU territory in the buyer’s personal luggage.  Tax-free sales are not applicable if the goods have been taken into use within the EU.

4 Refund procedure

4.1 Retailer uses a VAT refund company

Retailers supplying goods to travellers can use the services of VAT refund companies that are licenced by the Ministry of Employment and the Economy. The Decree on VAT free sales to travellers (485/1985) contains provisions on refund companies. The forms to be used by refund companies must be approved by the ministry. When a retailer refunds the VAT via a refund company, they have the certificate issued by the refund company as proof of the supply.

4.2 Retailer refunds the VAT

Retailers may refund the VAT to the buyer themselves. To make refunds, no special licence is required. When a retail company sells goods to a foreign traveller, the sale is considered a normal VAT liable sale until the retailer is provided with a declaration showing that the goods have been exported from the EU territory.

4.2.1 Sales receipt

The invoice or other verification given to the traveller must contain all information relevant to the supply.

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.

It is important that you as retailer are careful when making the entries in the receipt. You must give the details in at least Finnish or Swedish. If the details are insufficient or missing, the customs officer may refuse to stamp the receipt. A receipt which customs has stamped serves as documentation showing that the goods have left the EU, and you may enter the supply under tax-free sales in the bookkeeping.

You 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 you their passport at the time of the sale. You must write the passport number on the receipt. The buyer must confirm their own details with their signature.

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

4. Tax basis (the consideration paid for the goods excluding VAT) by VAT rate, the VAT rate applicable, amount of VAT to be paid in euros and the total price liable to VAT.

At the time of the sale, debit the traveller the whole price including VAT. Then report the sale in your periodic tax return as tax from taxable sales.

5. Possible charges 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 a 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 applicable 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 receipt. By signing the document, the buyer confirms that their personal details are correct.

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

5 Sealing of goods

The retailer must, when handing over the goods to the buyer, always seal the goods so that the customs can ascertain that they are intact at the time of exportation from the EU. Such seal may consist of for example adhesive tape which bears the refund company’s or the retailer's logo or name. If the retailer has no such tape, the goods must be packed in a plastic bag/package which bears the logo or name. The bag/package must then be closed by stapling so that it cannot be opened without stapler marks being left on the bag/package.  The seal must be put carefully so that the Customs office may notice that the goods are unused. This ensures that the buyer is eligible to the refund.

6 Stamping of receipts at Customs office

Upon leaving the EU territory from either Finland or via another EU country, the buyer has the tax-free receipt stamped in the customs office via which the buyer is leaving the EU. The Customs may then request that the unused goods be shown in their original packaging.

The customer must return the stamped tax-free receipt to the retailer, after which the retailer can enter the supply in their tax-free sales and refund the VAT to the customer, possibly with their fee deducted. The stamped tax-free receipt is the verification that the sale was tax-free. You as retailer must keep it in your accounting. If you charge a fee, you must pay VAT on it, because it is a compensation for a taxable service.

Even when a traveller must file an export declaration with the Customs, the sale is considered tax-free 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 official will stamp the tax-free receipt from the retailer to confirm that the goods are being exported from the EU territory. Customs customer release 31.8.2012: 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.

7 Sales of goods at airports

At airports, tax-free sales take place in tax-free shops. Tax-free shops are either customs warehouses under Article 99 of the Community Customs Code or warehouses under section 72 j of the Act on Value-Added Tax. The goods to be sold are therefore placed under the customs warehousing procedure referred to in said regulations.

  • VAT-free are the supplies of goods to travellers who take the goods in their accompanied luggage and who are travelling outside the EU VAT area.
  • Liable to VAT are the supplies of goods to travellers who take the goods in their accompanied luggage and who travel within the EU VAT area to another EU country.

If the traveller is domiciled in Norway, the selection of tax-free goods is limited.

8 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 those travellers who are domiciled in Norway. Those who are domiciled in Norway may purchase tax-free goods only when they will be taking the goods immediately in their accompanied luggage to Norway and will pay the VAT when importing the goods there. The supply is taxable until the traveller has proved (by showing a Norwegian customs decision) that the VAT has been paid in Norway. After receiving 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 (said bonded warehouse or tax warehouse) VAT-free only be supplied alcoholic beverages, tobacco, chocolate, sweets, perfumes, cosmetic products and toiletries.