VAT regulations concerning distance selling to Finland
- In force until further notice
As a rule, sales of goods to consumers in the EU internal market are taxed in the country of sale. Distance selling from one Member State to another is an exception to this rule. Distance selling takes place when a supplier from one member state supplies goods and is responsible for their delivery to a private individual or a non-VAT-registered person in another Member State (e.g. mail order selling). Contrary to the principal rule, selling of this kind is taxed where the goods are when the dispatch or transport ends, if the volume exceeds the threshold for distance selling set by the Member State of destination = the distance selling rule. The thresholds applicable in different Member States are shown in appendix 1. In Finland the threshold is set at EUR 35,000. Businesses engaged in distance selling must register and account for VAT in the Member State once the threshold of that state is exceeded.
Distance sales regulations do not apply to sales of new means of transport, goods installed or assembled by the supplier, or to the sales of goods to which a taxation method equivalent to the marginal taxation method for second-hand goods in Finland has been applied.
2. DISTANCE SELLING FROM OTHER EU MEMBER STATES TO FINLAND
The supply of goods is effected in Finland if the goods are dispatched or transported by or on behalf of the supplier from a Member State to a purchaser in Finland, and the supply does not qualify as an intra-Community acquisition. Even when the transportation or dispatch of goods has started outside the Community, and the goods are delivered into Finland via the Member State of importation, the goods are considered to be delivered into Finland from another Member State. According to the distance selling rule, VAT is charged in Finland on sales of goods if the distance selling by a supplier to Finland exceeds EUR 35,000 in a calendar year.
The distance sale regulations are applied only when the purchaser is a person whose purchases do not qualify as intra-Community acquisitions. In practice, the distance sales regulations apply when the purchasers are private individuals or other non-VAT-liable persons comparable with them. If the purchaser is a VAT-registered person, he is liable to pay VAT on intra-Community acquisitions effected in Finland.
Comparable with private individuals are
- businesses whose activity does not entitle to any deduction at all, (e.g. due to small-scale activity)
- legal persons, which are not businesses (e.g. associations, foundations not carrying on a trade).
Purchases of these businesses and legal persons do not qualify as an intra-Community acquisition if the value of the acquisitions, (excl. VAT), and excluding the value of new means of transport and excise goods and some other acquisitions defined in the VAT Act (e.g. tax exempt vessels and aircraft), does not exceed EUR 10,000 in the same calendar year and it did not exceed EUR 10,000 in the preceding year and the purchaser has not opted to have his purchases treated as intra-Community acquisitions although the value of the purchases does not reach the threshold. This option may be granted by the Tax Administration for a period stated in the application, however, for at least two full calendar years.
The above mentioned purchaser is liable to pay VAT in accordance with the regulations as soon as the EUR 10 000 threshold is exceeded during one calendar year.
For example, when the purchases during the beginning of a calendar year total EUR 9,000 and the next purchase during the same calendar year amounts to EUR 1,100, the purchaser must register for VAT in Finland and pay VAT on this EUR 1,100 intra-Community acquisition.
2.1. If the value of distance selling to Finland is less than EUR 35,000
Distance selling is not taxed in Finland if the value of sales made by the supplier does not exceed a maximum of EUR 35,000 (excl. VAT) in the same calendar year, and if the total sales of this kind during the preceding year did not exceed EUR 35,000. To this distance selling threshold is not counted sales of new means of transport, sales of goods installed or assembled in Finland, sales of goods subject to excise duty and sales of goods to which a taxation method equivalent to the marginal taxation method for second-hand goods in Finland has been applied in the country of departure.
However, a business engaged in distance selling may opt to be taxed in the country of destination instead of the country of departure by submitting an application to the authorities of the country of departure.
2.1.1. Registration for a VAT-liable person
The supplier has a right to opt to be taxed in Finland, even if the amount of distance sales in Finland does not reach EUR 35,000. In practice, this means that the supplier must submit the documents mentioned in subparagraph 2.3. to the Tax Administration. It is recommended to give notification at least 30 days before the new practice is introduced. In these circumstances the registration is ‘direct’, so the supplier need not designate a tax representative in Finland. (For further information, see page VAT registration of foreigners in Finland. The supplier has an obligation to keep books, that is, to keep records of business operations in Finland in order provide information needed for taxation. In addition, the distance seller has an obligation to submit periodic tax returns according to his reporting frequency either monthly, quarterly or yearly.
Once the supplier has opted for taxation of distance sales in Finland instead of the Member State of departure of the transportation, the decision is effective for the period of time according to the regulations of that Member State. If the supplier decides to have his distance sales taxed in the Member State of departure of the transportation after the period of time has expired, he must submit the written Notice of Termination of Business using the amendment and termination notification form to the Tax Administration before the time period expires. It is recommended to give notification at least 30 days before introducing the new practice.
2.2. If the value of distance selling to Finland exceeds EUR 35,000
If the total value of distance sales made in Finland by the supplier during one calendar year exceeds EUR 35,000 (excl. VAT), the sales during the following year are deemed to take place in Finland irrespective of their value. So, the VAT on these sales must be paid in Finland.
2.2.1. Registration for a VAT-liable person
When the distance selling threshold in euro is exceeded during a calendar year, the supplier must submit the documents listed in subparagraph 2.3 to the Tax Administration. The supplier is liable to pay the Finnish VAT on the difference between EUR 35,000 and the total value of sales. If the threshold is exceeded during a process of one supply, VAT must be paid on the entire supply. When the threshold is exceeded, the supplier is obligated to keep records of business operations in Finland and to submit periodic tax returns according to his reporting frequency monthly, quarterly or yearly.
If the distance selling threshold is not reached during the following year, the distance seller must submit a written Notice of Termination of Business using the amendment and termination notification form to the Tax Administration.
2.3. Documents to be submitted to the Tax Administration
When the value of distance sales to persons in Finland by a supplier in another Member State exceeds EUR 35,000 in one calendar year, that supplier must submit the following documents to the Tax Administration:
- Start-up notification (basic declaration) and, possibly, a power of attorney issued for signing it.
- The foreign equivalent of a trade register extract and a Finnish or Swedish translation thereof indicating the name, domicile, line of business, accounting period and the names of persons entitled to sign documents on behalf of the foreigner.
- The articles of association, partnership agreement or other similar regulations or a certified copy of the regulations in question and a Finnish or Swedish translation thereof. If the foreign equivalent of the trade register extract mentioned in item 2 above has been submitted to the regional tax office, the documents mentioned in this subparagraph need not be provided.
If the distance sales do not exceed EUR 35,000 in one calendar year or the preceding calendar year and the supplier opts to register and account for VAT in Finland, he must submit the documents mentioned above to the Tax Administration, together with a copy of application delivered to the tax authorities of his country of origin or a decision issued by the tax authorities of his country of origin to tax the distance selling in Finland, rather than in the country of departure.
Start-up notification forms, and amendment and termination notification forms (Y-forms) are available on the BIS website at www.ytj.fi, tax offices, the National Board of Patents and Registration of Finland, ELY Centres, the local register offices.
The documents mentioned above can be posted to the following address:
Alternatively they can be submitted to any tax office, the National Board of Patents and Registration of Finland, ELY Centres or the local register offices.
2.3.1 The Tax Administrations Office responsible of registration and supervision
Foreign corporation’s registration to value added taxpayers register and supervision is conducted in Uusimaa Corporate Tax Office and partnership’s and entrepreneur’s registration and supervision is conducted in Helsinki Area Tax Office.
Uusimaa Corporate Tax Office
Client service: Aleksanterinkatu 9, Helsinki
P.O. Box 30
Helsinki Area Tax Office
Client service: Aleksanterinkatu 9, Helsinki
P.O. Box 400
2.4. New means of transport, goods installed or assembled by the supplier and secondhand goods
The distance selling rule is not applied to the sale of new means of transport or goods installed or assembled by the supplier nor to the sales of goods to which a taxation method equivalent to the marginal taxation method for second-hand goods in Finland has been applied.
Acquisition of new means of transport transported to Finland from another Member State is always taxed as an intra-Community acquisition in Finland regardless of the status of the acquirer or the vendor. Thus acquisitions of new private vehicles from other EU Member States made by private individuals are also taxed as intra-Community acquisitions in Finland. New means of transport are defined in appendix 2. (For further information, see page VAT instructions on new means of transport and .)
Goods installed or assembled in Finland by the supplier are taxed as sales by the supplier in Finland if the supplier is liable to pay VAT here or the purchaser is a private individual. Otherwise, the purchaser pays the VAT (the reverse charge).
2.5. Goods subject to excise duty
In the VAT Act, the goods subject to excise duty are referred to as certain alcohol and alcoholic beverages, tobacco products and liquid fuels. More precise definitions of these are found in the Acts on the alcohol and alcoholic beverage duty, the tobacco duty and the excise duty on liquid fuels. Distance selling of goods subject to excise duty to private individuals to Finland is always taxed in Finland, irrespective of the value of the sales. The supplier must therefore register and account for VAT in Finland on the distance selling of excise goods in Finland in accordance with the provisions applied here.
Sales of excise goods to others than private individuals to Finland are always taxed as intra-Community acquisitions in Finland, and the distance selling rule is not applied. As far as excise goods are concerned, the amount of intra-Community acquisitions in a calendar year is of no significance (the EUR 10,000 limit does not apply). For those liable to VAT, intra-Community acquisitions of goods subject to excise duty are treated in the same way as intra-Community acquisitions of any other goods. However, if the buyer of goods subject to excise duty is a business, whose activities do no entitle to any deduction at all or a legal person, who does not carry on business activities, they must notify and pay VAT to the customs district.
3. DISTANCE SELLING FROM FINLAND TO OTHER EU MEMBER STATES
A business is VAT-liable for distance selling in the Member State where the transportation or dispatch ends, when distance sales exceed a threshold appropriate to the Member State in question (see appendix 1). In other words, the taxation of the distance sales is transferred from Finland to the Member State where the transportation or dispatch ends.
3.1. Distance selling exceeds the threshold in the Member State of destination
When the value of distance sales exceeds the appropriate registration threshold in a Member State, the taxation is transferred to the Member State in question. Distance sales exceeding the threshold are taxed in the Member State of destination, not in Finland. The supplier must register for VAT in the Member State and pay VAT as applicable there.
If the threshold is exceeded during a process of one supply, the supplier must account for and pay VAT for the entire supply in the Member State of destination. If distance sales have exceeded the threshold in one calendar year, the distance sales will not be taxed in Finland the following year either.
The distance selling is not taxed in Finland only if the purchaser is not liable for VAT. Therefore, the purchaser may be:
- a business, whose activities in his own country do no entitle to any VAT deduction at all or refund,
- a legal person, who is not a business,
- a business who in his own country is subject to the flat-rate scheme for farmers, or
- a private individual.
An additional provision is applied when the purchaser is someone mentioned in 1)–3). According to the rule, goods are deemed to be sold in a member state where the dispatch or transportation ends only if the value of the Intra-Community acquisitions of the purchaser mentioned in 1)–3) does not exceed the taxation threshold of intra-Community acquisitions of that Member State and the purchaser has not opted for taxation. Therefore, if the amount of intra-Community acquisitions exceeds the set limit of the Member State of destination during one calendar year or the preceding year, the purchaser is VAT liable for his acquisitions in the normal way.
3.2. Distance selling is less than the threshold in the Member State of destination
Distance sales may be taxed in the Member State of destination, even if the threshold is not exceeded. The supplier must submit a written application to the tax authorities of his domicile at least 30 days before the new practice is introduced. The Member State of destination must be mentioned in the application. Written evidence to show that the supplier has registered for VAT-liability in the Member State of destination must be provided. A decision to tax distance selling in the Member State of destination instead of Finland is in effect for the period specified by the supplier, however, for a minimum of two calendar years.
3.3. New means of transport, goods installed or assembled by the supplier and second-hand goods
The distance selling rule is not applied to the sale of new means of transport (see appendix 2) or goods installed or assembled by the supplier. These sales are taxed in the Member State of destination according to the regulations applicable in that State.
The distance selling rule is not applied to the sales of goods to which a taxation method equivalent to the marginal taxation method for second-hand goods in Finland has been applied, either.
3.4. Goods subject to excise duty
The goods subject to excise duty referred to in the VAT Act are certain alcohol and alcoholic beverages, tobacco products and liquid fuels. More precise definitions of these are found in the Acts on the alcohol and alcoholic beverage duty, the tobacco duty and the excise duty on liquid fuels. Distance selling of goods subject to excise duty to private individuals in other Member States are always taxed in the Member State of destination i.e. where transport or dispatch ends. Therefore, a distance seller established in Finland which supplies excise goods to private individuals in other Member States is liable to register for VAT in the Member State of destination and pay VAT on the distance selling of excise goods in accordance with the taxation criteria applied in the Member State of destination.
When selling goods subject to excise duty to a party other than private individuals, the distance selling rule is not applied. For the supplier, the sales are considered intra-Community sales and for the purchaser, the purchases are considered taxable intra-Community acquisitions in the Member State of destination.
If you have any questions concerning VAT, please contact the nationwide general helpline: 029 497 051 (at local call-charge). Please use the following number when calling from abroad: +358 29 497 051.
APPENDIX 1: TABLE OF THRESHOLDS FOR DISTANCE SALES IN DIFFERENT MEMBER STATES
|Name of Member State||Currency||Threshold|
|United Kingdom||GBP||70 000|
|Czech Republic||CZK||1 140 000|
|Hungary||HUF||8 800 000|
* 100 000 Euros up to end of 2010.
** 550 000 crowns up to end of 2010.
APPENDIX 2: NEW MEANS OF TRANSPORT
A means of transport is any of the following, when intended for the transport of passengers or goods:
- Motorized land vehicles with an engine capacity exceeding 48 cubic centimetres or with a power exceeding 7.2 kilowatts;
- Vessels with a length exceeding 7.5 metres;
- Aircraft with a take-off weight exceeding 1 550 kilograms.
“New” refers to:
- motorized land vehicles sold no more than six months and other vehicles no more than three months since the date of their first entry into service;
- motorized land vehicles that have travelled no more than 6 000 kilometres, vessels that have sailed no more than 100 hours and aircraft that have flown no more than 40 hours.
Vessels and aircraft exempt from VAT are not regarded as new means of transport. Vessels with hulls of at least 10 metres in length and which are not made primarily for recreation or sport are exempt from VAT. In addition, VAT is not levied on supply of aircraft to a business engaged mainly in international air traffic.