Value added tax procedure for importation as of 1 January 2018
- Date of issue
- Record no.
- 1/1/2018 - Until further notice
- Authorization directive
- Act on the Tax Administration (503/2010), section 2(2)
This is an unofficial translation. The official instruction is drafted in Finnish and Swedish languages.
1 General information on the value added taxation of importation
1.1 Key changes as of 1 January 2018
As of 1 January 2018, the value added taxation of goods imported by taxpayers entered in the VAT register will be transferred from the Customs to the Tax Administration. VAT-registered importers should now calculate and report value added tax (VAT) on imports and the taxable amount on their own initiative, in their VAT return form, along with their other business transaction details assigned to the tax period in question. The VAT on imports is assigned to the calendar month in which the customs clearance decision was issued, and the deductions are assigned to the same month. No VAT is payable if the imported goods are fully used for taxable business purposes i.e. purposes entitling to full VAT deductions.
The Customs will carry out the customs clearance procedure on imports as before. The Customs will no longer confirm the amount of VAT on imports, or whether or not imports of VAT-registered importers are VAT-exempt. The Customs will continue to levy customs duties and import charges on goods, as well as taxes other than VAT. Import charges levied by the Customs are determined on the basis of the nomenclature, origin and customs value of goods. This applies to all customers.
The Customs will continue to be in charge of the VAT of imports for importers other than those entered in the VAT register. Furthermore, the Customs will be in charge of value added taxation in cases in which the importer is a VAT-registered natural person and the goods are not imported for taxable business purposes.
The term “imported goods” refers to goods imported into the EU VAT area. As a rule, VAT must be paid on imported goods.
1.2 Competent authority
The new rules regarding the compentent authority on import VAT questions concerning the Tax Administration and the Customs entered into force on 1 January 2018. The competent authority is determined by the time when liability to pay VAT arises, i.e., the time of acceptance of a customs declaration, which is automatically printed out on the customs clearance decision confirmed by the Customs.
The deciding factor in determining the competent authority is whether or not the importer is registered in the VAT register at the time of acceptance of the customs declaration (date available on the clearance decision issued by the Customs). VAT registration can be checked on the Business Information System (BIS) website (www.ytj.fi/en) using the importer’s Business ID. When the importer is registered in the VAT register at the time of acceptance of the customs declaration, the competent authority is the Tax Administration.
If the importer is not registered in the VAT register, the competent authority for the import VAT is the Customs. The latter types of importers mainly include private individuals and non-profit organisations which are not engaged in VAT-taxable activities. Additionally, the Customs is the competent authority when goods are imported in contravention of customs legislation. This applies to all customers. Examples of infringements of customs legislation relating to the importation of goods include not presenting the goods to the Customs at all, or failure to comply with the Customs’ procedural rules.
The Customs is also in charge of the import VAT by VAT-registered natural persons, which are not related to the importer's taxable business activities. Natural persons entered in the VAT register must use their Business ID to submit customs declarations for goods imported for their taxable business purposes. In such cases, the competent authority is the Tax Administration. For other types of imports, VAT-registered natural persons must use their personal identity code to submit customs declarations. In such cases, the competent authority is the Customs.
The deciding factor for imports by legal persons is whether or not the importer was entered in the VAT register at the time of acceptance of the customs declaration. Whether or not individual batches of goods were imported for the purposes of taxable business purposes is of no significance. For instance, local governments do not need to itemise the different purposes for which goods are imported at the time of import. The grounds on which the importer has been entered in the VAT register are also of no significance. For example, companies that are VAT-liable for letting of immovable property or primary producers may also be entered in the VAT register. If registration in the VAT register is pending at the time of acceptance of the customs declaration for imports, the import VAT is levied by the Customs.
Foreign businesses which do not have a fixed establishment for VAT purposes in Finland but are subject to notification duty related to intra-Community acquisitions may also be entered in the VAT register. These foreign businesses claim the input VAT refund through special VAT refund applications meant for foreign businesses in accordance with § 122 of the Value Added Tax Act (VAT Act). The businesses must report the import VAT payable by using the VAT return and then claim a refund for the paid import VAT.
As importers, members of a VAT group act fully independently. The VAT group’s members are treated as VAT liable, and the competent authority is therefore the Tax Administration. The state as well as government agencies and unincorporated government enterprises are also liable for VAT. The VAT status of each individual agency is not separately indicated in the Business Information System (BIS). If the importer is a government agency, it must use its individual agency Business ID for imports, and the competent authority is the Tax Administration.
1.3 Tax border of the Åland Islands
The Åland Islands are not included in the EU VAT and excise duty area. However, the Åland Islands are included in the EU Customs Union and EU customs territory. For VAT purposes, the status of the Åland Islands in relation to Finland and other EU Member States is that of a third country.
Due to the special status of the Åland Islands, there is a tax border between the Åland Islands and the EU VAT territory. In practice, the EU VAT territory refers to EU Member States, in which the rest of Finland is also included. The tax border means that, in trading with third country jurisdictions as laid down in the VAT Act, the provisions related to exports and imports apply when selling and shipping goods between the Åland Islands and the EU VAT territory. No VAT is payable on export trade, as the VAT is paid at the destination of the transport in connection with the importation. VAT is payable by sole traders and other importers on both imports from the Åland Islands to elsewhere in Finland and imports from elsewhere in Finland to the Åland Islands, unless the imports have been separately legislated as VAT-exempt.
More information on the rules and procedures relating to the tax border of the Åland Islands is available in the Tax Administration´s instructions Tax border of the Åland Islands for VAT purposes (available in Finnish and in Swedish) and Åland Islands tax border and importing goods (in English).
1.4 Importation in Finland
“Imported goods” refers to the importation of goods into the EU. Goods are imported in Finland if the country is the EU point of entry for the goods. This is the main rule applied to imports from outside the EU customs and VAT territories, such as when goods are imported directly in Finland from China. Imported goods also include goods imported from the EU customs territory but outside the VAT territory, such as when goods are imported in Finland from the Canary Islands.
The time when the liability to pay VAT arises is the same as when the customs debt is incurred. The liability to pay VAT arises at the time of acceptance of the customs declaration for release for free circulation.
Importation is also deemed to take place in Finland if the imported goods have been placed into any of the following procedures specified in the Union Customs Code (UCC) when the goods have entered into the customs territory of the EU and the goods are in Finland when the procedure in question ends:
- the temporary storage of goods (UCC Article 144)
- the storage procedure specified in UCC Article 237
- the inward processing procedure (UCC Article 256)
- the temporary admission procedure with total relief from import duty (UCC Article 250)
- the external transit procedure (UCC Article 226)
- the internal transit procedures (UCC Article 227), or any of the above procedures used to import goods from a point located within the EU’s customs territory but outside the EU’s tax territory. For instance, if goods imported to Finland from the Canary Islands are in Finland at the time the internal transit procedure ends, the import is deemed to take place in Finland.
These customs procedures lead to a postponement in the payment of import VAT until the procedure ends with the release of goods for free circulation.
Such procedures do not include favourable customs treatment due to the end-use of the goods or the temporary admission procedure with partial relief from import duty. In such cases, the liability to VAT arises at the time when the customs declaration for placing imported goods to such a procedure is accepted. A VAT return must be filed and the VAT paid in the usual manner.
The VAT Act does not specify the arrival of a vessel as a procedure that leads to a postponement in the payment of import VAT. In addition, re-import is not specified as such a procedure in the VAT Act. Notwithstanding the above, case law on VAT states that if undeclared goods under the customs authorities’ supervision are re-imported outside the EU before their release for free circulation within the EU, the import is not deemed to have taken place for VAT purposes.
If the Union goods have been placed in the internal transit procedure of another EU Member State (in the EU customs territory and VAT area), and the goods are imported into Finland via a territory that is outside the EU customs territory and VAT area, the import is not deemed the importation of goods as defined in the Value Added Tax Act. The term “Union goods” refers to goods manufactured in the EU customs territory or goods imported into the EU’s customs territory and VAT area from outside the EU, which have been cleared for release for free circulation.
The importation of goods is also deemed to take place in Finland when non-Union goods are in Finland as part of an inward processing procedure, customs warehousing procedure or temporary admission procedure, with total relief from customs duties, the customs rules applicable to the use of corresponding goods is applied to them, and non-Union goods become Union goods. Further information on the procedures used by the Customs is available on the Customs’ website.
No VAT is payable on imported goods which are transferred to the tax warehousing procedure. Further information on the tax warehousing procedure is available in the Tax Administration´s Instruction Tax warehousing for VAT purposes (only available in Finnish and in Swedish).
2 Value added taxation procedure
2.1 Self-assessed tax
VAT on imports levied by the Tax Administration is a self-assessed tax. The procedural rules of customs legislation do not apply to self-assessed taxes. A self-assessed tax is calculated and paid by taxpayers on their own initiative. Importers liable for VAT calculate and report the import VAT and the taxable amount on their own initiative, in their VAT return, along with their other business transaction details assigned to the tax period in question. After customs clearance, the Customs releases the goods of VAT registered importers, regardless of whether or not the importer has paid the VAT on imports.
A VAT-registered importer who imports goods for its taxable business purposes entitling to input VAT deduction, declares the import VAT as payable and input VAT deductible at the same time. In such a case, no VAT is due. This procedure is referred to as postponed accounting of VAT, which applies automatically to all importers who have been entered in the VAT register. No special arrangements, criteria, or guarantees, are required.
The party liable to pay VAT on imported goods is the declarant (§ 86 b, VAT Act), i.e., the person in whose name the customs declaration is filed. The term “declarant” also refers to a person in whose name the declaration for temporary storage, entry summary declaration, exit summary declaration, declaration for re-import or notification of re-export is filed.
A customs declaration can be filed by a person who is able to provide all the information needed to apply the rules regulating the goods in question. The person in question must also be able to present the goods in question to the Customs. However, if special obligations are imposed on a specific person regarding the acceptance of the customs declaration, they must file the customs declaration personally or through a representative.
If a representative acts in their own name on behalf of a principal, the arrangement is referred to as indirect representation. In such a case, the party liable for the import VAT is the importer of the goods, i.e., the principal, not the indirect representative. A person who is in the position of a declarant or the principal of the declarant, at the time that the imported goods arrive in the EU (EU VAT area) from the EU’s customs territory (e.g. arrive from Åland to other parts of Finland), is also liable to import VAT. Only the principal, i.e., the importer of the goods, is entitled to deduct the import VAT. The import VAT and the taxable amount are reported on the VAT return filed by the principal, as is the corresponding deduction on goods that have been imported for use entitling to a deduction.
When an indirect representation is used, the representative must enter the personal identity code of the principal in the customs declaration, if it concerns a private import of a natural person. In all other cases, the Business ID of the principal must be used.
2.3 Taxable amount for VAT purposes
In principle, the taxable amount used to calculate the import VAT is the customs value, as determined by the Customs in accordance with EU customs legislation (§ 88, VAT Act), to which the items referred to in § 91, § 93 and § 93 a of the VAT Act have been added. The customs value is determined by the Customs in accordance with the EU customs legislation. The rules for the calculation of taxable amount have not changed. An importer liable to VAT must calculate the taxable amount and import VAT themselves. The amount of VAT is calculated by multiplying the taxable amount by the applicable VAT rate (24, 14 or 10 percent). The VAT rate is determined by the type of goods.
The Customs primarily determines the customs value on the basis of the transaction value of the goods. The transaction value is the price that has been paid for the goods, or that must be paid for goods sold for export into EU customs territory. According to the provisions of EU customs legislation, a commercial invoice which includes the price and terms of delivery of the goods must be presented for the customs clearance process. In the customs clearance process, the Customs issues a customs clearance decision which includes the customs value and the charges levied by the Customs. If the price or a component thereof is presented in a currency other than Euros, the amounts are converted into Euros by using the currency exchange rates confirmed by the Customs.
To calculate the taxable amount, the taxes, duties, import charges and other charges, excluding VAT, collected by the state and the EU during the customs clearance process are added to the customs value. Taxes and other charges paid outside Finland are also added into the taxable amount. However, car tax or oil damage duty are not included in the calculation of the taxable amount for VAT purposes (§ 93, VAT Act).
If excise duty is also payable, the Customs will collect it on the basis of the customs clearance decision, unless the Customs has granted a postponement in the payment of VAT to the importer. If postponement in the payment of tax has been granted to the importer, the importer must file an excise duty declaration within four days of the release of goods for free circulation. In both cases, the amount of excise duty is incorporated in the taxable amount of imported goods for VAT purposes. Anti-dumping and countervailing duties, as well as oil waste duties, are incorporated in the taxable amount of imported goods for VAT purposes in the same manner as the excise duties.
The costs of transport, loading, unloading and insurance of the goods, as well as other costs related to the importation to the first place of destination in Finland specified in the transport contract listed in § 91 of the VAT Act, must also be factored into the taxable amount of imported goods for VAT purposes. If, at the time when the liability to pay VAT arises, it is known that the goods will be transported to another destination in Finland or another EU Member State, the costs of transport up to the destination are added to the taxable amount. The destination is identified on the basis of freight documents or other transport documents relating to the imported goods. If the destination cannot be identified, the first place of unloading is considered to be the destination. This rule applies to transports organised by both the seller and the purchaser. According to § 71(1) point 2 of the VAT Act, VAT is not payable on the sale of transport, loading and unloading services and other services related to importation, if the value of the services must be included in the taxable amount of the imported goods.
EXAMPLE 1: A VAT-registered sole trader imports goods from China to Helsinki, from where the goods are transported to their final destination, Tampere. The customs clearance date on the customs decision is 14th February 2018. Based on the customs clearance decision, the customs value of the goods is EUR 8 750 and the total amount of duties and import charges is EUR 323,75. The total costs of unloading and loading the cargo as well as transportation from Helsinki to Tampere are EUR 1 426,25. The taxable amount for import VAT is EUR 10 500 (customs value EUR 8 750 + custom duties EUR 323,75 + the costs of unloading and loading the cargo as well as transportation from Helsinki to Tampere EUR 1 426,25).
The taxable amount for goods sold at a customs auction is their auction price. In such cases, the taxable amount does not include taxes, customs duties, import charges and other charges levied by the state or the EU (§ 93, VAT Act).
In order to establish the taxable amount for the importation of goods, the same exchange rate is applied as the one used for the determination of the customs value at the time when the customs debt is incurred (§ 101 a, VAT Act). The detailed rules on the exchange rate to be used to determine the customs value are laid down in Article 53 of the Union Customs Code and Article 48 of the Commission Implementing Regulation (EU) 2015/2447.
The taxable amount for a data medium and an ADP standard program stored thereon is the total value of the data medium and the stored ADP program. (§ 89, VAT Act)
Provisions on establishing the taxable amount for goods, which have been outside the EU for repair, manufacture or other treatment, as well as for goods of the same type imported in place of such goods, are laid down in § 90 of the VAT Act. The taxable amount is the costs of the repair, the treatment, or corresponding other costs and the costs of the dispatch as well as the value of parts incorporated in the goods outside the EU. However, this provision does not apply if the goods have been sold as tax-exempt outside the EU, or if such goods, which have been used for purposes which entitle to a deduction in Finland, have been sold outside the EU (§ 90, VAT Act).
VAT on importation payable to the Tax Administration is assigned to the calendar month during which the customs clearance decision was issued, i.e., based on the end date of the customs clearance process indicated on the decision. As it stands, the taxpayer has a customs clearance decision that includes the following information: the customs value, the amounts of customs duties and import charges, the date of acceptance of the customs clearance decision, and the end date of the customs clearance process. The date of acceptance is usually, but not necessarily always, the same as the end date of the customs clearance process.
If a special procedure specified in § 101 a is applied to the taxpayer’s imports, the VAT is assigned to the month during which the liability to pay VAT arose, i.e., based on the date of acceptance of the customs declaration. Further information on the above-mentioned special procedure described in § 100 a of the VAT Act is available in section 3 “Special procedure”.
The same rules apply to the periodisation of the liability to pay VAT and the deduction of VAT. A deduction is assigned to the same tax period as the VAT on importation. No VAT is payable if the imported goods are fully used for the taxable business activities.
2.5 Filing and payment of value added tax
VAT-liable importers report the VAT on imports in a VAT return on their own initiative, along with their other business transaction details assigned to the tax period in question. VAT must be paid for each tax period on the taxpayer’s own initiative. The reference number for self-assessed taxes must be used when paying VAT. Each taxpayer has their own, permanent reference number.
If the taxpayer’s tax period is one calendar month, the deadline for the payment of VAT is the 12th day of the second month following the tax period (§ 147, VAT Act).
The VAT return form has two sections for reporting VAT on imports:
- The taxable amount of VAT on imports is reported under ”Imports of goods from outside the EU”.
- The VAT on imports is reported under “Tax on imports of goods from outside the EU”.
- In certain situations, VAT is not payable on imports which take place in Finland (Articles 94–96 and 72 h of the VAT Act). This applies to the import of investment gold, for example. These types of imports are reported in the VAT return as follows:
- The taxable amount of VAT on imports is reported under ”Imports of goods from outside the EU”.
- No payable VAT is calculated on exempt imports. The amount to be reported under “Tax on imports of goods from outside the EU” is EUR 0.00.
The provisions laid down in the Act on Assessment Procedure for Self-assessed Taxes (Laki oma-aloitteisten verojen verotusmenettelystä 768/2016) are applied to imports of persons liable to VAT for which the Tax Administration is the competent authority. The rule regarding a minimum payment of EUR 5 for levied or collected taxes does not apply to the above imports. (§ 101 b, VAT Act)
If information affecting the calculation of the taxable amount of imported goods changes afterwards, such as the customs value or other charges levied by the Customs, the VAT return must be re-filed to correspond to the new information. A replacement return must be used to report the corrections to the Tax Administration, on the taxpayer’s own initiative. Further information on how to correct an error in the VAT information reported is provided on the Tax Administration’s web page Correcting errors in a self-assessed tax return.
The customs clearance decision and the related documents must be stored as part of the accounting documents. They are also a precondition for the right to deduct VAT (§ 102 a, VAT Act).
3 Special procedure
Rather than using the normal procedure for granting postponement for the payment of import VAT, the Tax Administration may impose the importer on a special procedure if the importer has committed or is considered likely to commit an infringement, for a maximum period of 36 months (§ 100 a, VAT Act). In the special procedure, the company reports and pays the VAT on imports separately to the Tax Administration, and the Customs does not release the goods to the importer until a VAT return has been filed and the VAT payment made. The VAT on imports must be assigned to the calendar month during which the customs declaration was accepted.
The Tax Administration may set a VAT-liable importer liable for a special procedure if in the last 12 months the taxpayer has materially neglected, or it can be assumed the taxpayer will at some point materially neglect, to fulfil their tax obligations in the manner specified in § 26(3) of the prepayment act (Ennakkoperintälaki 1118/1996). Based on the criteria for removal from the Prepayment Register (§ 26(2–3), prepayment act), account may also be taken of negligence on the part of organisations or corporations previously managed by the taxpayer, the negligence of persons who manage the organisation or corporation liable for tax, or the negligence of other organisations or corporations managed by such persons. The identification of negligence covers all of the company’s tax types, as well as neglect of the accounting obligation. Also start-up companies may be set under the special procedure based on the same criteria. In addition to the above, the Tax Administration may set an VAT-liable importer to the special procedure on the basis of repeated or serious infringements of customs legislation. The Customs monitors compliance with the above criteria and reports on them to the Tax Administration.
The Tax Administration issues an appealable decision when it sets the importer to follow the special procedure. A notice of the decision is delivered to the taxpayer before the decision takes effect and the taxpayer is provided with an opportunity to provide additional information. The appeal period is 60 days from receiving notice of the decision. Regardless of any ongoing appeal process, a decision can be enforced pursuant to § 31(2) of the Administrative Judicial Procedure Act (586/1996). If an importer wishes to obtain the imported goods as fast as possible, the importer can file and pay the import VAT separately to the Tax Administration as soon as the customs declaration has been accepted, prior to the general deadline for the VAT return and payment of VAT (§ 147, VAT Act).
EXAMPLE 2: The importer has been placed in a special procedure. A customs declaration on imported goods is accepted in May. The importer assigns the import to the VAT return for May; however, the importer can file a separate VAT return for the import VAT in May, immediately after the customs declaration has been accepted. At the same time, the importer pays the VAT on imports using the reference number for self-assessed tax. Taxes or deductions on other business transactions assigned to May are not yet included in the VAT return because their period of filing and payment does not end until the 12th of July. Other payable taxes and deductible taxes assigned to May are included on the replacement VAT return to be filed on July 12 at the latest, which must also include the import VAT reported earlier. Deductions on import tax paid separately are assigned in the usual manner to the calendar month during which the customs clearance decision was made. In practice, a customs clearance decision cannot be made before the VAT on imports has been paid in case the importer has been set into the special procedure. As a result, an importer placed in a special procedure will not receive the deduction before the payment has actually been made.
4 Advance ruling and written guidance
Upon the taxpayer’s written application, the Tax Administration may issue an advance ruling on how the VAT Act should be applied to a certain business transaction. The Tax Administration may also provide written guidance to persons liable to tax (§ 189, VAT Act).
Applications for advance rulings concerning VAT on imports may be processed either by the Customs or the Tax Administration. The deciding factor is whether or not the applicant is registered in the VAT register at the time when the application is filed. If the applicant is registered in the VAT register at the time when the application for advance ruling is filed, the advance ruling on the VAT on imported goods is issued by the Tax Administration. However, if the applicant is a natural person who has been entered in the VAT register and the imported goods to which the advance ruling is applied are not related to the person’s business operations, the advance ruling is issued by the Customs. The provisions concerning advance rulings issued by the Tax Administration apply, where applicable, to the issue and validity of advance rulings (§ 190(5), VAT Act).
If the applicant was registered in the VAT register at the time when the application for advance ruling was filed, it is of no significance if the applicant is removed from the VAT register during the validity of the advance ruling, or even before the advance ruling is issued.
Correspondingly, it is of no significance if the applicant of an advance ruling issued by the Customs is entered in the VAT register during the validity of the advance ruling, or even before the advance ruling is issued. The advance ruling is binding even in the above situations, provided that the facts affecting the legal issue have not changed. Removal from or entry into the VAT register in itself has no effect in practice on the binding nature of the advance ruling, because the material provisions on the taxation of imports are the same regardless of whether the party responsible for levying the VAT is the Tax Administration or the Customs.
Further information on applying for an advance ruling is available in the Tax Administration instruction How to file an application for advance ruling and the decision thereon (available only in Finnish and in Swedish).
5 Entry into force
This Instruction enters into force on 1 January 2018. The Instruction applies to imports for which the liability to pay VAT arose on or after 1 January 2018.
The Tax Administration levies VAT on imports for which the liability to pay VAT arises on or after 1 January 2018 and for which the importer is entered in the VAT register. If the importer is a natural person who is entered in the VAT register, VAT is levied by the Customs if the imported goods are unrelated to the importer’s business. Matters that are pending on 1 January 2018 will not be transferred from the Customs to the Tax Administration. The Customs will be responsible for any adjustments and reassessments relating to decisions it has made on or before 31 December 2017.
Chief Tax Specialist