Indirect tax snapshot
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Value Added Tax (VAT) is the main indirect tax in Finland as in other European Union (EU) countries.
VAT is a consumption tax which is applied on the supply of most goods and services. It is also applied to goods, and certain services imported to Finland.
As VAT is levied on transactions the seller has the responsibility for charging, collecting and paying VAT to the tax authority on every supply (output tax). Thus, the seller operating a value added taxable business in Finland is liable to register for VAT purposes.
In addition to output tax, the seller may also incur VAT (input tax) on its purchases including the VAT paid at importation. The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.
Value added tax is payable in Finland on:
- the sales of goods and services in the conduct of business, which takes place in Finland
- the importation of goods, which takes place in Finland
- the intra-Community acquisition of goods, referred to in Article 26 a, which takes place in Finland
- the removal of goods from warehousing arrangements, as referred to in Article 72 l, which takes place in Finland.
There are three rates of VAT that are applied to goods and services in Finland; the standard rate and the two reduced rate and the zero rate. Additionally, a zero-rate applies in certain instances. Even though VAT is broadly applied to transactions, some goods and services are exempted from VAT.
A person operating a value added taxable business is liable to register for VAT purposes if his turnover during a calendar year amounts to €10,000 or more (As of 2021 the threshold is €15,000). Additionally, a voluntary registration is available even if the registration limit would not be exceeded.
For the registration purposes, a ‘person’ includes any legal entity engaged in business operations. The registration will cover all business activities apart from voluntary registration for letting of real property.
Two or more persons within the field of financial or insurance services may form a group for VAT purposes and apply for VAT group registration. For the VAT group registration it is provided that the persons within the group:
- are providing financial or insurance services
- are established, or has a fixed establishment, in Finland
- have close financial, economic and administrative connections with each other.
The main advantage of a VAT group is that, any supply of goods or services within the group is disregarded for VAT purposes. However, there are also some disadvantages such as the liability for taxes. Within the group all members of the VAT group are jointly and severally liable for the VAT debt of the group during the period of their membership.
No. The VAT registration threshold does not apply to supplies made by a non-established business that does not have a fixed establishment in Finland. If the reverse charge does not apply, the non-established business must register for VAT in Finland.
A non-established person that does not have a permanent establishment in Finland may apply for voluntary registration for VAT purposes.
Formerly, EU businesses that are selling goods within the EU above a certain threshold (€ 35,000) to buyers located in Finland had to register and pay VAT Finland. According the new OSS scheme which came into force on the 1st of July 2021, this rule is abolished and replaced with a new EU-wide threshold of € 10,000. Below this new threshold you can continue to apply the domestic rules for VAT on your cross-border sales. If your sales are above this threshold, you are liable for VAT in Finland if your buyers are located here. Above this threshold, businesses can easily register in a new OSS – where they can easily declare and pay the VAT.
As of the beginning of 2015, telecommunications, radio and television broadcasting and electronically supplied services sold to non-taxable persons will be taxed in the country where the buyer is established. As of the 1st of July 2021, businesses who are conducting intra-EU distance selling of goods or selling services, as telecommunications, broadcasting and electronic services or other services that are taxable in another EU country than the resident country of the seller, to non-taxable persons can enter to the OSS scheme.
By entering to the OSS scheme, a business operator conducting distance selling of goods or selling services do not need to register for VAT separately in each Member State; instead, it can fulfil its obligations in a concentrated manner via the tax authority of one Member State. Registration for special schemes is voluntary but businesses not using the OSS scheme must be registered for VAT purposes in Finland if they have sales to consumers in Finland.
Yes, a fiscal representative is required from such persons, that are not established in Finland and do not have a fixed establishment in the European Union or in a country which have a treaty with Finland concerning mutual assistance. The fiscal representative appointed must be domiciled in Finland and needs to be approved by the Regional Tax Office. In addition, the Regional Tax Office may require a guarantee for the payment of the tax.
The general accounting period for VAT is one month. The periodic VAT return submitted on monthly basis must arrive at the tax office on the 12th day of the second month following the accounting period in question.
However, there is relief available for smaller businesses. If the turnover is under €100,000 per year the person liable to tax may apply for quarterly accounting period, ie the periodic VAT return is filed in every three months. If the turnover is under €30,000 per year the person liable to tax may apply for annual accounting period, ie the periodic VAT return is filed in every twelve months.
Yes. If the periodic VAT return is submitted late a penalty for late filing is imposed. The amount of the penalty depends on how many days late the return is submitted and on the size of the tax payable, but with the maximum amount being €15,000.
If the tax payable has not been paid by the due date a late payment interest is payable. The taxpayer is expected to calculate the correct amount of late payment interest and account it to the tax account on one’s own initiative. The interest will start to accrue on the day following the due date and it will stop accruing on the date of payment, both days inclusive.
A person making intra-community supplies of goods or services is required to submit EC sales listing (ESL return). The ESL return states the details of the purchaser and the value of the transactions of goods and services. The ESL return needs to be submitted not later than the 20th day of the month.
Additionally, an intra-stat return for import or export needs to be filed if certain thresholds have been exceeded in intra-community supplies of goods. The intrastat return is submitted on monthly basis.
In addition to penalty for late filing and late payment interest a punitive tax increase may be imposed if the VAT rules are not followed. Depending on the nature of the neglect or error, the tax increase may vary from 15% to 15%. In case of tax fraud, the tax may be increased by not less than 50% and to not more than three times its amount.
Also a punitive payment due to neglect may be issued due to neglectful actions other than misfiling a VAT return, after a notice from the Tax Administration. Maximum amount for the payment is €15,000. A punitive payment of €2,000 to €15,000 may also be issued for a failure to file or misfiling the summary notice concerning EU trade by a VAT able business.
Yes, Finland has adopted two special refund schemes for non- registered businesses; one for EU established businesses and the other for businesses outside EU.
The EU cross border refund scheme, available in all EU member States, allows non-registered, but EU established businesses to recover VAT incurred in Finland under certain conditions.
Businesses established outside of the EU can also reclaim the VAT incurred on imports or purchases of goods and services under certain strict conditions.
The following information must be stated on a VAT invoice:
- the date of issue of the invoice
- a sequential number, based on one or more series, which uniquely identifies the invoice
- the VAT number of the taxable person who supplied the goods or services to which the invoice relates
- the buyer’s VAT number when reverse charge is applied, and in the case of intra-community trade
- full names and addresses of the seller and buyer
- the quantity and nature of the goods supplied or the extent and nature of the services rendered
- the date on which the goods or services were supplied or the date on which a prepayment on account was made
- the price exclusive of VAT per rate of VAT, displaying the unit price and any rebates, discounts and credits (if not included in the unit price)
- the rate of VAT chargeable
- the VAT payable in respect of the supply of the goods or services
- indications of any VAT exemption or reverse charge
- if the invoice is drafted by the buyer, the term ‘self-invoicing’
- if applicable, the details necessary to identify the goods as a new means of transport
- if applicable, an indication concerning the VAT margin scheme if second-hand goods, works of art, antiquities and collectibles or certain travel agency services are being supplied
- if applicable, an indication concerning the supply of taxable investment gold
- if an earlier invoice is being amended, a reference to the earlier invoice.
If the value of goods or services is less than €400 a simplified invoice may be issued. A simplified invoice must state the following information:
- the date of issue
- the seller’s name and VAT number (business identification)
- identification of the type of goods (including quantity) and services supplied
- the VAT due, specified by the rates of VAT chargeable, or alternatively, the price(s) exclusive of VAT per rate of VAT.
There have been discussions concerning the adoption of SAF-T in Finland but at least as of yet, no measures have been implemented nor concrete decisions made in the matter.
For further information on indirect tax in Finland please contact: