What VAT change?
There are several VAT rates in use in Finland, and the change coming into effect from September 2024 concerns the general rate: i.e., the rate applied to sectors that have until now used a 24% VAT rate. Reduced VAT rates for food at 14% and for books, culture, and medicines at 10% will remain unchanged.
The change will take effect on September 1, 2024, when the VAT rate will increase from 24% to a new rate of 25.5%.
Who does the VAT change affect?
The VAT increase affects entrepreneurs and light entrepreneurs whose products or services fall under the general VAT rate.
VAT is a tax added to the price of a product or service. While until now a 24% VAT has been added to your prices, you will now need to add a 25.5% VAT— meaning there will be a slight increase in your prices.
How will the VAT change affect the UKKO system?
Starting September 1, 2024, the UKKO system will include an option for VAT at 25.5% for expenses and other income:
When creating an invoice, the delivery date will become mandatory due to the change. Once you select a delivery date for the invoice, you will see the available VAT rates in the menu. For invoices where the delivery date falls in September, VAT 24% will no longer be an option:
If the delivery date is before September 1, the old VAT rates will still be available:
Do I need to change the prices of the products and services I have saved in the UKKO service due to the VAT change?
No, you do not need to. When the VAT change comes into effect, you will select the correct VAT rate for the invoice when you issue it. The final price of a product or service on the invoice will be slightly higher than before, as the new VAT rate is higher.
If you want the price of your product or service to remain the same for your customers despite the VAT change, select "VAT included in the price" in the system, either on the invoice line or individually in the product register. This way, the total price of your invoice will not change despite the VAT increase.
Products in the product register with VAT 24% will automatically update to the new VAT rate of 25.5% on the first day of September:
When should I choose the new VAT rate for income or expenses and how is it done?
When the VAT change takes effect on September 1, 2024, the UKKO service will offer the option to select either the old or new VAT rate for both income and expenses. The VAT rate is determined based on when the product is delivered to the customer or when the service is fully performed. For expenses, you will find the correct VAT rate on the expense receipt, i.e., the invoice or receipt.
Select the old VAT rate of 24% when:
- The product is delivered to the customer by August 31st, 2024, or earlier.
- The service is fully performed for the customer by August 31st, 2024.
- The expense receipt or invoice for the business expense shows the old VAT rate of 24%.
Select the new VAT rate of 25.5% when:
- The product is delivered to the customer on or after September 1st, 2024.
- The service is completed on or after September 1st, 2024.
- The expense receipt or invoice for the business expense shows the new VAT rate of 25.5%.
I purchased equipment for my business on installment. What VAT rate should I record in the accounting when paying installments?
If you made the purchase on installment before the VAT change, the entire price is subject to the old VAT rate of 24%, as the product was delivered to you while the old VAT rate was still in effect. Therefore, record the remaining installment payments in your accounting with the old VAT rate.
Which VAT rate should be applied to advance payments?
Advance payments are subject to the VAT rate in effect at the time of the payment. If the advance payment is charged by August 31, 2024, the old VAT rate of 24% applies.
However, if you have invoiced the advance payment but the customer pays it late, in September, the new VAT rate of 25.5% will apply. In this case, create a credit note in the UKKO system and send a new invoice for the advance payment with the new VAT rate.
I have a long-term project that started before the VAT change and continues after the VAT change. How should I choose the VAT rate when invoicing for the work?
The VAT rate is determined based on when the product or service is delivered or performed. For a longer project, choose the correct VAT rate based on when the reporting period ends.
For example: If you are carrying out a major renovation project for a customer that started in early August and is completed at the end of September, the reporting period is from August 1 to September 30, 2024. The invoice for the project should use the new VAT rate of 25.5%.
If, however, you charge for part or all of the project as an advance payment in August, you can apply the old VAT rate, as mentioned earlier about advance payments.
I work continuously for a client and invoice the work once a month. When should I start using the new VAT rate?
In a continuous assignment, products or services are considered delivered at the end of the reporting period if the invoice is sent after the reporting period ends. So, similar to larger projects: for example, for the reporting period from August 14 to September 13, the invoice should use the new VAT rate of 25.5%, as it is already in effect at the end of the reporting period.
If, on the other hand, you invoice the work at the beginning of the reporting period, it is considered an advance payment, and the situation is different. If you send the invoice to the customer at the beginning of the reporting period, for example, during August for the reporting period from August 14 to September 13, use the old VAT rate of 24%.
Which VAT rate should be chosen if I send a product to the customer in August, but it arrives in September?
If you know the product will arrive with the postal carrier in September, the new VAT rate of 25.5% applies. However, if you invoice and the customer pays for the product in August, the payment is considered an advance payment, and you can use the old VAT rate of 24%.
When will the VAT on my UKKO service fee change?
The UKKO service fee is paid in advance, so the charge always applies to the upcoming month. The new VAT rate will thus come into effect with the first payment charged to you on or after September 1, 2024.
For example, the service fee paid on August 14, 2024, covers the billing period from August 14 to September 13. Since the advance payment is charged in August, the old VAT rate will apply.
Late payments – what to do if the invoice's original date and due date are in August, but the customer pays in September?
If the product or service was fully delivered to the customer before the VAT rate change, i.e., by August 31, 2024, the old VAT rate of 24% applies, even if the customer pays late. No new invoice is necessary.