How do I record agency or commission sales as a limited company?

If your limited company acts as an agent for another company, the money received from the customer is recorded on the balance sheet, not as your company’s own sales. Your company’s own sales consist only of the commission earned from this sale.

If your limited company sells the products to the customer in its own name, this is not a commission sale. In that case, the entire amount charged to the customer is recorded as your company’s sales, and the amount paid to the other company is treated as a purchase.
 

How do I identify an agency or commission sale?

The transaction is an agency or commission sale when another company—the principal—sells the product or service to the customer and your limited company acts as an agent on the principal’s behalf.

For example, check:

• Who is shown to the customer as the seller on the receipt, payment terminal receipt or online store?
• In whose name are the terms and conditions of sale?
• Who is responsible for returns and complaints?
• What has been agreed in the contract between the parties?
• Is your limited company only entitled to a commission?

The fact that your limited company receives the payment and later transfers part of it to another company does not, by itself, determine how the transaction should be treated.
 

When your limited company acts only as an agent

If the other company sells the product to the customer and your limited company acts as an agent on its behalf, proceed as follows:

1. Record the money received on behalf of the principal as income in the usual way. Create a new income entry in the service and write, for example, the following in the income description:
   “This is an agency sale that must be recorded on the balance sheet, as well as commission income that is the company’s own VATable income.”
2. Attach all available documents to the income entry, such as the sales report and settlement report. Make sure that your limited company’s commission is clearly itemized.
3. When the money is transferred to the principal, add the transferred amount as an expense for your company. Write the following in the expense description field:
   “Agency sale recorded on the balance sheet.”

Select 0% VAT for both the principal’s share of the agency sale and the expense paid to the principal. Your limited company accounts for VAT only on the commission that belongs to your company.
 

How to add the agency sale and commission as income

1. Select Add income.
2. Select Other income as the transaction type.
3. Add two separate lines to the income entry:
   • On the first line, enter the commission earned from the agency sale.
   • On the second line, enter the amount to be transferred to the principal.
4. Select the correct VAT rates for the lines:
   • The commission: generally 25.5% VAT.
   • The amount transferred to the principal: 0% VAT.
5. Write the following in the income description:
   “This is an agency sale that must be recorded on the balance sheet, as well as commission income that is the company’s own VATable income.”
6. Attach all available documents, such as:
   • the sales report
   • the settlement report
   • the receipt or other sales document provided to the customer
   • the contract between the parties or another explanation of the arrangement
7. Make sure that the commission and the amount transferred to the principal are clearly shown on the income lines and in the attached documents.
    

How to add the payment transferred to the principal

When you transfer the principal’s share:

1. Create a new expense entry in the service.
2. Enter the amount transferred to the principal as the expense.
3. Select 0% VAT for the expense.
4. Write the following in the expense description field:
   “Agency sale recorded on the balance sheet.”
5. Attach the settlement report or another document showing the amount paid.
    

Example of an agency or commission sale

Your limited company receives a total of EUR 124 from the customer on behalf of the principal. Your company’s commission is EUR 24.80, and EUR 99.20 is transferred to the principal.

Add the income to the service as follows:

• First line: commission, EUR 24.80
  • VAT rate generally 25.5%
• Second line: amount transferred to the principal, EUR 99.20
  • VAT rate 0%
• Total income: EUR 124
• Income description:
  “This is an agency sale that must be recorded on the balance sheet, as well as commission income that is the company’s own VATable income.”
• Attach the sales report, settlement report and any other relevant documents.

When you transfer EUR 99.20 to the principal:

1. Create a new expense entry in the service.
2. Enter EUR 99.20 as the expense paid to the principal.
3. Select 0% VAT.
4. Write the following in the expense description field:
   “Agency sale recorded on the balance sheet.”
5. Attach the settlement report or another document showing the amount paid.

The money received on behalf of the principal and the amount transferred to the principal do not remain in your limited company’s turnover. Your company’s own VATable income is the commission.
 

When your limited company sells the product in its own name

If your limited company is shown to the customer as the seller of the product or service, this is not an agency or commission sale.

In that case:

1. Record the entire amount charged to the customer as your limited company’s sales using the correct VAT rate.
2. Treat the amount later paid to the other company as a purchase for your limited company.
3. Treat the VAT related to the purchase normally if the conditions for deducting VAT are met.

The fact that payment is made only after the customer has paid does not turn your own sale into an agency or commission sale.
 

Please also note

The settlement report or other accounting documentation must show:

• the total amount received from the customer
• the share transferred to the principal
• your limited company’s commission
• any VAT included in the commission
• the amount paid to the principal

If the commission is invoiced separately, attach the relevant invoice or another reliable document. The commission is treated separately based on its own supporting document.
 

If you are unsure how to treat the transaction

Send the following information to osakeyhtio@ukko.fi:

• the contract or a description of the operating model
• the receipt or other sales document provided to the customer
• the sales and settlement reports
• information about who is responsible for returns and complaints
• an explanation of the commission amount.