What does a private trader need to know about VAT?

Value added tax, or VAT, is a consumption tax that the buyer pays to the Tax Administration through the seller. The seller adds the tax to the sales price of the product or service and then pays the VAT received from the sale to the Tax Administration. It is always worth thinking of VAT as the state’s money that is only temporarily held in the entrepreneur’s bank account. This helps you avoid unpleasant surprises!
 

When does a private trader have to register for VAT?

A private trader usually has to register for VAT if their turnover exceeds EUR 20,000 per calendar year. If the threshold is exceeded during the year, the VAT liability begins from the moment the threshold is exceeded.

If your private trader business receives income from companies located in other EU countries, such as Uber or Bolt, you must register for VAT purposes for business activities or become subject to a reporting obligation for intra-Community supplies of services. You can read more about trade within the EU here.

You can also register for VAT voluntarily even if your turnover remains below EUR 20,000. Registration is completed in MyTax. You can find the instructions here.

The Value Added Tax Act also separately defines which sales of goods and services are exempt from VAT. You can read more about these on the Tax Administration’s website.

The UKKO Entrepreneur service does not automatically register your private trader business for VAT when you establish it. However, you can register for VAT yourself later if you wish.

If your turnover approaches the EUR 20,000 threshold, we will also notify you by email.
 

Which VAT rates are used?

The applicable VAT rate depends on the product or service you sell.

• 25.5% is the general VAT rate and applies to most goods and services.
• 13.5% applies, for example, to food products, restaurant and catering services, books, medicines, sports and physical activity services, cultural and entertainment events, passenger transport and accommodation services.
• 10% applies to newspapers and magazines.
• In some situations, a sale may be exempt from VAT or subject to a zero VAT rate, for example in connection with healthcare services.

Always check the VAT rate applicable to the product or service you sell with the Tax Administration.
 

What does being registered for VAT mean in practice?

When your private trader business is registered for VAT:

• you add VAT to the sales price of goods and services subject to VAT
• you include the information required by the Value Added Tax Act on your invoices, such as a reference to the reverse charge applicable to the construction industry
• you can deduct the VAT included in business-related purchases that qualify for a VAT deduction
• you report and pay VAT to the Tax Administration according to the tax period of your private trader business
• you must submit a VAT return for every tax period, even if you have had no sales during the tax period.

VAT is not your company’s money. It is a good idea to keep it separate from your other sales income so that you have enough money to pay the tax by the due date.
 

What if I am not registered for VAT?

If your private trader business is not registered for VAT:

• you do not add VAT to your invoices
• you do not submit VAT returns or make VAT payments
• you cannot deduct the VAT included in your business purchases.

If you register for VAT later, notify the UKKO Entrepreneur private trader service’s customer service of the change and your tax period.
 

How is the VAT return handled in the UKKO Entrepreneur service?

The UKKO Entrepreneur service prepares and submits the VAT return on your behalf. You only need to make sure that all necessary sales, purchases, receipts and other supporting documents have been added to the service by the deadline.

When you receive an email from us confirming that the VAT return has been submitted to the Tax Administration, you only need to pay any VAT due to the Tax Administration according to the instructions in the email.

Read more detailed instructions in the article VAT return in the UKKO Entrepreneur service.
 

Frequently asked questions

Can I register for VAT voluntarily?

Yes, you can. You can register for VAT in MyTax even if your turnover remains below EUR 20,000. Also notify the UKKO Entrepreneur service’s customer service when you register.
 

Can I deduct the VAT on purchases?

You can deduct the VAT included in business-related purchases that qualify for a VAT deduction if your private trader business is registered for VAT. If you are not registered for VAT, the VAT on purchases cannot be deducted on VAT returns.

If your private trader business is not registered for VAT, the VAT included in purchases is taken into account in income taxation instead of VAT taxation. In practice, this means that the VAT amount is recorded on the profit and loss statement instead of on the VAT return.

You can also think of it this way: instead of dividing the total amount including VAT between the profit and loss statement, which records the net amount, and the VAT calculation, which records the VAT amount, the entire amount including VAT is recorded as a deduction on the profit and loss statement. This affects the result of your private trader business.

You should therefore always report all business-related purchases to your accounting.
 

Does a private trader registered for VAT have to submit a VAT return if there have been no sales or purchases?

Yes. If your private trader business is registered for VAT, you must submit a VAT return for every tax period, even if there have been no sales subject to VAT or purchases during the tax period.

The UKKO Entrepreneur service handles the return on your behalf once you have provided the necessary information and confirmed the tax period.
 

Do I need to add VAT payments to the accounting of my private trader business?

You do not need to add a receipt for VAT payments or refunds to your accounting, as VAT is processed separately from the rest of the accounting.

However, if you want to add a VAT payment or refund to your customer account, you can add the VAT return itself or a screenshot of the payment shown in MyTax as an attachment to the income or expense. Select Taxes → Value added tax (VAT) as the transaction type.

 

Foreign trade between EU countries – intra-Community trade

An intra-Community supply, meaning the sale of goods to a VAT-liable company located in another EU country, is exempt from VAT.

For the sale to be exempt from VAT:

• the goods must be transported from Finland to another EU country
• the buyer must be liable for VAT in an EU country other than Finland
• the buyer must have a valid VAT number in the other EU country.

If your private trader business sells services to another company in an EU country, your business must be registered for VAT in Finland or at least be subject to a Notification of VAT on EU service supply.

The EU reverse charge mechanism applies to these intra-Community supplies of services. This means that the buyer pays VAT in their own country.

You can read more about selling services and goods to a company located in another EU country here.

If the conditions for VAT exemption are not met, the seller charges, reports and pays VAT normally on the sale of the goods in Finland.

Please note that the UKKO Yrittäjä private trader service is not suitable for you if your private trader business belongs to the VAT special scheme (OSS) or teh EU VAT scheme for small businesses.

You can find more information about VAT in foreign trade on the Tax Administration’s website: VAT on international trade.
 

VAT on imports

The Tax Administration is responsible for import VAT when the importer is registered in the VAT register. The importer must calculate the amount of import VAT independently and report it to the Tax Administration.

When importing goods, the customer submits a customs declaration for the imported goods to Customs.

Customs issues a customs clearance decision stating whether the customer’s tax matters are handled by Customs or the Tax Administration.

The following are generally handled by Customs:

• private individuals
• private traders when the import is not related to the importer’s business
• foreign businesses that are not registered for VAT in Finland.

The following are generally handled by the Tax Administration:

• importers liable for VAT
• private traders when the import is related to the importer’s business.

You can find more information about import VAT on the Tax Administration’s website: VAT on imported goods.

Please note that purchases of goods from outside the EU are not permitted in the UKKO Entrepreneur private trader service.