Value Added Tax (VAT) is a consumption tax paid by buyers of goods or services. Entrepreneurs add the tax to the selling price of the product or service and remit the VAT collected from the sales of goods or services to the tax authority. VAT should always be considered as money belonging to the state, which temporarily rests in the entrepreneur's account. This way, there are no unpleasant surprises!
The general VAT rate in Finland is 24 percent. In addition, there are two reduced VAT rates (10 and 14 percent) and a zero rate.
Items subject to the zero rate include sales abroad, as well as the sale of certain tax-exempt goods. For example, activities in the health and social care sector, social welfare services, financial and insurance services, as well as lottery and gambling services.
In addition, the zero rate applies to businesses with small-scale operations, where the turnover during the financial year is less than 15 000 €. These businesses do not need to invoice VAT as part of their product selling price, but they also cannot deduct the VAT on their purchases.
Reduced Value Added Tax Rate 14%
- Food and feed
- Restaurant and meal services
Reduced Value Added Tax Rate 10%
- Books
- Newspapers and periodicals
- Digitally supplied books and newspapers, as well as periodicals
- Medicines
- Sports services
- Passenger transportation
- Accommodation services
- Compensation for television and radio broadcasting
- Cultural and entertainment events
Import Value Added Taxation
The Tax Administration is responsible for the taxation of imports when the importer is registered in the VAT register. The importer must calculate the import VAT amount on a self-assessment basis and report it to the Tax Administration.
For imports, the customer submits a customs declaration for imported goods to customs.
Customs issues a decision to the customer on whether they are a customs or a Tax Administration customer.
Generally, customs customers are:
- Private individuals
- Private traders, when the import is not related to the importer's business
- Foreign traders who are not in the Finnish VAT register.
Generally, the Tax Administration customers are:
- Value added tax liable importers
- Private traders, when the import is related to the importer's business.
More information regarding imports: https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/vat/international-commerce/value-added-taxation-of-imported-goods/
How much VAT should be paid?
The total amount of value added taxes depends on the amount of turnover a company has during the financial year and the types of transactions involved in the business.
The VAT rates are determined according to the conditions set by the Tax Administration.
However, the 24% VAT rate is commonly used.
Foreign trade between EU countries - community trade
Community trade sales, i.e., the sale of goods to another VAT-registered business, are VAT-exempt in community trade.
The requirement for exemption is that the goods are transported from Finland to another EU country, the buyer is VAT registered in another EU country than Finland, and the other EU country's trading partner has a valid VAT number.
If the conditions for exemption are not met, the seller reports and pays the tax normally on the sale of goods in Finland.
More information on VAT taxation in foreign trade: https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/vat/international-commerce/