Finland – Increase of the VAT Rate and Tax Compliance

The Finnish Parliament adopted the government’s proposal to amend the VAT Act and increase the general VAT rate. The Standard VAT Rate, currently fixed at 24%, shall be increased to 25.5%. 

The government proposal will also introduce an increase in the insurance premium tax, which will rise from 24 percent to 25.5 percent, based on the fact that the insurance premium tax rate is interconnected with the standard rate. 

Applicability 

According to the Government proposal, the new Standard VAT Rate should become effective on September 1, 2024. 

Impact – Tax Calculations and Reporting 

The introduction of the new tax rate and its date of implementation is of high importance for businesses making supplies within the country. Allocating the proper rate is pivotal for the correct tax calculation and later reporting requirements for the mandated taxable persons. 

The current notices and official updates state that the effective date of the change will probably be the one indicated in the Government proposal, but it remains to be seen. 

To ease the process of proper tax calculations before the effect of this change and as soon as the amendment of the VAT Act becomes effective, the Tax Administration prepared practical tax instructions for interested parties on how to charge the correct rate in these transitory times. 

Taxpayers responsible for levying import tax should be aware that this tax rate change will also impact their tax calculations and reporting duties. One relevant guideline for these persons is that the date of acceptance of the customs declaration shall determine the adequate VAT rate for the underlying transaction. 

Domestic and foreign taxable persons making supplies under the Finnish VAT framework should be aware that the Standard VAT Rate will be increased soon. Therefore, they should start with adequate preparations to avoid any chance of being non-compliant.