EU VAT guide – Finland

VAT rates in Finland 

How much is VAT in Finland? 

The Standard VAT Rate (Arvonlisäveron(ALV)) in Finland is 25.5%. 

Some supplies are exempt from VAT. This applies to business activities like health care, insurance, and educational services.

The exact list of taxable transactions and allocated Finland VAT rate can be found in VAT Finland regulations. 

VAT thresholds in Finland 

The VAT legislation contains valuable information about the VAT threshold in Finland and its applicable provisions. Interpreting the appropriate information shared by Tax Authority officials is also a helpful source of information. 

VAT registration threshold for resident businesses: Small businesses that fulfill all mandatory requirements, besides the threshold, can benefit from the small business scheme and operate outside the VAT compliance liabilities. The threshold is EUR 15,000 for the accounting year(12 consecutive months).

VAT registration threshold for non-resident businesses: In most cases, there is no registration threshold for foreign businesses without a permanent establishment in the country. 

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000.

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold.

VAT Taxable Activities in Finland

A taxable person by Finland VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Finland VAT: 

• The supply of goods and rendering of services in Finland for consideration;
• Receipt of reverse-charge services by a taxable person in Finland;
• Export of goods;
• Import of goods;
• Intra-community acquisition of goods.

Other case scenarios exist where domestic or foreign businesses should impose Finland VAT on their transactions. 

Tax Representative in Finland 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. Tax persons with tax residence in third countries or territories with mutual assistance agreements signed with Finland can fulfill their tax obligations without contracting a tax representative. 

Having a tax intermediary isn’t compulsory for EU-established companies. Still, the economic operator could acquire the professionals to ease and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Finland 

Electronically Supplied Services 

The EU VAT Directive defines Electronically Supplied Services (ESS) as those services whose delivery relies on the Internet or similar digital networks. The nature of the delivery of digital services makes them more specific than other types of services. The delivery of ESS almost entirely relies on remote transfer via digital networks or the Internet. 

The level of human intervention or involvement bears minimal or no relevance. 

Finland has incorporated the principles and related concepts of Electronically Supplied Services as defined in the EU VAT Directive.  By adopting these provisions from the EU VAT framework, Finland simplifies compliance for digital service providers, tax authorities, and customers. 

The harmonization of the domestic regulatory framework with the principal concepts shared in the main VAT piece of legislation at the EU level, i.e., the EU VAT Directive, made understanding of this new concept of services, its taxability rules, recognition, and everything relevant less burdensome for local and foreign taxable persons when providing this type of services to local customers. 

However, despite these clarifications, the interchangeable use of terms such as “digital services,” “digital products,” and “electronic services” can still create confusion regarding their definitions and associated tax implications.

Taxability Rules for ESS

Implementing the E-Commerce VAT package on July 1, 2021, introduced significant changes to the EU VAT framework. The VAT reform introduced many important modifications to the EU VAT framework concerning the framework of e-commerce and the supply of digital services. 

The primary goal of EU regulators was to reduce the bureaucratic burden on EU and non-EU businesses involved in cross-border operations, particularly those engaged in distance sales of goods and the provision of digital services.

The new rules introduced simplified reporting schemes, possibly eliminating the burden of multiple VAT registrations based on the more formal reasons mandated by the destination country. The possibility for taxable persons to report their supplies in an aggregate manner significantly decreased the expected budget allocation for compliance services that were necessary before the EU VAT modernization.

Noteworthy novelties introduced by the 2021 E-commerce VAT reform include (non-exhaustive list):

• B2B Electronically Supplied Services: For B2B transactions, an EU-wide harmonized place of supply rule ensures consistency across member states;
• B2C Electronically Supplied Services: Taxable persons without a fixed establishment in any member state should follow the place of supply rule based on the customer’s location, clarifying tax obligations for vendors providing services to EU-based customers;
• Distance Sales of Goods and ESS: Intra-community vendors and suppliers of ESS can utilize the EU-wide threshold of EUR 10,000, covering intra-EU distance sales and ESS supplies to EU customers. If their turnover is below this threshold, they can apply domestic tax rules or voluntarily opt for the One Stop Shop (OSS) system if preferred;
• Exceeding the Distance Sales Threshold: For EU-based vendors with a turnover exceeding EUR 10,000, the destination principle determines the place of supply for the delivery of ESS.

These changes aim to streamline VAT compliance, making it more manageable for businesses operating within the Single Market.

How much is VAT in Finland for Electronically Supplied Services?

VAT rate Finland: A standard VAT rate of 25.5% is applied in most cases on sales of Electronically Supplied Services in Finland

E-Commerce VAT Rules in Finland 

On July 1, 2021, EU regulators adopted E-commerce VAT reform. The rules stemming from this VAT package reshaped the indirect tax landscape at the Union level. These modifications primarily addressed simplifying the rules surrounding the E-commerce space and related Platform economy.

Important modifications of the EU VAT Directive introduced through E-Commerce Reform:

Cross-Border Sales of Low-Value Goods: The amendments introduced a unified threshold of EUR 150 for importing low-value goods in consignments from third countries or territories. 

Intra-Community Distance Sales: The previous national thresholds for intra-community distance sales have been removed, simplifying VAT obligations for non-resident sellers and reducing compliance complexity.

Domestic Sales by Deemed Suppliers: In specific scenarios, digital platform operators are now responsible for charging, collecting, and reporting VAT to tax authorities. This shift in VAT compliance duties from the original vendor to the digital platform operator streamlines the process.

Provision of B2C Electronically Supplied Services (ESS): The scope of services that could be reported under the common scheme has been expanded, making VAT reporting more manageable for businesses engaged in cross-border activities.

Improvements for uniform reporting systems:

Alongside revising the taxability rules for different types of B2C transactions, the latest EU VAT reform from 2021 introduced the below-mentioned changes concerning simplified reporting systems.

These include introducing new versions of the expanded MOSS scheme, now known as the One-Stop Shop (OSS) scheme and the Import-One-Stop Shop (IOSS) scheme. These initiatives aim to streamline VAT reporting and compliance across the EU, making the related tax and legal challenges less costly and confusing for the impacted parties.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Conditions for Using the Non-Union OSS

This special scheme allows taxable persons established outside the EU to adhere to it. Suppliers who have adhered to this scheme can report their transactions in a simplified manner. The scope of the transactions that can be aggregated into this scheme covers the B2C supply of services to customers residing in the EU. 

Conditions for Using the Union OSS

Taxable persons whose place of business is within the Member State can utilize the Union OSS scheme to report intra-community distance sales of goods and cross-border B2C services. Non-EU-based taxable persons can also use this scheme to report their intra-community distance sales of goods to EU customers.

Conditions for Using the Import One-Stop-Shop (IOSS) Scheme

The Import One-Stop-Shop (IOSS) scheme is accessible to taxable persons whose place of business is within the countries belonging to the EU, as well as to those that are outside of it.  This scheme facilitates the reporting of import VAT on low-value goods imported from third countries and territories. 

It simplifies customs procedures and tax reporting by allowing suppliers to remit VAT at the point of sale rather than at the import point.

OSS Return and Payment 

Finland doesn’t offer a simplified reporting mechanism for foreign providers of digital services or products.  However, it has incorporated into its national framework the harmonized rules concerning digital economy from the EU VAT Directive. 

This alignment simplifies matters for foreign digital service providers when the place of supply is within Finland. It allows non-established sellers to access the OSS schemes, enabling them to operate as registered taxable persons under OSS, thereby eliminating the need for local VAT registration.

The introduction and national implementation of the OSS schemes under the EU VAT Directive have significantly reduced the need for multiple VAT registrations and lowered compliance burdens for foreign digital service providers and those involved in intra-community distance sales of goods.

However, users of the OSS schemes should be aware that registration for one or more special OSS schemes does not eliminate the possibility of mandatory registration in certain circumstances. 

Electronic Platform and Deemed Supplier Rules 

Finland has aligned its national legislative framework with the provisions introduced in the EU VAT Directive after adopting the E-Commerce VAT package. These updates have significantly reduced compliance and administrative costs for non-resident taxable persons supplying goods and services to Finnish customers.

The E-commerce reform introduced the concept of the deemed supplier for digital platform operators. Under this concept, the digital platform operator assumes VAT compliance responsibilities for B2C transactions rather than the original vendor. 

The EU VAT Directive provides an exhaustive list of transaction types for which this shift is possible in practice. 

In practice, this shifts VAT responsibilities from the original vendor to the platform operator in specific scenarios:

Import of Low-Value Goods: When EU and non-EU established suppliers sell imported low-value goods to EU customers via digital marketplaces.

Sales of Goods Within the EU: When the non-EU established vendors supply goods already in free circulation in the EU to the customers based in the Member State/s, no matter the value of the supply.

When certain conditions are met, the deemed supplier rule is triggered. This effectively transfers the VAT liability from the original vendor to the digital platform operator. Consequently, the marketplace becomes responsible for fulfilling the VAT obligations typically handled by the original merchant.

This multi-sided transaction is comprised of two parts:

• Business-to-Business (B2B): The initial transaction from the original vendor to the digital marketplace is an exempted or zero-rated B2B transaction;
• Business-to-Consumer (B2C): The subsequent transaction from the marketplace to the end consumer is categorized as a B2C transaction.

This rule streamlines the reporting processes for both online vendors and digital platforms. 

Invoice Requirements in Finland 

General invoice information:

• Date of invoice issuance;
• Date of the supply of goods or provision of services if different from the date of the invoice issuance;
• Unique invoice numbers issued in sequence.

Seller information:

• Company name;
• Full address (head office);
• Billing address if different from company address;
• VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address if different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price, excl. VAT;
• Total without VAT;
• VAT amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information.

Foreign Currency Invoice in Finland  

In Finland, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR.

VAT Return in Finland 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Finland rules, in general, submit declarations:

1. Monthly;
2. Quarterly; 
3. Annually.

Penalties for late reporting and omitted declarations 

Taxpayers should charge Finland VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

If a taxable person makes a late payment, late registration, or erroneous declaration, different types of penalties could be assessed against the non-compliant taxable person. 

• Late submission of VAT return – late filing penalty shall be included alongside the owed tax;
• For the late payment of outstanding tax, the late payment penalty shall be added to the owed tax.

Need assistance with VAT in Finland?
We can help!

Dedicated account manager

As our client, you will be assigned to a multilingual account manager who can address all your tax-related inquiries and resolve any issues you may have at any time.

Single point of contact

We serve as single point of contact, simplifying the process and ensuring that your VAT compliance is handled efficiently and effectively within single stop.

Exclusive customer service

We support our clients, ensure fast response time and always go beyond by offering tailored assistance and individual attention.

Certified experts

Our team is combined of more than 40 experts, who can provide wide range of services and are certified members of IVA, AITC and VAT Forum. Currently we have more than 800 clients and knowledge how VAT works in 100 locations.