Comprehensive Guide to VAT in Finland: Rates, Registration, and Reporting

VAT in Finland - Four Types of Rates

There are four types of VAT rates in Finland:

1. Standard VAT rate,

2. Intermediate VAT rate,

3. Reduced VAT rate,

4. Zero VAT rate.

How Much is VAT in Finland’s Regions?

VAT Finland Laws do not provide information on special rates of VAT applicable in specific regions, so the four previously stated VAT rates are relevant throughout the country.

VAT Registration Threshold

Apart from Finland VAT law, necessary VAT-related information, including the VAT registration threshold in Finland, is found on the Tax Administration website and published official comments and guidelines.

Under the Finland VAT regulatory framework, small businesses whose turnover in 12 consecutive months is below EUR 20,000 are exempt from VAT registration requirements. However, if this VAT threshold in Finland is exceeded, enterprises must register for VAT. Unlike for domestic taxable persons, Finland has no VAT threshold for foreign taxable persons.

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services, and non-EU established suppliers of electronically supplied services is set at the EU level. All EU Member States, including Finland, implemented those rules in national legislation. 

Those rules introduced an EU-wide EUR 10,000 threshold for intra-EU distance sales of goods and B2C supplies of services. In contrast, no threshold was applied to non-EU-established suppliers of Electronically Supplied Services.

Finland also introduced the EU VAT SME scheme, designed to simplify VAT obligations for small businesses that are established within the EU. To qualify, an EU-established business must keep its annual EU-wide turnover below EUR 100,000 and also stay under each relevant country’s national small-business threshold in both the current and previous calendar year. Regarding the national threshold, it is set at EUR 20,000 in Finland.

Types of Taxable Activities in Finland

Under the Finnish VAT law, a person, legal or natural, who sells goods or provides services as part of their business activities is considered taxable. Other business activities, such as receiving reverse-charge services, exporting and importing goods, and acquiring goods intra-EU, are taxable.

Furthermore, economic activities such as agriculture, forestry, horticulture, fur farming or reindeer husbandry, the sale of artwork, also known as primary production, the transfer of the right to use real estate under specific circumstances, and performance by artists and athletes are all considered taxable.

VAT Registration Process

All taxable persons must register for VAT, except those eligible for the small businesses scheme. Therefore, taxable persons must register for VAT once the EUR 15,000 threshold is reached.

Finland VAT Registration for Domestic Businesses

Domestic taxable persons, such as domestic businesses, can register for VAT as soon as they engage in taxable activities voluntarily or later. Registration is completed electronically through a Tax Administration portal, MyTax. The registration process usually takes around three weeks after the form is filled out and submitted.

Finland VAT Registration for Foreign Businesses 

Foreign businesses and individuals who engage in economic activities in Finland must register for VAT before doing so. Foreign companies cannot benefit from the small business scheme, but their registration process is the same for local taxable persons.

Documents required to complete the VAT registration process include the foreign equivalent of a trade register extract translated into Finnish, articles of association, by-laws, partnership agreement, or other similar regulations, or a certified copy of the rules translated into Finnish, and a Power of Attorney issued for the signature if necessary. EU-based businesses are not required to appoint a tax representative, whereas non-EU businesses must appoint one and submit additional documents.

VAT Returns in Finland

The Finnish Tax Administration's instruction provides essential information on VAT return filing frequency and deadlines. According to the VAT Finland rules, there are three types of VAT returns: monthly, quarterly, and annual. VAT returns are submitted electronically by the 12th of the month following the reporting period, except in some cases when paper forms are allowed, even if there were no VAT-liable activities during the reporting period. The annual VAT return is submitted by the end of February of the following year.

Penalties for Failure to File Tax Return

Penalties for late VAT return filing depend on the overdue periods. Penalties may be imposed even if there is no tax to pay, but the VAT return was submitted late.  The late filing penalty is EUR 3 per day if the return is overdue for 1 to 45 days. If it is overdue for more than 45 days, the penalty is EUR 135 plus 2% of the VAT due.

When a VAT return is not submitted, the Tax Administration first sends a reminder with an estimation of the VAT due. If the VAT is submitted after the reminder's reception, the penalties for late filing will be imposed. However, suppose the taxable person still does not file a VAT return after receiving the reminder. In that case, the Tax Administration will assess the due VAT based on the estimation, and a punitive tax increase will be imposed.

VAT Rules for Electronically Supplied Services 

Electronically Supplied Services (ESS), often called digital services, digital products, or electronic services, are defined by the EU VAT Directive as services delivered through the Internet or similar networks without or with minimum manual input. ESS heavily depends on automatic distribution and technology.

In 2021, as an EU Member State, Finland implemented EU-wide taxability rules for the ESS, thereby making compliance more efficient and straightforward for digital service providers and consumers. Nevertheless, introducing a unified approach to ESS at the EU level simplifies the collection of VAT on these services for the National Tax Administration.

Taxability Rules for ESS:

The e-commerce reform introduced the most notable novelties regarding the taxability rules related to ESS in 2021. These include EU-harmonized place-of-supply rules for B2B and B2C supply of ESS, as well as distance sales of goods and ESS. The general rules on the place of supply apply to B2B ESS supply, whereas for B2C transactions, the place of supply is the consumer's country of residence.

Distance sales of goods and ESS taxability rules introduced a EUR 10,000 threshold. When the annual turnover from these sales exceeds the threshold set at the EU level, taxable persons must apply the VAT rate of the country of delivery, e.g., the VAT rate Finland.

When the annual turnover does not exceed the EU threshold, taxable persons can either apply the VAT rate of their country of establishment or voluntarily register for OSS and benefit from a single VAT registration.

How much is VAT in Finland on ESS?

The Finland VAT rate for ESS is 25.5%.

E-Commerce Rules

The 2021 E-commerce Package not only influenced the ESS taxability rules. It also introduced additional significant changes to the EU VAT landscape, thus changing the course of the so-called platform economy in the EU and across the globe. One of the most essential novelties was the introduction of the EUR 150 threshold for imports of goods from non-EU countries, commonly known as cross-border sales of low-value goods.

Digital platform operators also faced new rules governing their VAT liability for collecting and remitting VAT to the Tax Authority on supplies they facilitated, known as the deemed supplier rules. Before the EU VAT regulatory framework reform, each EU country had its own threshold for Intra-community distance sales. The decision to abolish these thresholds and introduce a single EU threshold reduced the complexity and administrative burdens for all relevant parties.

As a final touch to this evolution of EU VAT rules, the Mini One Stop Shop (MOSS), which showed remarkable results, was expanded and transformed into the One Stop Shop (OSS). The expansion was achieved by establishing a new Import One Stop Shop (IOSS) scheme, in addition to those established under MOSS. Therefore, the OSS totals three schemes, each important in its way:

• Union Scheme,

• Non-Union Scheme,

• Import Scheme.

VAT EU Reporting

In Finland, taxable persons must submit an EU VAT Recapitulative Statement, also known as an EC Sales List, and an Intrastat report.

EC Sales List

If a Finnish taxable person, e.g., a legal entity, sells goods or provides services to another VAT-registered person in another EU country, an EC Sales List (ESL) is required for each month. The ESL must be filed electronically by the 20th of the month following the reporting period through the government's MyTax portal.

However, if no transactions are subject to ESL, submitting one is unnecessary. The ESL must include details on all in-scope transactions, including total values and customer information such as VAT numbers. Non-compliance can result in penalties ranging from EUR 100 to EUR 200, depending on the length of the overdue period.

Intrastat 

The Intrastat report is submitted to the Finnish Customs Statistics (FCS) when the export or import thresholds are exceeded, also known as the arrivals and dispatches thresholds. In Finland, these thresholds are set at EUR 800,000, and FCS notifies taxable persons once they exceed the limit.

Digital Reporting

Local Businesses

The Finnish government adopted and implemented rules for mandatory B2G e-invoicing, whereas such regulations do not apply to B2C or B2B transactions. All B2G e-invoices must be received and transmitted in accordance with European standards, meet VAT invoice requirements, and include data on the order number and agreement number. Regarding B2B transactions, the E-invoicing Law provides a special provision allowing taxable persons with an annual turnover exceeding EUR 10,000 to request e-invoices from their suppliers. 

Non-Resident Businesses

Non-resident businesses making supplies to state authorities must follow the same B2G e-invoicing rules as local companies. The Peppol network secures compliance with this requirement.