Finland - Changes in Standard VAT Rate

On June 28, 2024, the Finnish Parliament passed the Value Added Tax Act changes outlined in the government's proposal (HE 61/2024). These amendments relate to the state's second supplementary budget proposal for 2024. 

The amendments include changing the standard VAT rate and reforming the insurance premium tax (IPT) rate.

Practical Implications 

These changes will directly impact businesses and individuals. From September 1, 2024, the standard VAT rate will increase from 24 percent to 25.5 percent. Similarly, the insurance premium tax will also rise from 24 percent to 25.5 percent, as it is aligned with the general value-added tax rate.

In practice, the new VAT rate will apply to transactions where the obligation to pay VAT arises on or after September 1, 2024, whereas transactions for which the VAT liability arose before the effective date will still be subject to the 24% VAT rate.

If the goods are delivered before August 31, 2024, and the buyer pays for goods later in September, the 24% rate will apply.

When an advance payment is made to the seller, they must report VAT for the tax period the payment was received. If the advance is received before the VAT changes take effect, the applicable VAT rate is 24%.

For installment contracts, when the seller and buyer agree that the buyer can pay for the purchased goods in many installments, the date of the goods's delivery determines when the obligation to pay VAT arises.

VAT on services is calculated when the services are provided to the recipient. When the services are not completed by the time the VAT change takes effect, the applicable VAT rate will be in the one in effect on the date the finished service is delivered.

These changes also affect e-commerce businesses using the EU OSS and IOSS. Not only do businesses need to adapt to implement new rates on their goods and services, but they will also face challenges regarding the VAT reports they must submit for the Q3 2024 period.

Conclusion

Businesses in Finland should prepare for the upcoming VAT and IPT rate increases, which will take effect on September 1, 2024. All businesses must adjust their prices, invoices, websites, and accounting systems to reflect the new rate, thus avoiding potential penalties.

Source: Finland Tax Authority (Vero Skatt), The Finnish Parliament