Finland - New VAT Rate and Impact on Foreign Suppliers

The government proposal for amending the VAT Act, partly related to the change of the standard VAT rate, has been passed before the parliament. Parliament gave the green light to the proposal that stipulates the increase of the VAT rate from the present 24% to 25.5% after the summer holidays. 

This significant change was mainly based on the Statewide plan to increase public coffers by deriving more resources from the central consumption tax.

The Standard or General VAT rate hasn’t increased for over a decade, making this a rare and significant event in the business world. 

Effective Date

The new Standard VAT Rate should be applied for the covered supplies starting September 1, 2024. 

New VAT Rate and Related Impact

All foreign providers should take the change in the Standard VAT Rate seriously, as it is with the locally established taxable persons. Providers of digital services or e-commerce sellers should consider the upcoming changes and act accordingly. 

The impact of the VAT rate change will be reflected in the issued invoice, tax return, and, most importantly, on the final price, which mostly interests the final consumer. 

It should consider some legal guidelines concerning adequate calculation methods concerning the underlying supply of goods or provision of services in the transitory period. 

When we address the supply of services, the triggering momentum should be when the service is performed,i.e., when the recipient receives it—practically speaking, when the “delivery” is finalized. 

We have different subcases regarding the supply of goods. Still, the general rule states that the VAT rate allocated to the supply in question should be based on the delivery time,i.e., when the recipient has received the goods. 

Conclusion

Foreign providers of digital services(independent operators or digital platform providers) should be aware of the upcoming changes and adapt their accounting or tax engine solutions to accommodate them. 

As noted, the allocation of the incorrect rate could cause some headaches because, in the end, the wrong tax will be indicated in the tax report, which will most probably be a foundation for the late penalty fine, among other repercussions. 

Source: Finnish Parliament