VAT Rates in Finland
VAT rates in Finland by product or service
The reduced VAT rate will only be applied to specific products covered by the VAT Directive.
The standard VAT rate is 25.5%. Also, the standard VAT rate will generally apply to all goods and services for which no exemption or reduced VAT rate is provided.
The first reduced VAT rate is 13.5%. This reduced rate will be applied to most food products, including catering and restaurant services, water, and pet food.
In addition, legally, there is a reduced VAT rate of 10%. This other reduced VAT rate will generally apply to certain pharmaceutical products, books (both printed and digital), newspapers and periodicals, passenger transport, hotel accommodation, cinema, and sports services.
Supplies and services at 0% are general supplies, such as exports.
Finally, some supplies are exempt from VAT, such as, for example, health and social care, education, financial and insurance transactions, and real estate exemptions.
Furthermore, if you are in doubt about the VAT rate applicable to a particular product or service in Finland, we recommend that you contact us.
VAT Deduction Limits in Finland
Input VAT is generally deductible as long as the goods or services are used for business purposes.
However, certain expenses are subject to special rules:
- Hotel accommodation: input VAT is 100% deductible provided the invoice is issued to the company and the expense is incurred for business purposes. The VAT on hotel breakfast is not deductible though.
- Business entertainment: input VAT is generally not deductible. However, staff entertainment is 100% deductible, although subject to limitations.
- Gifts to employees are not deductible.
- Marketing and samples of goods or advertising gifts are deductible.
- Attendance to conferences, fairs and exhibitions: input VAT is 100% deductible.
- Cars, vans and trucks cost: the deduction of input VAT is restricted, particularly when it comes to vehicles for mixed use. We recommend check the guidelines in detail.
A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.
Find here general information about VAT deduction in Finland, and here the VAT deduction rules for VAT on vehicles.
Statute of Limitations in Finland
The statute of limitations is three years in Finland.
The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests. An extended period of time may apply in certain scenarios, for example, when the Finnish tax authorities receive the information from international exchange of information between tax administrations.
The statute of limitations also determines the period a taxpayer can voluntarily correct any errors on past submissions, as well as deduct input VAT. This is three years calculated from the beginning of next year.
Tax point rules in Finland
The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
- General rule: When the supply of goods or services is subject to the mandatory issuance of an invoice, then the tax point is by the time of the supply of the goods or services. If the invoice is issued prior to the supply of goods or services, the tax point arises on the invoice date.
- Prepayments or advanced payments create a tax point because an invoice must be issued for each instalment or prepayment. Special rules apply for vouchers.
- Continuous supplies of services: if the intra-Community acquisition of a service covers a period of more than 1 year, VAT has to be accounted on an annual basis. Tax point is considered to have occurred the last day of the year.
- Intra-Community acquisitions and supplies: Tax point occurs on the invoice date or the 15th day of the month following the month in which the invoice was issued, whichever occurs earlier
- Import: Tax point occurs when the goods are imported according to the relevant import documents.
Find here official information about time for issuing an invoice.
Use and enjoyment rules
When it comes to establishing the place ofsupply of a transaction, Member states may deviate from the general rules for B2B and B2C services according to the place where the services have been usedand enjoyed. This exception may be introduced to avoid double taxation (positive use and enjoyment rules), to avoid non-taxation (negative use andenjoyment rules), or both.
Finland has not introduced the use and enjoyment rule for any type of services.
Finnish Bad Debt Relief
Bad debt refers to an unpaid invoice for which the supplier has paid the VAT to the tax administration: this is, an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer. This is often due to the client´s bankruptcy, insolvency or simple missed payments to suppliers. In these cases, most countries allow to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.
Bad debt relief refers to the possibility of recovering the VAT from that invoice. Finland allows for bad debt relief by adjusting the out VAT paid in the periodic VAT return.
The necessary adjustments can be made in accordance with Generally Accepted Accounting Principles, i.e., when it has become evident that the payment will most likely not be received.
