Finland's VAT Rate Increase: Comprehensive Guide to the 2024 Tax Change

Starting 1 September 2024, the general VAT rate in Finland will increase from 24% to 25.5%.

Here are the practical implications of various scenarios.

I. IMPACT ON GOODS AND SERVICES

Goods Delivery: The VAT rate applicable to the sale of goods is determined by the delivery date.

• Before 31 August 2024: Goods delivered on or before this date will be taxed at the 24% rate, regardless of payment timing.
• From 1 September 2024: Goods delivered on or after this date will be taxed at the new 25.5% rate.

Example: A car ordered in August but delivered in September will incur a VAT of 25.5%. Conversely, spare parts delivered on 1 September will be taxed at 25.5% if transportation was the seller’s responsibility; otherwise, if the buyer is responsible and transportation begins on 31 August, the rate remains 24%.

Advance Payments: VAT on advances is reported based on the payment date.

• Before 1 September 2024: Advances paid before this date will be taxed at 24%.

Example: An advance paid in August for a car delivered in September will be taxed at 24%.

Instalment Payments: VAT on instalment payments is based on the delivery date.

Example: A washing machine delivered in August and paid for in instalments will be taxed at 24%, regardless of the payment schedule.

Services: VAT on services is allocated to the tax period when the service is completed.

Example: A cleaning service completed on 30 August 2024 will be taxed at 24%, whereas a transportation service ending in September will be taxed at 25.5%.

Continuous Supply: VAT for continuous supplies (e.g., rental services) is determined by the end date of the period.

Example: Rent for a period ending 31 May 2025 will be taxed at 25.5%, unless paid in full before 1 September 2024, in which case the rate is 24%.

II. FILING AND REPORTING VAT

MyTax System:

• Monthly Tax Period: Starting 1 September 2024, the VAT return will reflect a 25.5% rate for domestic sales.
• Quarterly or Annual Tax Periods: For those reporting quarterly or annually, the new VAT rate will apply proportionally within the tax period.

Other Electronic Services:

• E-Services: Use the same reporting format as before for VAT returns, despite the change in rate.
• Paper Forms: The existing paper form will be used until the end of 2024, with a new version available from 1 January 2025. All VAT rates will be entered under the same category.

III. PERIODICITY RULES

VAT Reporting: The date of payment or invoice does not always dictate the tax period for VAT reporting.

• Cash Basis Reporting: VAT is reported based on payment dates.

Example: Payment received on 1 September 2024 for goods delivered on 30 August 2024 will be reported with a VAT rate of 24%.

• Accrual Basis Reporting: VAT is reported based on the invoice date.

Example: An invoice dated 30 August 2024, with delivery in September, will be reported with a VAT rate of 25.5%.

This VAT rate adjustment necessitates careful management of billing and reporting practices to ensure compliance and accuracy.

IV. VAT RATE ON GOODS AND SERVICES PLACED INTO OWN USE: 

Construction Services

• Own Construction:

• Business-Performed Construction: If you perform construction services in your own business and place the construction into your own use, the 25.5% VAT rate will apply to the part of the construction completed on or after 1 September 2024.

• Purchased Construction Services:

• Services Completed On or After 1 September 2024: If you purchase construction services and the work is completed on or after 1 September 2024, the VAT rate for placing these services into your own use will be 25.5%.

• Services Paid for Before 1 September 2024: If you paid for the construction services in full before 1 September 2024, the VAT rate applicable to placing these services into your own use will remain 24%.

Real Estate and Major Renovations

• Ongoing or Unfinished Construction:

• If Construction is Ongoing: If an unfinished construction service for a new building or major renovation is still ongoing at the time of sale or transfer, VAT must be paid based on the rate effective at the time of sale or transfer.

• Finished Construction with Sale or Transfer: If the construction is completed but the real estate unit is sold or transferred on or after 1 September 2024, the VAT rate for placing the real estate into own use will be 25.5%.

V. INTRA-COMMUNITY ACQUISITIONS 

Reporting Month:

General Rule: For VAT reporting purposes, the calendar month for reporting purchases from other EU countries (intra-Community acquisitions) is the month following the acquisition. Therefore, if the correct VAT reporting month is September 2024 or later, the new VAT rate of 25.5% must be applied.

Invoice Date: If the supplier's final invoice is dated within the same month as the delivery of the goods, the intra-Community acquisition should be reported in that same month.

Advance Payments:

Effect on Reporting: The VAT reporting month does not change even if a part of the price was paid in advance. The VAT rate applied should be based on the reporting month relevant to the delivery date or invoice date as specified.

Summary:

For purchases made in September 2024 or later, apply the 25.5% VAT rate when reporting and paying VAT.

Report intra-Community acquisitions in the month following the acquisition, or in the month of invoice if applicable.

The VAT rate is determined based on the reporting month, regardless of advance payments.

VI. BUYING SERVICES FROM FOREIGN BUSINESS

Services Provided on or After 1 September 2024:

• New VAT Rate: Services that fall under the reverse charge mechanism and are provided on or after 1 September 2024 will be subject to a VAT rate of 25.5%.

Advance Payments:

• Prior to 1 September 2024: If the buyer paid for the service in advance before 1 September 2024, the VAT rate applicable will be 24%.

VII. VAT RATE CHANGES FOR IMPORTED GOODS

VAT Liability Date:

On or After 1 September 2024: For goods imported into Finland where the VAT liability arises on or after 1 September 2024, the new VAT rate of 25.5% will apply. VAT liability is determined based on the date when Customs acknowledges receipt of the import declaration.

Before 1 September 2024: If the VAT liability arises before 1 September 2024, the applicable VAT rate is 24%, even if the importation occurs after this date.

Reporting VAT on Imports

The VAT on imports must be reported for the calendar month in which Customs issues the decision on customs clearance. This decision determines the reporting period for VAT purposes.

Reporting to the Tax Administration

VAT on imports should be reported to the Tax Administration according to the VAT rate applicable at the time the VAT liability arises.

Summary:

Goods imported where VAT liability arises on or after 1 September 2024 will be subject to a VAT rate of 25.5%. If VAT liability arises before 1 September 2024, the rate of 24% applies.

VAT on imports should be reported in the month when Customs issues the customs clearance decision.

VIII. ACCOUNTING ADJUSTMENTS, SALES DISCOUNTS, BAD DEBT 

VAT Rate Application for Adjustments:

• When including any granted discounts, write-offs of bad debts, or other adjustments in your VAT reporting, apply the VAT rate that was in effect at the time the goods were delivered or the services were provided.
• This rule also applies to accounting adjustments made in tax periods starting on or after 1 September 2024.

Handling Adjustments Across VAT Rate Changes:

• Adjustments related to discounts or changes in service provisions that occurred before and after 1 September 2024 should reflect both the old and new VAT rates.
• The impact of such adjustments must be spread appropriately over the periods affected by the different VAT rates.

Example Scenario:

• If goods were delivered or services were provided before 1 September 2024, and a discount is granted or adjustment is made after this date, apply the VAT rate that was in effect when the original transaction occurred.

• Conversely, if a service provided on or after 1 September 2024 is later adjusted, use the new VAT rate for the adjustment.

IX. VAT RATE APPLICATION UNDER THE ONE STOP SHOP (OSS) SCHEME: FINLAND AS THE MEMBER STATE OF CONSUMPTION

Under the One Stop Shop (OSS) scheme, VAT rate application in Finland, as the Member State of consumption, follows specific rules that may differ from the general VAT rules. Here’s how the VAT rate is determined:

General VAT Rate Determination:

For Goods:

Delivery Date: The VAT rate depends on the date of delivery of the goods.

Before 1 September 2024: If the goods are delivered before 1 September 2024, the VAT rate applicable is 24%.

On or After 1 September 2024: For goods delivered on or after 1 September 2024, the VAT rate will be 25.5%.

For Services:

Completion Date: The VAT rate is determined by the date when the service is completed.

Before 1 September 2024: If the service is completed before 1 September 2024, the VAT rate is 24%.

On or After 1 September 2024: If the service is completed on or after 1 September 2024, the VAT rate is 25.5%.

Advance Payments:

If an advance payment is received before 1 September 2024, the VAT rate applicable to the entire supply (sale) is 24%, regardless of when the delivery or service is completed.

Special Rules for Import and Union Schemes:

Import Scheme:

Payment Timing: When using the Import Scheme, the VAT rate is determined by the date the buyer’s payment for the goods is accepted.

This rule deviates from the general VAT rate application, where typically the date of delivery or completion determines the VAT rate.

Union Scheme:

Payment Timing: Similarly, under the Union Scheme, the applicable VAT rate also depends on the time when the buyer’s payment for the goods is accepted.

E-Interface: This applies when the VAT taxpayer uses an e-interface allowing non-EU companies to deliver goods within the EU.

Key Points to Remember:

For Goods: The VAT rate is based on the delivery date unless an advance is received before 1 September 2024.

For Services: The VAT rate is based on the completion date of the service unless an advance is received before 1 September 2024.

Import and Union Schemes: VAT rate determination depends on the timing of the buyer’s payment, differing from the general rules.

SOURCE/RECOMMENDED READ: 

New VAT rate from 1 September 2024 – instructions for VAT reporting - vero.fi