Finland’s Value Added Tax (VAT), known as Arvonlisävero (ALV), is a key part of the country’s tax system and follows EU VAT regulations. The VAT system in Finland applies to businesses providing goods and services domestically, as well as to imports and intra-community acquisitions.

VAT Rates and Categories

The standard VAT rate in Finland is 25.5%, which has been in effect since September 2024. In addition to this, there are reduced rates of 14% and 10% applied to specific categories of goods and services. Essential goods such as foodstuffs, public transportation, books, pharmaceuticals, and restaurant services are taxed at 14%, while newspapers, magazines, and certain cultural services benefit from the 10% rate. Some transactions, including exports, intra-community supplies, and certain journal publications, are zero-rated and not subject to VAT.

VAT Registration and Compliance

Businesses operating in Finland must register for VAT if their annual turnover exceeds €20,000. For non-resident businesses, there is no minimum threshold, meaning VAT registration is required from the first taxable sale. Digital service providers within the EU must register for VAT if their pan-EU sales exceed €10,000.

Finland allows VAT grouping, which enables businesses in the financial services sector to consolidate their VAT reporting under one entity. However, non-Finnish residents cannot join a VAT group unless they have a fixed establishment in Finland.

VAT Reporting and Filing

Businesses must file VAT returns electronically through Finland’s OMAVERO and Suomi.fi portals. The frequency of VAT filings depends on the company’s annual turnover:

• Businesses with turnover above €100,000 must file monthly VAT returns,
• Those with turnover between €30,000 and €100,000 may file quarterly,
• Businesses with turnover below €30,000 can file annually.

VAT payments and returns are due by the 12th of the second month following the reporting period. Non-resident businesses must file monthly regardless of turnover.

VAT Invoicing Rules

Finland has strict VAT invoicing regulations. Invoices must contain specific details such as invoice date, a unique invoice number, supplier and buyer details, VAT rates, and the total amount payable. For intra-community supplies, businesses must issue invoices by the 15th of the following month.

E-invoicing is widely accepted, and businesses can issue simplified invoices for transactions below €400. Businesses must keep VAT records for six years after the end of the accounting year.

Special VAT Rules

Certain special VAT rules apply in Finland:

• Reverse Charge Mechanism: Non-resident businesses supplying goods or services to Finnish companies generally do not need to register for VAT, as the Finnish buyer accounts for the VAT under the reverse charge mechanism. However, some sectors, such as construction, energy trading, and scrap metal sales, also apply the domestic reverse charge,
• Import VAT Deferment: Businesses can defer import VAT and report it in their next VAT return, avoiding immediate cash payments at customs,
• Bad Debt Relief: Businesses can claim VAT refunds on bad debts, provided they can prove that the debt is irrecoverable.

Digital Services and E-Commerce

Finland follows the EU’s One-Stop-Shop (OSS) VAT system, which simplifies VAT compliance for digital services and distance selling. This allows EU-based digital service providers to report and pay VAT in one EU country instead of registering in multiple jurisdictions. For non-EU businesses, a Fiscal Representative is required unless the business is based in a country with an EU mutual assistance agreement, such as Norway or the UK.

Penalties and Interest for Late Compliance

Failure to comply with VAT obligations in Finland can result in penalties and interest charges:

• A €3 per day fine applies for late VAT filings, increasing to €135 after 45 days and a maximum of €15,000 per return,
• Late VAT payments incur a 7% interest charge,
• Incorrect VAT reporting can lead to fines ranging from 10% to 50% of the unpaid tax, depending on the severity of the error.

Finland’s VAT system is structured to ensure compliance and efficiency, aligning with EU VAT regulations. While businesses must navigate strict invoicing and reporting requirements, mechanisms like VAT grouping, deferred import VAT, and bad debt relief provide flexibility. With a high standard VAT rate of 25.5%, companies operating in Finland should prioritize accurate reporting and timely filings to avoid penalties and ensure smooth tax operations.