New VAT rate in Finland from September 1, 2024

Starting September 1, 2024, Finland will implement a change in the standard VAT rate, increasing it from 24% to 25.5%. This change directly affects e-commerce sellers, who must adjust to the new regulations to remain tax compliant and avoid financial issues. In this article, we present details about the new rules and tips on how to prepare for these changes.

VAT rate increase: Who is affected?

The new 25.5% VAT rate will apply to all goods and services currently subject to the 24% rate. This means that all companies selling goods or providing services in Finland must comply with the new regulations. This applies to both domestic taxpayers and foreign entities using the One Stop Shop (OSS) system for VAT reporting.

Sales classification by delivery date

Since the VAT rate change occurs mid-quarter, sellers must pay special attention to the delivery date of goods or the provision of services to apply the correct VAT rate. The key rules are as follows:

• Goods delivered by August 31, 2024, will be subject to the 24% rate.
• Goods delivered from September 1, 2024, will be subject to the 25.5% rate.

Advances and prepayments

If a seller receives an advance payment before September 1, 2024, the VAT rate for that advance is 24%. However, if the advance is received after this date, the rate is 25.5%, regardless of the delivery date of the goods or the service provision.

Installment agreements and continuous services

For installment agreements and continuously provided services, the VAT obligation arises at the time of delivery or completion of the service. Even if payment is spread out in installments, the VAT rate is determined by the delivery date. For continuous services, if the payment period spans before and after September 1, 2024, VAT will be calculated proportionally based on the completion date of each billing period.

Filing VAT returns after September 1, 2024

VAT taxpayers must remember that the new regulations will affect VAT return filings. For monthly filings, the September return must reflect the new 25.5% rate.

For quarterly filings, the third VAT return for 2024 (covering July, August, and September) must include both the old 24% rate and the new 25.5% rate. Similarly, for annual VAT returns for 2024, both rates must be accounted for.

VAT reporting in the MyTax system and paper declarations

The MyTax system, Finland’s primary tax reporting tool, will be updated to enable taxpayers to correctly report sales according to the new VAT rate. These updates are necessary to ensure a smooth transition to the 25.5% rate and to avoid errors in tax declarations.

Monthly and quarterly returns will feature new dedicated fields for reporting sales at the 25.5% rate. This allows taxpayers to separately report sales subject to the 24% and the new 25.5% rates, facilitating easier reconciliation and transparency.

For taxpayers using paper declarations, a new form reflecting the changes will be available from January 1, 2025. However, until the end of 2024, taxpayers will have to use the current forms. Practically, this means that both the old 24% rate and the new 25.5% rate will need to be reported on a single form. Taxpayers must complete these forms with great accuracy to avoid mistakes that could lead to corrections and further explanations with the tax office.

One Stop Shop (OSS) and VAT rate change

Taxpayers using the OSS system must also adapt to the new regulations. The VAT rate will depend on the delivery date of the goods or the provision of the service. For prepayments received before September 1, 2024, the VAT rate is 24%, regardless of the delivery date.

Key tips for e-commerce sellers

1. Monitor delivery and payment dates: Ensure your systems are updated to correctly track delivery and payment dates, allowing for the correct VAT rate application.
2. Update your accounting systems: Ensure your accounting software is updated to handle the new VAT rate.
3. Communicate changes to customers: Inform customers about the upcoming changes and how they may affect the prices of goods and services.
4. Adjust contracts and invoices: Ensure all contracts and invoices comply with the new VAT regulations.

Summary

The change in Finland’s standard VAT rate from 24% to 25.5% from September 1, 2024, is significant for e-commerce sellers. Adjusting to the new regulations requires attention and preparation to ensure compliance and avoid potential tax issues. Monitoring delivery and payment dates, updating accounting systems, communicating with customers, and adjusting contracts and invoices to the new requirements are crucial. With proper preparation, sellers can smoothly transition through this period of change and continue to operate effectively in Finland.

For questions or additional information, we encourage you to contact our team of experts, ready to provide assistance and support: Contact us – amavat®.