General VAT Rate Increase in Finland

General VAT rate to rise

The general VAT rate will rise from 24% to 25.5% from 1.9.2024. The new VAT rate will apply to goods and services currently taxed at 24%.

How will the VAT increase affect you in practice?

Goods trade

The time of supply of the goods determines whether the 24% or 25.5% rate applies.

Example 1: A customer orders a new car in August 2024, the car is delivered in September 2024 and the customer pays for it at the time of delivery. The tax rate applicable to the sale of the car is 25.5%. The timing of the order, the signing of the sales contract, or the registration of the car is irrelevant. The tax rate is determined by the time of delivery.

Example 2: A seller dispatches spare parts to a buyer on August 31, 2024. The goods arrive at the buyer’s warehouse on September 1, 2024. If the transport is contractually the seller’s responsibility, the buyer is considered to have received the goods on September 1, 2024, and the applicable tax rate is 25.5%. However, if the transport is the buyer’s responsibility, the goods are deemed delivered when the transport starts on August 31, 2024, making the sale subject to a 24% tax rate.

Service sales

VAT on the sale of a service is allocated to the tax period in which the service is provided. If the service is ongoing when the tax rate changes, the applicable rate is the one in effect when the service is completed. The service is considered supplied when it becomes available to the customer.

Example: An individual hires a cleaning company to wash the windows of his home. The windows are cleaned on August 30, 2024. The company sends the customer an invoice at the beginning of September, and the customer pays on the due date in September. The service is taxed at a rate of 24%.

Sale of a recurring service

In the case of a continuous service, the consideration is determined by the passage of time. For example, rental services or software as a service (SaaS) are considered continuous services.

Example 1: A software license is sold to a customer for a 3-month period, from September 1, 2024, to November 30, 2024. The invoice is generated on August 15, 2024, and the customer pays for the entire period at once, using a service like Stripe, on August 15, 2024. The 24% tax rate applies in this case because the payment is received before September 1, 2024.

Example 2: A software license is sold to a customer for 12 months, from September 1, 2024, to August 31, 2025. An invoice is sent to the customer on August 31, 2024, with a 14-day net payment term. The customer pays the invoice on September 13, 2024. The 25.5% tax rate applies because the license period falls after the VAT rate change, and the payment was not made in advance before September 1, 2024.

If the customer had paid for the 12-month license in full before August 31, 2024, the 24% tax rate would have applied.

Prepayment

The recipient of an advance payment declares and pays the VAT for the tax period in which the advance payment was received. If the advance payment was received before the amendment came into effect, the applicable tax rate is 24%. The Tax Administration’s guidance provides further examples, including cases related to the importation of goods.

Tax administration’s guidelines

Valjas assists with navigating the VAT change

If you’re feeling overwhelmed by the work involved in the VAT change, we’re here to support you. Contact us, and let’s get your finances in order—individually and efficiently.