The value-added tax, more commonly abbreviated as VAT, is a form of indirect tax that is calculated by multiplying the price of a good or service by the percentage of its production or distribution. Businesses in Finland are obligated to collect value-added tax (VAT) from their customers and pay it over to the relevant authorities. VAT is an essential source of revenue for the Finnish government. It is essential to have a solid understanding of the Value-Added Tax (VAT) system in Finland and be able to effectively calculate and submit VAT if you intend to do business there or are already doing so.
In the following piece, we will take a more in-depth look at the topic of “vat calculator Finland” and present a detailed guide to the many facets of VAT in Finland.
How to Calculate VAT in Finland:
It is not too difficult to calculate the Value-Added Tax (VAT) in Finland because the basic VAT rate is 24% and there are only two reduced rates, which are 14% and 10% respectively. To determine the amount of value-added tax (VAT) that should be applied to a certain transaction, multiply the net amount by the rate of VAT that should be applied.
If you sell an item for €100 and the regular VAT rate applies, for instance, you will need to add €24 of VAT to the price, which will bring the total to €124. To determine the net amount from the total amount, simply divide the total by the multiplier of the applicable VAT rate plus one. This will give you the net amount. For instance, if the total amount including VAT is €124 and the typical VAT rate applies, you would need to divide €124 by 1.24 in order to arrive at the net amount of €100. This would be the amount that you would pay without the VAT.
Types of VAT Rates in Finland:
As was stated before, Finland’s value-added tax (VAT) is calculated using one of three different rates: the ordinary rate, which is 24%, the reduced rate, which is 14%, and the super-reduced rate, which is 10%. The reduced rate is applicable to particular categories of goods and services, such as food, medicine, and literature, in contrast to the regular rate, which is applicable to the vast majority of products and services.
Certain necessities, like food and tickets for public transportation, are taxed at a significantly lower rate than other items. Because applying the incorrect rate might result in either an underpayment or an overpayment of value-added tax (VAT), it is crucial to know which rate applies to your items or services.
Finland VAT Rates:
Here is a list of the current rates of VAT in Finland as of 2023:
- Standard rate: 24%
- Reduced rate: 14%
- Super-reduced rate: 10%
VAT Registration in Finland:
If you have a turnover that is greater than €10,000 per calendar year, you are required to register for VAT if your firm is located in Finland. You also have the option of registering voluntarily if your annual turnover is less than the threshold amount; however, this option may not be profitable if the majority of your customers are private consumers because they will not be able to deduct the VAT that you charge them.
In order to get your company registered for VAT in Finland, you have to send an application to the country’s tax authorities and supply information about your company, including your company’s identification number, contact information, and bank account details.
Filing a VAT Return in Finland:
You are required to submit a VAT return on a regular basis as a registered VAT payer in Finland. The frequency of these filings is often either monthly or quarterly, depending on the size of your firm. You are required to record both your VAT liability and your input VAT on the VAT return.
Input VAT refers to the VAT that you have paid on purchases that are relevant to your business. You are permitted to deduct input VAT from your VAT liability; the difference between these two figures is the amount that you are required to pay to the tax authorities or that you are eligible to receive as a refund. It is essential to ensure that you have correct records of all of your transactions and that you understand the rules and regulations linked to VAT in Finland in order to simplify the process of filing a VAT return, which can be a difficult task.
VAT Refunds in Finland:
There is a possibility that you could be eligible for a VAT refund if you operate a foreign company that has incurred VAT costs in Finland but is not registered for VAT in the nation. In order to be eligible for a VAT refund, you must first file an application for a VAT refund with the relevant tax authorities in either your home country or the nation in which you are registered for VAT.
The procedure of applying for the return can be time-consuming, and you are need to present supporting papers, such as invoices and receipts, in order to demonstrate that you are qualified to receive a refund.
VAT Threshold in Finland:
As was just brought out, the threshold for the VAT in Finland is set at €10,000 per calendar year. If your annual revenue is greater than this threshold, you are required to register for VAT, charge customers VAT, and then remit that tax.
If your business has a turnover that is lower than the threshold, you have the option of registering voluntarily; however, this may not be helpful to you if the majority of your customers are individual consumers because they will not be able to deduct the VAT that you charge them.
VAT Deductions in Finland:
In Finland, companies are permitted to claim a VAT input deduction for purchases made in connection with their operations. This comprises the value-added tax (VAT) on goods and services that are utilized in the creation of goods or services that are sold, in addition to the VAT on overhead costs such as rent, utilities, and office supplies. However, there are some restrictions on VAT deductions, such as the fact that VAT on entertainment expenses is not deductible. These deductions are not allowed.
VAT Number in Finland:
When you register for Value-Added Tax (VAT) in Finland, the country’s tax authorities will provide you with a VAT number to use. This number is a one-of-a-kind identification that can only be used by your company, and it is required to be included on all invoices and other documents that are associated with VAT. Y
ou can use your VAT number to verify the VAT status of your customers and suppliers, as well as to make claims for VAT refunds in other EU nations. These are both possible uses of your VAT number.
Common VAT Mistakes in Finland:
When it comes to the Value-Added-Tax (VAT) in Finland, there are a few frequent blunders that companies might make, such as the following:
Using the incorrect rate of value-added tax (VAT): It is crucial to know which VAT rate applies to your products or services in order to avoid charging the incorrect rate of VAT. Using the incorrect rate might result in either underpayment or overpayment of VAT.
Not registering for value-added tax: If your annual revenue is greater than the threshold, you are required to register for VAT; otherwise, you risk incurring penalties and interest for any VAT that is owed.
Inaccurate record-keeping: When it comes to filing VAT taxes and requesting VAT refunds, having accurate records is absolutely necessary. Be sure to maintain track of all of the receipts and invoices that are connected to your business activity.
Not deducting VAT correctly: You are allowed to deduct the value-added tax (VAT) that you paid on purchases that are directly relevant to your business activities; however, there are limitations on certain categories of expenses, such as those related to entertainment. Make sure that you have a solid understanding of the policies and procedures that govern VAT deductions.
The value-added tax (VAT) is an essential source of revenue for the government of Finland, and it is mandatory for enterprises to collect and pay VAT on all of their sales. Understanding the value-added tax (VAT) system in Finland is essential for any company that does business in the country since it can have an effect on your company’s cash flow, level of profitability, and capacity to comply with tax requirements.
You can guarantee that you accurately calculate, declare, and pay VAT by making use of a VAT calculator and by adhering to the rules and regulations that are related to VAT. This will allow you to avoid incurring penalties and interest on unpaid VAT.
Q: What is the current VAT rate in Finland?
A: The standard rate for the value-added tax (VAT) in Finland is currently 24%, and there are also reduced rates of 14% and 10%.
Q: When do I need to register for VAT in Finland?
If your annual revenue in Finland is greater than €10,000 for the calendar year, you are required to register for VAT. You can also register voluntarily if your turnover is lower than the requirement, however this may not be useful to you if the majority of your customers are individual consumers.