The Finnish Parliament has approved on 28th June 2024 the Government’s proposal to raise the general VAT rate from 24% to 25,5%. Additionally, the rate of insurance premium tax follows the general VAT rate and is therefore also to be increased to 25,5%. The changes are scheduled to take effect on September 1st 2024.
VAT changes in goods and services
For goods and services supplied after September 1st 2024, the new VAT rate of 25,5 % will apply.
- For supplies of goods, the delivery date is determinative, i.e. goods delivered before September 1st, 2024 are subject to 24 % VAT rate and goods delivered after September 1st 2024 are subject to 25,5% VAT rate.
- For supplies of services, the date on which the services are considered to be provided to the recipient is determinative.
- Care should be taken especially with advance payments, instalment contracts and on-going agreements to ensure that the correct VAT rate is applied.
The Finnish Tax Administration has released some instructions regarding the upcoming change.
Further changes proposed by the Government
Further changes to the VAT rates on various goods and services are also expected to take place on January 1, 2025 as the reduced VAT rate of 10 % is proposed to increase to 14 % for all goods and services currently subject to 10% VAT rate, with the exception of newspapers and periodicals. The VAT rate of children’s diapers and menstrual protectors is meant to decrease from 24% to 14%.
The Ministry of Finance has sent the draft legislative bill for consultation round on July 2, 2024. The draft legislative bill is open for comments until August 19,2024.
In addition, the VAT rate of candies and chocolates is expected to increase from 14% to 25,5% at some point during 2025.
| OVERVIEW OF PROSPECTIVE CHANGES | |||
| GOODS AND SERVICES | CURRENT TAX RATE | TAX RATE AFTER THE AMENDMENT | CHANGE EXPECTED TO TAKE PLACE |
| Sweets and chocolate | 14 % | 25.5 % | During 2025 |
| Medicines, books, tickets for cultural and entertainment events, sports services, passenger transport and other comparable goods and services | 10 % | 14 % | 1.1.2025 |
| Children’s diapers, incontinence protectors, menstrual protectors | 24 % | 14 % | 1.1.2025 |
| Food, animal feeds, restaurants and catering services | 14 % | 14 % | 1.1.2025 |
| Newspapers, magazines and accommodation services | 10 % | 10 % | 1.1.2025 |
Any questions?
The regulations regarding value-added taxation and other indirect taxation change constantly, which is why both avoiding risks and optimizing value-added tax impacts can be challenging for companies and require continuous monitoring of regulatory changes.
Finding the answers requires posing the right questions and compiling appropriate background information.
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