Finland’s VAT policy is based on the "destination principle" of the European Union VAT system. This means that VAT, or arvonlisävero in Finnish, is payable to the country's government where the product or services are consumed, regardless of where you're supplying them from. So, if you have clients in Finland, you have to comply with Finnish VAT rules. VAT is administered by The Finnish Tax Administration, a government agency steered by the Ministry of Finance.
The standard VAT rate in Finland is 24%, with reduced rates of 14%, 10%, and 0% applied based on the products you sell. This guide includes main VAT obligations and VAT rates for freelancers working in Finland. Let's get started!
VAT Rates in Finland for Freelancers
The Finnish government levies four different VAT rates, and freelancers must charge the amount that applies to their products and services.
- The Standard Rate - Unless the items or services you offer are in the reduced rate or zero-rated category, you should charge the standard VAT rate of 24%.
- The Reduced Rate of 14% - The reduced rate of 14% applies to items such as food (excluding live animals), some agricultural supplies; restaurants and catering services (excluding alcoholic beverages), soft drinks, take-away food, cut flowers and plants for food production, and so on.
- The Reduced Rate of 10% - The Reduced rate of 10% applies to items like pharmaceutical products, domestic passenger transport, books (including e-books), newspapers, admission to cultural events and amusement parks, hotel accommodation, admission to sports events, use of sports facilities, domestic transport, and so on.
- The Zero Rate - When items are zero-rated, they are still VAT-taxable, but the rate of VAT you must charge your consumers is 0%. This rate applies to printing services for publications of non-profitmaking organizations, intra-community and international transport, certain works of art, collector’s items and antiques, and so on. Although there are no charges on zero rates, you should record sales of goods and services and create a report based on your returns.
Here is a list of services that are usually exempt from VAT.
When to Register for VAT as a Freelancer in Finland
Starting 1st January 2021, Finland increased the VAT threshold from €10,000 to €15,000, which means that your taxable sales revenue exceeds €15,000 before you need to register for VAT. If your sales revenue is currently below €15,000, registering for VAT is optional. This threshold does not apply to foreign, non-resident traders with Finnish VAT registration. Their threshold is nil.
You can register for VAT as soon as you start making purchases or start selling/providing your services. If you register voluntarily, you have the option of registering at the same time as you start your business, or later.
Registration for VAT in Finland will take you approximately 3 weeks.
How to Register for VAT in Finland as a Freelancer
You can file your start-up/freelance notification online using the service at ytj.fi, if you are at least 18 years old, have a Finnish personal identity code, and have your own personal internet banking codes/mobile certificate/electronic identity card (HST card). You will need to provide the following information (in Finnish or in Swedish):
- personal details;
- your proposal for the company name, and a maximum of two alternative names;
- address and contact details.
You can then register for VAT and manage all your tax information with the Tax Administration through the MyTax system.
You can also register using the Mini One-Stop Shop, an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return. This scheme is optional but convenient and especially useful if you have customers in multiple countries within the EU, including Finland. MOSS allows you to avoid registering in each Member State of consumption.
VAT for Expat Freelancers in Finland
VAT registration and tax control regarding foreign companies, partnerships, and self-employed individuals are administered by Helsinki Area Tax Office. Here is a list of documents you need to submit in order to register for VAT.
As a foreign self-employed individual, you have to send the Finnish Tax Administration an account describing the work you do in Finland. Each time you get a new assignment or job, you should submit such an account again. If you stay in Finland for no longer than 6 months, you are considered a non-resident taxpayer; whereas, if you stay in Finland for longer than 6 months, you are treated as a Finnish tax resident.
Read more: Check this beginner's guide to register and start working as a freelancer in Finland as a foreigner.
Obligations for VAT Registered Freelancers in Finland
After registering for VAT, you must make sure to:
- Charge the correct VAT rate
- Pay any VAT owed to the tax office
- File VAT returns
- Maintain VAT invoices and a VAT account
VAT invoices are the official record of how much tax you charge and collect, and therefore the official proof of how much tax you owe the government. In order to completely comply with VAT laws, you must make sure to include the following in your Finnish VAT invoices:
- Your business name and address
- Your business VAT number
- Invoice date
- Invoice sequencing number
- Description of the goods or services
- Rate of VAT applied to each item
- Total amount including VAT
The invoices must be issued within six months of delivering your product or service. You must then store these invoices electronically for ten years.
How to Automate Boring VAT Tasks as a Freelancer with Xolo
VAT calculation can be confusing at times especially if you're just starting out sending invoices and aren't sure if you're completely compliant to all the local rules. With Xolo Go, we'll help you automate VAT aspects like calculation and number adding. In addition to VAT invoice creation and issuing, you'll also have your own dashboard to keep track of your finances, reimburse your expenses, and download your earning reports at tax times.
If opening a EU business and running it online is your thing, Xolo Leap will be a perfect hassle-free solution which help you register your e-Resident business, handle tax returns and make sure every aspect of your business is compliant and effective. Besides, automatic VAT calculation, collection and declaration features will also surely lift the burden with managing your business admin.
Growth your freelance business and leave the boring VAT management to Xolo!
