Finland Proposes Increase to Reduced VAT Rate from 10% to 14% from January 2025

On 27 September 2024, the Finnish Tax Administration published information on a government proposal to amend reduced value added tax (VAT) rates. If approved by Parliament, the changes would enter into force on 1 January 2025. Under the proposal, VAT on several goods and services currently subject to the 10% reduced rate would increase to 14%. Affected categories include medicines, books, sports services, passenger transport, admission fees to cultural, entertainment and sporting events, and accommodation services. At the same time, VAT on menstrual and incontinence products and children’s diapers would be reduced from the standard rate of 25.5% to 14%. VAT on newspapers and magazines would remain unchanged at 10%. Transitional rules According to Senior Tax Specialist Mika Jokinen, the applicable VAT rate depends on when the goods are delivered or the service is performed, not on the contract date or the invoicing date. Where an advance payment is received before the VAT rate change, the advance payment is subject to the VAT rate in force at the time of payment. For example: • If a concert ticket for an event in 2025 is paid in December 2024, VAT of 10% applies. • If the same ticket is paid in January 2025, VAT of 14% applies. The same principle applies to services. For instance, a passenger transport service performed in December 2024 but invoiced in January 2025 is treated as supplied in 2024 and remains subject to the 10% VAT rate. Continuous services For continuous services, such as monthly gym memberships, the VAT change applies from January 2025 onwards, meaning membership fees charged for January and later periods would be subject to 14% VAT. Fees paid in advance in December 2024 would still be subject to the 10% rate. Summary of proposed reduced VAT rates from 1 January 2025 14% (previously 10%) • Books • Medicines • Sports services • Passenger transport • Admission fees to cultural, entertainment and sporting events • Accommodation services 14% (previously 25.5%) • Menstrual and incontinence products • Children’s diapers 10% (unchanged) • Newspapers and magazines