In a press release published on 15 August 2024, the Verohallinto provided guidance on the application of the upcoming increase in Finland’s standard VAT rate from 24% to 25.5%, effective 1 September 2024. According to the Tax Administration, the decisive factor in determining whether the 24% or 25.5% VAT rate applies is the date of delivery of goods or the performance of services. The timing of ordering, signing a contract, invoicing or payment does not in itself determine the applicable VAT rate. If an advance payment has been received before the VAT rate increase, the advance payment remains subject to the 24% VAT rate, even if the delivery or service takes place after 1 September 2024. The Tax Administration illustrates this with practical examples.
If a customer orders a car in August 2024 but the vehicle is delivered in September 2024 and paid for upon delivery, the sale is subject to 25.5% VAT, regardless of when the order was placed or the contract signed. Similarly, for services, VAT is determined by the actual performance date of the service. For example, cleaning services performed in August 2024 are subject to 24% VAT even if the invoice is paid in September. For ongoing construction projects, different VAT rates may apply to different parts of the same contract. Work completed before 1 September 2024 is subject to 24% VAT, while work completed on or after that date is subject to 25.5% VAT.
The Tax Administration also addressed practical issues related to invoicing systems. If an invoicing or cash register system does not support decimal VAT rates, invoices or receipts may be corrected manually, provided that all legally required invoice details are included and VAT is accounted for at the correct rate. The VAT increase applies only to supplies taxed at the standard VAT rate. Goods and services subject to reduced VAT rates of 10% or 14%, such as food, medicines, books, newspapers, accommodation and certain cultural and sports services, are not affected by the September increase.
The government has estimated that prices of goods and services subject to the standard VAT rate may increase by approximately 1.2%, although the actual impact will depend on market conditions and pricing decisions by individual businesses.
