In an article published on 15 August 2025, Finnish tax publication Taloustaito (Verot) addressed the VAT treatment of instalment sales of business assets by sole traders (“toiminimi”). The question concerned the sale of business equipment under an instalment agreement where ownership and possession are transferred immediately, but the final instalment is paid up to two years later. The seller reports VAT on a monthly basis and asked whether VAT could be paid gradually as instalments are received. According to Taloustaito, the answer is no: VAT cannot normally be paid entirely in step with instalment payments.
However, VAT may in practice be spread over more than one period, depending on the VAT accounting method applied. If the taxable person applies the cash basis (maksuperusteinen tilitys), VAT included in each instalment may initially be allocated to the calendar month in which the payment is received. Nevertheless, once 12 months have elapsed from the delivery of the goods, VAT must be accounted for on all remaining unpaid instalments by the end of that month. In the example given, goods delivered in June 2025 would require VAT on outstanding instalments to be declared for June 2026, with the VAT due date falling in August 2026.
Where the taxable person applies the accrual basis (suoriteperusteinen tilitys), VAT may during the financial year be allocated based on invoicing or, if instalments are not invoiced separately, on receipt of payments. However, at the end of the financial year, VAT reporting must shift fully to the accrual basis unless the taxpayer is entitled to continue using the cash basis. This means that VAT must be declared for the last calendar month of the financial year also on instalments that have not yet been invoiced or paid by year-end. In Taloustaito’s example, equipment delivered in June 2025 with a financial year ending in December 2025 would require VAT on unpaid instalments to be reported for December 2025. The article highlights that while instalment sales may affect cash flow, they do not in themselves defer VAT liability indefinitely. Taxable persons engaging in instalment sales should therefore pay close attention to the applicable VAT accounting method and the statutory time limits triggering VAT payment.
