Goods or services diverted to private use
One form of selling subject to VAT is the self-supply of goods or services. If the taxpayer has entered a VAT deduction on the purchase of a good or service but the good/service is later diverted to a non-deductible activity or to a purpose partially exempted from VAT, the taxpayer must treat this the same way as a transfer to own use and pay VAT accordingly.
Own use, often called self-supply, is subject to VAT taxation because any earlier VAT deduction has to be adjusted when the self-supply occurs. On the other hand, if the original purpose for which the taxpayer had bought a good or service was private consumption or other non-VAT activity, there had never been any “earlier VAT deduction”.
To divert goods and services from a company is self-supply when the goods’ or services’ purpose of use changes to:
- Private consumption
- Any other purpose unrelated to your business, or to
- A business purpose that does not give you the right to VAT deductions
Example: A company bought a set of goods to use them as operating assets when conducting VAT-taxable business. Being normally entitled to a VAT deduction, the company claimed deduction for the input VAT on the goods when submitting its VAT return. Some time later, the owner takes the goods away from the company for her own use, her family’s use or for giving them to someone else as a gift. She must pay VAT on the goods because they were diverted from the company’s business to a purpose connected to private consumption. In the same way, she the owner must pay VAT if she gives goods to company employees’ private use free of charge, or if she gives goods to business partners as a corporate gift.
However, to give samples to potential customers, i.e. to give someone a product sample from the company’s stock-in-trade is not self-supply and does not require paying VAT.
Declare all occurrences of self-supply when you submit your VAT return
After diverting goods from the company’s operating assets or from its inventory, or after using a company-provided service for private purposes, fill in the relevant amount of VAT on the ‘Tax on domestic sales by tax rate’ line of the VAT return.
Small-scale private use is permissible
From the VAT perspective, when you only divert a small quantity of goods or a less extensive service from your company to your own or your family’s private use, you do not have to account for the input VAT. The threshold for permissible self-supply is approximately 850 euros per year. This is only allowed to VAT taxpayers who are natural persons, to the VAT taxpayer’s spouse, to undistributed estates of deceased persons, and to tax partnerships.
Read more:
- “The VAT guidebook” — Arvonlisäverovelvollisen opas (sections 3.7 and 4.5, available in Finnish and Swedish)
- “Value added tax on self-supply and below-market pricing” — Oman käytön ja alivastikkeellisten luovutusten arvonlisäverotus (in Finnish and Swedish)
- “VAT on self-supply by companies in the real property management sector” — Kiinteistöhallintapalvelun oman käytön arvonlisäverotus (in Finnish and Swedish)
- “VAT and employee lunchrooms” — Henkilöstöruokailun arvonlisäverotuksesta (in Finnish and Swedish)
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