VAT for small-scale businesses
If you are conducting small-scale business, you do not have to register for VAT.
The scale of your business operations is determined based on the turnover. The business is small in scale if the company’s turnover for the accounting period (12 months) does not exceed €15,000. The threshold applies to accounting periods that have started on 1 January 2021 or after. (In 2020, the threshold was €10,000.) If the turnover exceeds the threshold, the company must be entered in the VAT register.
The company can register for VAT voluntarily even if its turnover does not reach the threshold. This may be beneficial, for example, if the company buys a lot of goods or services subject to VAT for its taxable business operations. When the company is VAT-registered, you can usually deduct the VAT included in the goods or services you buy.
Read more about how to register for VAT
Note: The threshold for small-scale business is not applicable to foreign companies with no permanent establishment in Finland. Read more about VAT for foreign businesses in Finland.
You must estimate the turnover yourself
You must estimate in advance whether your sales for the accounting period will exceed the threshold of €15,000. If you think the threshold will be reached, register for VAT.Make sure your estimate of the turnover for the accounting period is not too low. If you do not register for VAT and your turnover is higher than allowed for a small-scale business, you will have to pay VAT retroactively for the entire accounting period. You may also have to pay late-payment charges.
VAT-related reductions for small-scale businesses
- If your turnover for the accounting period is less than €30,000, you may be entitled to a VAT relief, i.e. a reduction from the VAT you have paid during the accounting period. A requirement is that the company has been registered for VAT. Read more about the VAT relief scheme.
- The VAT period is usually one month. In other words, VAT must be reported and paid on a monthly basis. For small businesses, the VAT period may be longer: a quarter or a year. Read more about VAT periods.
Frequently asked questions
When you estimate your company’s turnover, include the following items:
- sales of goods and services subject to VAT
- certain VAT-exempt sales of goods and services under the Value Added Tax Act, such as export sales and intra-Community supply.
Do not include the following:
- proceeds from fixed assets sold by the company. In other words, do not include selling of any assets bought for business operations. For example, if an earth moving company sells one of its excavators, the proceeds are not included in the turnover because excavators are the company’s fixed assets.
- certain sales of financial and insurance services in situations where the sales are related to other sales
- most sales not subject to VAT, such as social, health and medical services.
Calculate the turnover for an accounting period of 12 months. If the actual accounting period is shorter or longer than 12 months, the turnover must be adjusted to represent 12 months of business activity.
First make an estimate of your turnover for the accounting period, then multiply it by 12 and divide the result by the number of full months of business activity.
Example: The company’s first accounting period is 14 September 2022−31 December 2022. During the period, the company’s turnover is €4,200. Because the first accounting period is shorter than 12 months, the turnover must be adjusted to represent 12 months of business activity:
Turnover for the accounting period: €4,200
Full months of activity during the period: 3 (October, November and December – September is not a full month).
Adjusted turnover representing 12 months of activity: €4,200 × 12 months / 3 months = €16,800.
This means that your company’s adjusted turnover exceeds the €15,000 threshold for small-scale business. The company must be registered for VAT as from the first day of business activity (14 September 2022).
When your business has been registered for VAT, do the following:
- Always add VAT to the prices of the goods and services you sell.
- When you issue an invoice to the buyer, include all the details required by the Value Added Tax Act. See detailed guidance on invoice requirements.
- Deduct the VAT on the goods and services you have bought for your VAT-liable business operations from the VAT total on your sales.
- If your turnover for the accounting period (12 months) is less than €30,000, you can request a VAT relief for small businesses.
- File and pay VAT to the Tax Administration regularly according to your tax period (usually once a month).
- Start filing VAT returns immediately as you register your company for VAT.
- File a return for every tax period, even if you have not started your operations yet or have not had any sales during the period. Instructions for filing and payment.
You can check the company’s liability for VAT in the Business Information System (BIS). Go to the Business Information System.
The service shows you when the company’s registration became effective and what registers the company has been entered in.
Note: If you have started business operations, you will see your company’s details in the service after the Tax Administration has processed your registration request.
If the company has not been registered for VAT and its turnover exceeds €15,000 during the accounting period, you will have to pay VAT retroactively for the entire period. You may also have to pay late-payment charges.
If you notice that the turnover exceeds the €15,000 threshold during the accounting period:
- Sign up for the VAT register immediately.
- File VAT returns for the entire accounting period.
- Pay the VAT for the entire accounting period.
When the Tax Administration enters a business in the VAT register retroactively, the start date of registration is usually the first day of the accounting period. Note that the first few VAT returns and payments for the accounting period may already be late if your company’s tax period is determined to be a month or a quarter but a longer period has already passed. You can take that into account when you register for VAT: if possible, select a longer tax period.
Example: The company started conducting business on 1 January 2022. Its turnover exceeds €15,000 on 1 May. The company registers for VAT, stating that its tax period is a quarter. The due date for the returns and payments for January–March is 12 May. The company files a VAT return for January–May and pays the VAT by the due date. It does not have to pay any late-payment charges.
If the company had selected a tax period of one month, the returns and payments for January and February would already have been late. The company would have had to pay late-payment charges for them.