VAT relief for small businesses
The VAT relief for small businesses is a form of tax credit for entrepreneurs and companies who are registered for VAT and whose net sales for the accounting period (12 months) are less than €30,000.
If the company’s net sales are
- €15,000 or less (€10,000 in 2020), the company will be refunded the entire amount of the VAT qualifying for the relief.
- over €15,000 (€10,000 in 2020) but less than €30,000, the company will receive a partial VAT relief.
What information is required for requesting the relief?
To request VAT relief, fill in the information on the VAT return form:
- net sales qualifying for the relief
- amount of VAT qualifying for the relief.
The amounts of net sales and VAT that qualify are not automatically the same as the company’s net sales and VAT recorded in its accounting, because not all sales and taxes can be taken into account in the relief.
Use the VAT relief calculator for the required figures (year 2020). The calculator takes into account that some of your sales and VAT do not qualify for the relief. The calculation result gives you the information you need for requesting the relief.
When to request VAT relief
Report the information relating to your request for VAT relief on your VAT return. Your tax period for VAT determines when you should make the request. You can request the relief either on the final VAT return for the calendar year or for the accounting period.
|Tax period||When the relief must be requested|
|month||on the VAT return for the final month of the accounting period|
|quater||on the VAT return for the final quarter (October–December) of the calendar year|
|year||on the VAT return for the calendar year|
How does the relief affect the amount of tax?
When you submit VAT and relief details in MyTax, the e-service automatically deducts the relief amount from the amount of VAT payable.
If the relief amount is greater than your VAT payable for the tax period, you will receive the rest as a refund. If you have no VAT payable for the tax period, you will receive the entire relief amount as a refund.
Remember to file the relief as income on your tax return
The income you receive from a VAT relief is taxable in income taxation. This income must be recorded in the company’s accounting as income received in the accounting period that qualifies for the relief.
However, if your company uses cash-based accounting, you must record the relief as income received in the year when the Tax Administration actually pays the relief to your company. If a company that uses cash-based accounting deducts the relief from the amount of upcoming tax payable for the tax period, the relief is considered to be income received in the tax year when the VAT filed on the VAT return in question would have fallen due.
Report the relief in the year’s income tax return in the section for grants and subsidies received.
The VAT relief is considered to be received from the same income source as the income for which the relief was granted. For example, VAT relief for a business operation is considered income from a business source and VAT relief for agriculture is income from agriculture.
Frequently asked questions
The accounting period started in 2021: When the net sales qualifying for relief are between €15,000 and €30,000, the relief is calculated with the following formula:
VAT – (net sales – €15,000) × VAT
The accounting period started before 2021: When the net sales qualifying for the relief are between €10,000 and €30,000, the relief is calculated with the following formula:
VAT – (net sales – €10,000) × VAT
In the above formula, net sales and VAT mean only the amounts qualifying for the relief.
If the net sales qualifying for the relief are €15,000 or less (€10,000 in 2020), this formula is not used. In this case, the amount of VAT relief will be the same as the amount of VAT qualifying for the relief.
You can calculate the amount of net sales and taxes qualifying for the relief with the VAT relief calculator (year 2020).
Examples of VAT relief calculations
Example: The sales that qualify for VAT relief: physiotherapy, including VAT-exempt and VAT-liable sales
The physiotherapist’s annual net sales consist of VAT-exempt physiotherapy (€20,000) and VAT-liable zone therapy (€15,000 without VAT). The tax-exempt sales related to physiotherapy are not included in the net sales qualifying for VAT relief. The net sales qualifying for the relief is therefore €15,000.
Example: A company must pay VAT based on the reverse charge mechanism.
A company’s tax period is the calendar month. During the accounting period 1 January–31 December 2020, the company’s domestic net sales subject to VAT amount to €11,000 (without VAT). The VAT (24%) on these sales is €2,640. The VAT on the company’s deductible purchases is €150. Additionally, the company must pay €250 of VAT based on the reverse charge mechanism. In other words, the deductible VAT for the accounting period is €400 in total: the reverse-charged €250 and the VAT on domestic purchases €150.
The net sales that qualify for VAT relief is €11,000.
The amount of VAT that qualifies for relief is the difference between the tax payable on the domestic sales (€2,640) and the tax deductible for the accounting period (€400), i.e. €2,240.
VAT relief calculation:
€2,240 – (€11,000 – €10,000) x €2,240 = €2,128
The amount of the relief is €2,128.
Example: Some of the deductible VAT relates to forestry
In the accounting period 1 January– 31 December 2021, the net sales qualifying for VAT relief is €16,900 and the VAT to be paid (24%) is €4,056. The VAT deductible for business is €4,190 in total. This amount includes €1,500 of VAT deductible for forestry. The forestry operation does not entail any VAT to be paid.
The VAT for the accounting period is €134 negative. The VAT qualifying for relief is €1,366: the VAT payable €4,056 minus the VAT deductible (excluding the VAT deductible for forestry) €2,690.
VAT relief calculation:
€1,366 – (€16,900 – €15,000) x €1,366 = €1,192.97
The amount of the relief is €1,192.97.
Read more about the calculation in the detailed guidance on the VAT relief for small businesses (available in Finnish and Swedish, link to Finnish).
For example, you are not entitled to the relief, if
- the VAT for the accounting period is negative, i.e. the amount of VAT included in purchases is greater than the amount of VAT paid on sales.
- the company’s entire net sales consist of activities that do not qualify for the VAT relief, such as sales of services outside Finland or sales of fixed assets.
- the company is regarded as a foreign resident with no permanent establishment in Finland.
You can request VAT relief retroactively for 3 years from the end of the accounting period that qualifies for the relief.
If your company’s accounting period is not the calendar year and your tax period is the month, the start of the 3-year time limit is the start of the next year after the end date of your company’s accounting period qualifying for the relief.
If you submit your request retroactively, you must file the final VAT return of the accounting period or calendar year again.
Example: The company’s accounting period that qualifies for the relief is 1 January – 31 December 2018. The company’s tax period is the quarter. In the year 2020, someone at the company realises that no VAT relief had been requested the 2018 accounting period. The company corrects their error by filing a new VAT return for the year’s final tax period (October, November and December 2018). This return must be filed by 31 December 2021.