VAT exemption and right to VAT refunds: diplomats, international bodies, bodies of the European Union, and defence activities

This is an unofficial translation. The official instruction is drafted in Finnish and Swedish languages.

Value added tax (VAT, ‘alv’/’moms’ in Finnish/Swedish) is levied on the sale of goods and services, as well as on Intra-Community acquisitions and importation in Finland, unless the provisions of the Value Added Tax Act (‘VAT Act’; 1501/1993) expressly grant exemption. Missions of other countries, offices of career consuls, diplomats, international bodies, and bodies of the European Union located in Finland are entitled to exemptions for their purchases. In practice, these exemptions are granted in the form of VAT exempt imports or VAT exempt intra-Community acquisitions, or alternatively, in the form of VAT refunds granted based on an application for purchases of goods and services made in Finland.

Sales of goods and services to diplomatic missions and offices of career consuls located in EU countries other than Finland and their diplomat staff and to international bodies, bodies of the European union, NATO member states and defence forces of EU countries are VAT exempt to the same extent as in their country. Furthermore, exemption from VAT can be applicable under certain conditions to the supply of goods to a diplomatic mission and to an individual diplomat located in a country outside the European Union.

1 Diplomats and international organisations

1.1 Diplomats posted and international bodies located in Finland

1.1.1 Procedure by the seller

When a Finnish company sells goods or services to diplomats posted to Finland, to those with diplomatic status or international bodies located in Finland, the sale is considered a domestic sale and taxed as usual (with the exception of motor vehicle sales, exempt under section 72e of the VAT Act). ‘Diplomats’ and those in diplomatic status means diplomatic missions, offices of career consuls, diplomatic representatives, career consuls and the family members of these living in the same household. International bodies mean an international body referred in section 129 b of Value Added Tax Act and which is located in Finland and recognised by Finland.

The seller reports the amount of the VAT payable on the sales in the ’Tax on domestic sales by tax rate’ section of the VAT return.

The invoice given to the parties concerned should include the following information:

• seller’s name
• seller’s address
• seller’s Business ID
• buyer’s name
• buyer’s address
• quantity and description of goods, or alternatively, if selling services instead of goods, information on the scope and nature of the services
• date of delivery of goods, or date when the services were provided
• amount subject to tax specified for each VAT rate if several rates apply
• VAT rate(s)
• the amount of VAT (€).

Motor vehicles can be sold VAT exempt to non-Finnish diplomatic and comparable missions, offices of career consuls, diplomatic representatives and career consuls posted in Finland. The sale of motor vehicles to the administrative and technical staff of non-Finnish missions who are not nationals of Finland and family members of the same household is also VAT exempt, provided that they acquire the motor vehicle for their personal use when settling down in Finland.

For verification of a VAT exempt sale of a motor vehicle, the buyer must provide a certificate (known as the ‘French document’) approved by the Ministry for Foreign Affairs for the seller’s bookkeeping, stating that the buyer is entitled to acquire the goods VAT exempt. The sale of motor vehicles is directly VAT exempt if the requirements for VAT exempt status are met, and therefore the return procedure cannot be applied to this situation.

The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return.

1.1.2 Entitlement to refund

Diplomatic and comparable missions and the offices of career consuls in Finland, diplomatic representatives, career consuls and family members of these living in the same household are entitled to apply for a refund of the VAT included in the purchase price of goods and services purchased for official or personal use. International bodies and their personal referred in section 129 b of Value Added Tax Act, which are located in Finland and recognised as such by Finland are entitled to receive back the VAT included in the purchase price of goods and services acquired for official or personal use, if this has been agreed under the body’s establishment or headquarters agreement.

The right of diplomats and persons in the same position to receive a refund of the VAT included in the purchase price is based on reciprocity, meaning it only applies to the missions of those countries that grant the corresponding right to Finnish missions or diplomats.

Staff of diplomatic missions or the office of a posted consul other than the diplomatic representative or posted consul are not entitled to a tax refund.

The exemption from VAT applies to goods and services purchased for official or personal use of the persons listed above, provided that the price of the goods or service is at least 170€ including VAT.

‘Goods’ and ‘service’ refer to a single item or service, not to the total sum of several purchases in the same invoice.

The VAT refund application is submitted to the Ministry for Foreign Affairs. The original invoices are not appended to the application. The invoice details are reported itemised on a form provided by the Ministry.

The Ministry verifies the applicant’s right to a refund based on reciprocity, the convention establishing the body, the relevant headquarters agreement, the applicant’s status and the purpose of the goods or services. Other conditions for the refund are verified by the Southern Finland Tax Office 2, which also refunds the VAT.

Application forms are available from the Ministry. The application is submitted to the Ministry quarterly, and at the latest within one year from the invoice payment date. More information is in the Ministry’s publication ‘Diplomatic privileges and immunities in Finland’ available for download at www.um.fi.

1.2 Diplomats in other EU Member States

Sales of goods and services to diplomatic and comparable missions, offices of career consuls and their staff operating in EU Member States other than Finland are exempt from VAT on the terms applied to the exemptions and refunds granted in their country of posting.

The buyer provides the seller with a VAT and/or excise duty exemption certificate serving as proof that the sale is not subject to VAT. This document is certified by the ministry for foreign affairs of the country of posting and serves to prove that the sale would be exempt or refundable if it took place in the country of posting. The seller must retain the certificate in their bookkeeping as proof of the VAT exemption of the sale. The certificate must have the (A) and (B) parts. Part (B) includes details on the goods or service purchased. Purchases of goods other than those approved by a ministry for foreign affairs are subject to VAT as usual.

The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return.

1.3 Diplomatic missions located outside the EU

Sales to diplomatic missions outside the EU are VAT exempt if the usual requirements of exports are fulfilled. Sales to diplomatic missions located in non-EU countries are also exempt if the seller delivers the goods to the Courier Services Office of the Ministry for Foreign Affairs for delivery to their final destination by the diplomatic courier. The seller proves the grounds for the VAT exemption of the sale by retaining the invoice in their bookkeeping. The invoice must have the Ministry’s stamp.

Sales to diplomatic missions’ staff are VAT exempt only as exports. For more information see our instructions ‘VAT in export trade’ (only in Finnish or in Swedish).  

The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return.

1.4 International bodies located in other EU Member States

The selling of goods and services to international bodies and their staff in other EU Member States is exempt from VAT within the limits and under the conditions laid down by the international conventions establishing the bodies or by the relevant headquarters agreements. It is required that the international body is recognised as such by the public authorities in the host Member State.

To prove that the purchase is VAT exempt, the buyer must provide the seller with a VAT and/or excise duty exemption certificate. The certificate also serves as a written confirmation from the relevant authority in the international body’s host Member State stating that, under the body’s establishment or headquarters agreement, the sale would be exempt or refundable if it took place in the host Member State. The certificate must have the (A) and (B) parts. Part (B) includes details on the goods or service purchased.

The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return.

2 Bodies of the European Union

Bodies of the European Union include the following: the Council of the European Union, the European Parliament, the European Commission, the European Economic and Social Committee, the European Committee of the Regions, the Court of Justice of the European Union, the European Court of Auditors, the European Ombudsman, the European Central Bank, the European Investment Bank, and the European Data Protection Supervisor.

2.1 EU body located in Finland

Sales to EU bodies in Finland are taxable as regular domestic sales. The only exception from this rule are sales of motor vehicles, which are exempt under section 72e of the VAT Act. Sales are reported in the ‘Tax on domestic sales by tax rate’ section of the VAT return.

Sales of motor vehicles to EU bodies in Finland are VAT exempt.

The EU body is expected to provide the seller with written confirmation of its right to VAT exempt purchases of motor vehicles. The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return. 

Sales to EU bodies located in Finland are subject to tax. EU bodies are entitled to refunds of VAT included in the price of goods and services purchased for official use. Refunds are paid quarterly based on refund applications. The price of the goods or services must be at least 80€ including VAT for the purchase to be eligible for a VAT refund.

The EU body is expected to deliver a refund application with copies of invoices from the sellers of the goods or services to the Finnish Tax Administration, which will refund the paid VAT within six months of the receipt of the application.

2.2 EU bodies located in other EU Member States

Sales of goods and services to EU bodies and staff located in other EU countries are exempt from VAT under the rules laid down by the public authorities in the host Member State.

The buyer must provide the seller with a VAT and/or excise duty exemption certificate to prove to the seller that the purchase is VAT exempt. The certificate also serves as a written confirmation from the relevant authority in the Member State of the EU body stating that the sale would be exempt or refundable if it took place in the host Member State. The seller must retain this document in their bookkeeping as proof of the VAT exemption of the sale. The certificate must have the (A) and (B) parts. Part (B) includes details on the goods or service purchased.

The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return.

3 Defence activities

Purchases for joint defence activities are VAT exempt when the defence forces of other EU Member States or other NATO member countries than Finland take part in joint defence activities outside their country.

In some situations, the VAT exemption is granted directly, i.e. the sales are carried out exempt of VAT. In other situations, the VAT exemption is granted with refunds. These instructions describe the situations where the direct VAT exemption is applicable, and the situations where a refund must be applied for VAT included in the price of a purchase.

Defence activities implementing measures under the EU common security and defence policy include military operations, activities of combat forces, mutual assistance, projects related to the Permanent Structured Cooperation, activities of the European Defence Agency, and defence exercises. Joint defence activities under NATO similarly include military operations and military exercises. The VAT exemption does not apply to tasks carried out by civilian personnel or tasks that are otherwise carried out entirely with civilian resources.

3.1 Activities in Finland

3.1.1 Purchases in Finland

Starting on 1 July 2022, VAT included in the price of goods and services is refunded to the defence forces of other EU Members States if the goods and services are purchased in Finland for the official use of the armed forces of the defence forces or the civilian personnel of such armed forces located in Finland when the armed forces participate in activities implementing the EU common security and defence policy outside their country. The right to VAT refunds also applies to the VAT included in the price of goods and services purchased for the messes or canteens of such armed forces located in Finland.

Starting on 26 May 2023, VAT included in the price of goods and services is refunded to the defence forces of other NATO member countries if the goods and services are purchased in Finland for the official use of the armed forces of the defence forces or the civilian personnel of such armed forces located in Finland when the armed forces participate in joint defence activities. The right to VAT refunds also applies to the VAT included in the price of goods and services purchased for the messes or canteens of such armed forces located in Finland.

The VAT included purchase price of the purchase made in Finland must be at least 170€ for the purchase to be eligible for a VAT refund.

VAT is refunded per quarter based on an application submitted to the Finnish Tax Administration. The application is not subject to any format requirements and it must be submitted within one year of the invoice payment date. The defence forces of the other country must submit the application.

The application must include the following information:

• that the application is a VAT refund application
• the applicant’s details (name, address, contact person name and telephone number)
• bank account details (account number and BIC)
• the application period, i.e. quarter, to which the application pertains
• details of the activities during the application period eligible for a VAT refund, e.g.
  • the parties that participated in the defence operation or exercise
  • the name and duration of the defence operation or exercise
  • the location of the defence operation or exercise
• details of the purchase eligible for a VAT refund
  • receipt/invoice number
  • seller name and Business ID
  • receipt/invoice creation and payment date
  • description of the purchased goods or services
  • VAT exempt price of the purchase
  • amount of VAT paid

The application should be addressed to the Finnish Tax Administration with the following address:

Finnish Tax Administration
PO Box 560
00052 VERO
FINLAND 

The application can also be submitted via email. The use of the secure email service requires that the Finnish Tax Administration sends a link for submitting the application. The link can be requested from the address vatrefunds@vero.fi.

The Finnish Tax Administration verifies the applicant’s right to the refund from the Finnish defence forces. The Finnish Tax Administration responds to all enquiries on applications.

Prior to Finland's NATO membership,  the VAT exemption of acquisitions made by the defense forces of a NATO state in Finland was based on the NATO-SOFA agreement (Agreement among the States Parties to the North Atlantic Treaty and the Other States Participating in the Partnership for Peace regarding the Status of Their Forces) 65/1997 (act 744/1997, only in Finnish and Swedish). The agreement was applied to the Partnership for Peace (PfP) exercises organised in Finland, and VAT refunds could be applied under certain conditions for purchases made in connection to these in Finland

3.1.2 Purchases in other EU Member States

When the defence forces of other EU Member States participate in activities implementing the EU common security and defence policy in Finland, goods and services purchased in other Member States and delivered to Finland for such activities are VAT exempt. When the defence forces of other NATO member countries participate in NATO defence activities in Finland, goods and services purchased in other member countries and delivered to Finland for such activities are VAT exempt.

As a requirement for the VAT exemption, the defence forces of the EU or NATO country other than Finland must have a VAT and/or excise duty exemption certificate certified by the Finnish Tax Administration.

On the request of the armed forces of defence forces of other countries or their civilian personnel or their messes or canteens located in Finland, the Finnish Tax Administration verifies, for the purpose of purchasing goods and services in other member countries, whether they would be entitled to a VAT refund or whether they could purchase goods and services VAT exempt if the purchase was made in Finland.

The certificate required for VAT exemption for purchases made in other member countries must be submitted to the Finnish Tax Administration for certification. The certificate should be delivered to the following address:

Finnish Tax Administration
PO Box 30
00052 VERO
FINLAND

3.1.3 Import of goods

Goods imported into Finland are VAT exempt if they are purchased by the defence forces of EU Member States other than Finland that participate in activities implementing the EU common security and defence policy in Finland or the defence forces of NATO member countries other than Finland that participate in NATO defence activities in Finland.

As one of the requirements for the VAT exemption, the purchase price of the goods imported must be at least 170€ including VAT.

The Finnish Customs verifies whether the import VAT exemption requirements are met and issues a decision on the VAT exemption of the imported goods if the conditions are met. 

3.2 Activities in other EU Member States

No VAT is paid on goods and services sold to EU Member States other than Finland if the buyer is the defence force of another EU Member State and the goods are purchased for the use of its armed forces or its civilian personnel or the messes or canteens of the armed forces located in an EU Member State other than Finland.

As a requirement for the VAT exemption, the armed forces must participate either in activities implementing the EU common security and defence policy or in NATO defence activities in another EU Member State and the purchases must be for these activities. As a requirement for the exemption, the purchase must be such that it would be VAT exempt in the destination country as well. The exemption does not apply to the defence forces of the destination country.

If the buyer invokes this rule as grounds for requesting a VAT exempt invoice from a Finnish seller, the buyer must provide the seller with a written VAT and/or excise duty exemption certificate certified by the appropriate authority in the destination country. The certificate proves that the sale would be exempt or refundable if it took place in the destination country.

The seller must retain this certificate in their bookkeeping as proof of the VAT exemption of the sale. The certificate must have the (A) and (B) parts. Part (B) includes details on the goods or service purchased.

The seller reports this sale in the ‘Turnover subject to 0% VAT’ section of the VAT return.