Rules and procedures regarding distance selling to non-taxable persons and VAT

This is an unofficial translation into English. The official instruction in Finnish and Swedish has record number A7/200/2013.

The agreement on the UK’s withdrawal from the European Union came into force 1 February 2020. The agreement sets out a transition period until the end of 2020, when the relations between the EU and the UK continue under the EU’s current rules, as if the UK were still a member state. After the transition period has ended, all goods moving between the UK and the EU must be cleared at Customs. Accordingly, all commercial operations with goods will be subject to the VAT Act provisions on exports and imports. Further information on the UK’s withdrawal and its impact on VAT and the position of Northern Ireland from 1 Januari 2021 is available on the Brexit pages on tax.fi.

Updates were made to section 2.5.2 of this guidance to reflect the changes and the tax process where goods subject to excise duty are purchased as an intra-Community acquisition, the purchaser being a business enterprise or a legal person with no VAT registration. Starting 2021, these purchasers must log in to MyTax to complete the tax return for intra-Community acquisitions for reporting the VAT on the excise products before paying the VAT.

The Tax Administration’s contact details and the table of thresholds for distance selling in each EU country have been updated on 3.5.2018.

The guidance has a number of terminology changes because of the amendments of tax rules coming into force on 1 January 2017. New terminology replaces the terms used so far because the Act on Assessment of Self-Initiated Taxes (Oma-aloitteisten verojen verotusmenettelylaki) and the Act on Tax Collection (veronkantolaki) come into force, and because the act governing the Tax Account has been repealed.

Due to the transfer of responsibilities from Customs to the Tax Administration as of 1 January 2017, an update was made to section 2.5.2 of this guidance.

The following updates were made due to legal changes in January 2011:

• new VAT rules on sale of heating energy and cooling energy
• sections 2.3 and 2.5 have been completed
• section 4 on invoicing obligations has been added
• section 5 on reporting obligations has been added.

1 Introduction

Selling goods to consumers in the EU internal market is normally taxed under the principle known as the place-of-supply rule. Distance selling is an exception to this rule. Distance selling means that a supplier from one EU country supplies goods and is responsible for their delivery to a private individual or a non-VAT-registered person in another EU country (e.g. mail order selling). Contrary to the principal rule, selling of this kind is taxed where the goods are when the dispatch or transport ends, if the volume exceeds the threshold for distance selling set by the Member State of destination i.e. under the distance selling rules of the EU country concerned. The thresholds applicable in different countries are shown on the last page of this instruction.The threshold is set at €35,000 in Finland. If sales in the Member State of destination exceed the threshold VAT of the Member State is applied and you must register for VAT.

Distance selling rules do not apply to sales of new means of transport, goods installed or assembled by the supplier, or to the sales of goods to which a taxation method equivalent to the margin tax scheme for second-hand goods in Finland has been applied. They also do not apply to supply of gas through a natural gas system situated within the territory of the EU or any network connected to such a system, the supply of electricity, or the supply of heat or cooling energy through heating or cooling networks.

Distance selling rules apply to goods supplied within the EU internal market – therefore the rules do not apply to goods bought from or sold to non-EU countries. This means that distance selling rules do not apply to supplies to the Åland Islands, including cases where the sale is to or from the Finnish mainland; with regard to the provisions of the Section 5 of the Act governing the Province of Åland, as the Åland Islands  is considered as being outside the Finnish territory according to the VAT Directive. (For more information, see the guidance "The tax border of the Åland Islands for VAT" —  Ahvenanmaan veroraja arvonlisäverotuksessa, available in Finnish and Swedish only.)

2 Distance selling from other EU countries to Finland

Supplies of goods are deemed to take place  in Finland if the goods are dispatched or transported by or on behalf of the supplier from another EU country to a customer in Finland and the supply does not qualify as an intra-Community acquisition. Even when the transportation or dispatch of goods has started outside the EU, and the goods are delivered into Finland via another EU country (known as the Member State of importation), the goods are deemed as delivered to Finland from the EU. According to the distance selling rules, if the value of your distance sales exceeds the threshold of EUR 35 000 you have to register for VAT in Finland. The threshold does not include the amount of VAT.

The distance selling rules are applied only when the customer's purchases do not qualify as intra-Community acquisitions. This means that the rules apply when the customers are private individuals or other non-taxable persons comparable with them. But if you sell goods to customers registered for VAT in Finland it is not distance selling, because customers registered for VAT  must pay VAT on intra-Community acquisitions that take place  in Finland. For more information see  "Value-added-tax in the trading of goods in Finland" – Arvonlisäverotus EU-tavarakaupassa, available in Finnish and Swedish only.

Comparable to private individuals are

• Business enterprises with operations that do not qualify for any deduction at all (due to reasons such as being a small entrepreneur)
• Legal entities that are not businesses (such as associations or foundations not carrying on a trade).

When the above businesses and legal entities buy goods from another EU country the purchase is not an intra-Community acquisition if all of the following conditions are met:

• The net value of the goods bought does not exceed EUR 10 000 per calendar year, excluding the value of new means of transport and excise goods and some other acquisitions defined in the VAT Act (such as exempt vessels and aircraft)
• The net value of goods acquired as intra-Community acquisitions did not exceed EUR 10 000 during the previous calendar year
• The acquirer has not filed an application to the Finnish Tax Administration to have purchases treated as intra-Community acquisitions although the acquisitions do not reach the threshold.

Customers who are comparable to private individuals must pay VAT on their intra-Community acquisitions as defined in the  VAT Act immediately when they have exceeded the EUR 10 000 threshold during a calendar year.

2.1 Distance selling to Finland stays below EUR 35 000

Distance selling is not taxed in Finland if the value of the sales does not exceed EUR 35 000 (as a net value without VAT) in the same calendar year, and if the total sales of this kind during the preceding year did not exceed EUR 35 000. The following supplies are not included in this distance selling threshold: sales of new means of transport, sales of goods installed or assembled in Finland, sales of goods subject to excise duty and sales of goods to which a taxation method equivalent to the margin tax scheme for second-hand goods in Finland has been applied in the country of departure. Distance selling rules do not apply to
the supply of gas through a natural gas system situated within the territory of the EU or any network connected to such a system, the supply of electricity, or the supply of heat or cooling energy through heating or cooling networks.

However, distance selling businesses may opt to be taxed in the country of destination instead of the country of departure by submitting an application to the authorities of the country of departure.

2.1.1 VAT registration

If your business distance sales to Finland and the annual net sales stay below EUR 35 000 you can still opt for VAT in Finland. In this case you must submit an application together with the documents listed below in section 2.3.. We recommend that you do this at least 30 days before the liability to VAT begins. Your business enterprise can register for VAT in Finland (for more information, please see the guidance VAT registration of foreigners in Finland, guidance available only in Finnish or Swedish, link to Finnish). You must have an accounting system in order to record your business operations in Finland for purposes of providing the information needed for taxation. In addition, you have an obligation to submit VAT returns according to the set reporting frequency either monthly, quarterly or yearly.

When your VAT registration is valid you pay VAT on all your distance selling to Finland regardless of the sales volume.

When you have opted for VAT taxation in Finland instead of the Member State of departure of the transport, the decision is valid for the period of time as defined in  that Member State. If you later decide to have your distance sales taxed in the Member State of departure of the transport you must submit a written Notice of Termination of Business to the Tax Administration before the period expires. We recommend that you do this at least 30 days in advance.

2.2 Distance sales to Finland is more than EUR 35 000

When your distance sales to the Finnish customers are over EUR 35 000 during one year your distance sales during the following calendar year will automatically be taxed in Finland regardless of the amount of the sales volume.

2.2.1 VAT registration

If you go over the distance sales threshold during a calendar year, you must submit the documents listed below in section 2.3 with your registration documents. You must register for Finnish VAT and pay VAT in Finland for the sales that exceed EUR 35 000. If you are making a delivery of goods to Finland in order to fulfill an order from a customer and you go over the threshold as you are delivering you must pay VAT in Finland for the entire delivery concerned. When you have gone over the threshold, you must maintain accounting books in Finland and file VAT returns according to a reporting frequency either monthly, quarterly or yearly.

If the value of your distance sales in the calendar year after next year will not exceed the registration threshold you must submit a written notice of termination of business to the Tax Administration.

2.3 Documents to be submitted

When distance sales to customers in Finland exceed EUR 35 000 per calendar year you must file the following documents:

1. Start-Up Notification form (if necessary, with a letter of authorisation in order to permit the person who completes the form to sign it) enclosed with appendix   6204 or 6206. Start-Up Notifications and other 'Y' forms are available for downloading on the www.ytj.fi Website
2. Copy of the Trade Register excerpt of your company or a similar document from your country that proves its incorporation and registration with a translation into Finnish or Swedish. It must clearly show the company name, the fiscal domicile, the  sector of business, the accounting period and the names of the individuals authorised to sign the company name.
3. Articles of association of the company, the charter, the partnership agreement, or similar by-laws or a certified copy of them, with the translation into Finnish or Swedish. However, this documentation does not have to be filed if the foreign Trade Register certificate described above in item (2) is filed.

If distance sales to Finland both for the current calendar year and the preceding year have stayed below EUR 35 000 but you voluntarily choose Finland as the country of VAT liability (see 2.1.1 above), you must additionally to the documentation listed above file a copy of the application letter delivered to the tax authorities of your country or of the decision issued by them to tax your distance sales in Finland instead of the country of departure.

Send documents to

PRH – Verohallinto  
Yritystietojärjestelmä – Business Information System
PO Box 2000
00231 HELSINKI

2.3.1 The tax offices in charge of registration and supervision

VAT registration and tax control regarding foreign corporate entities is administered by Uusimaa Corporate Tax Office, and VAT registration and tax control regarding foreign companies, partnerships and self-employed individuals is administered by Helsinki Area Tax Office.

Addresses:

Southern Finland Corporate Tax Office  
PO Box 30
00052 VERO
FINLAND

Helsinki Area Tax Office                            
PO Box 400
00052 VERO
FINLAND

2.4 New means of transport, goods installed or assembled by the supplier, secondhand goods and electricity, and gas, heat and cooling energy supplied through networks

Distance selling rules do not apply to supplies of new means of transport, goods installed or assembled by the supplier, nor to supplies of second-hand goods to which a tax procedure equivalent to the margin tax scheme of second-hand goods in Finland has been applied in the country of departure.

Acquisitions of new means of transport in other EU countries are taxed in Finland as intra-Company acquisitions regardless of the status of the buyer or the seller. When private individuals acquire new vehicles in other EU countries this acquisition is also taxed in Finland as intra-Company acquisitions. New means of transport are defined on the last page of this guideline. For more information, please see VAT instructions on new means of transport and Private individual buys a new means of transport in another EU member state (available in Finnish and Swedish only).

Goods installed or assembled in Finland by the seller are taxed as sales by the seller in Finland, if the seller is liable to pay VAT here or the buyer is a private individual. Otherwise the buyer will account for VAT under the reverse charge mechanism.

Distance selling rules do not apply to the supply of gas through a natural gas system situated within the territory of the EU or any network connected to such a system, the supply of electricity, or the supply of heat or cooling energy through heating or cooling networks.

2.5 Goods subject to excise duty

Goods subject to excise duty are taxed in the country of consumption. Value-Added Tax Act refers to excise goods as those listed in Section 3 of the Act on Excise Duty on Alcohol and Alcoholic Beverages (1471/94), in Section 2, subsection 1 of the Act on Excise Duty on Manufactured Tobacco (1470/94) and in Section 2, subsection 1 of the Act on Excise Duty on Liquid Fuels (1472/94) and Section 2, subsection 2, lines (a) and (c) of the Act on excise duties on electricity and certain fuels  (1260/1996), with the exception of gas delivered via a natural gas system situated within the territory of the EU or any network connected to such a system (Section 26 e, Value-Added Tax Act).

The VAT procedure with respect to the goods subject to excise duty and supplied from other EU countries depends on whether the buyer in Finland is a private individual or other buyer.

2.5.1 Private individuals as buyers

Distance selling of goods subject to excise duty is always taxed in Finland regardless of the total value of sales. Sellers must register for Finnish VAT and pay VAT at the Finnish VAT rates on all distance sales to private individuals.

2.5.2 Other buyers

VAT distance selling rules are not applied to distance selling of goods subject to excise duty to other purchasers than private individuals. Instead, all purchases of such goods are deemed as taxable intra-Community acquisitions in Finland. The value of intra-Community acquisitions per calendar year is of no significance (the 10,000-euro threshold does not apply).

• Taxable persons treat their intra-Community acquisitions of excise goods in the same way as intra-Community acquisitions of any other goods.
• Business enterprises or legal persons that do not have a VAT registration must report and pay VAT by completing the tax return for intra-Community acquisitions in MyTax. For example, companies or non-profit corporations that carry out activities not subject to VAT, and have no VAT registration, are expected to complete this tax return (for more information, see above in section 2 "Comparable to private individuals are"). It is not necessary for the purchasers discussed above to submit an application for VAT registration merely for the purpose of intra-Community acquisitions of goods subject to excise duty and for the reporting (for more information, see “VAT treatment of EU commerce of goods” – Arvonlisäverotus EU-tavarakaupassa (in Finnish and Swedish).

3 Distance selling from Finland to other EU

Businesses must pay VAT for distance sales  in the EU country where the transport or dispatch ends when the amount of sales  exceeds  the threshold in force in the EU country concerned. For the threshold amounts, see the end of this guideline. VAT is not paid in Finland on distance sales that exceed the threshold.

3.1 Threshold exceeded in the EU country of destination

When the value of your distance sales exceeds the threshold the VAT liability is transferred to the EU country concerned. This means that your selling is then taxed in the country of destination, not in Finland. You must register for VAT in that EU country and pay VAT there as applicable.

If you are making a delivery of goods in order to fulfill an order from a customer and you exceed the threshold as you are delivering, you must pay VAT for the entire sale in the country of destination. If the value of your distance selling in a calendar year exceeds the threshold, your distance sales during the following calendar year will not be taxed in Finland either.

However, distance sales cannot be exempt from VAT unless your customer is not liable for VAT.

Such customers may be:

1. Businesses with operations that do not entitle them in their own EU country for any deduction at all, or to any VAT refund,
2. Legal entities that are not businesses,
3. Businesses subject to the flat-rate scheme for farmers in their own EU country, or
4. Private individuals.

An additional provision is applied when customers fall into the categories listed above in (1) to (3):  goods are deemed as sold in the EU country where the dispatch or transportation ends only if the value of the customer's intra-Community acquisitions does not go over the threshold of intra-Community acquisitions of that EU country, and the customer has not opted for VAT. For this reason if their intra-Community acquisitions exceed the threshold of the country of destination during one calendar year or the year before, the customer becomes VAT liable for their acquisitions in the usual way.

3.2 Threshold not exceeded in the EU country of destination

Even if the threshold in the EU country of destination is not exceeded you may voluntarily register for VAT as a distance seller in the country of destination. If you opt for taxation you must file a written application to the Finnish Tax Administration at least 30 days in advance.

The application must be made in writing. You must include the name of the EU country concerned in your application letter and enclose the written evidence to show that you as the seller have registered for VAT there. The Finnish Tax Administration may then give the decision to tax distance sales in the country of destination instead of Finland. The decision remains in force for a minimum of two calendar years, or for a period that you have specified in your application.

3.3 New means of transport, goods installed or assembled by the supplier, secondhand goods and electricity, and gas, heat and cooling energy supplied through networks

Distance selling rules do not apply to supplies of new means of transport (for the definitions, see the last page of this guidance) and goods that the supplier installs or assembles at the customer's premises. You must pay VAT on these sales in the country of destination under local VAT rules. Similarly, distance selling rules do not apply to the sales of goods to which a taxation method equivalent to the margin tax scheme for secondhand goods in Finland has been applied (for more information, please see the guidance Käytettyjen tavaroiden sekä taide-, keräily- ja antiikkiesineiden marginaaliverotusmenettely, available in Finnish and in Swedish only).

Distance selling rules do also not apply to the supply of gas through a natural gas system situated within the territory of the EU or any network connected to such a system, the supply of electricity, or the supply of heat or cooling energy through heating or cooling networks.

3.4 Goods subject to excise duty

Goods subject to excise duty are taxed in the country of consumption. Value Added Tax Act refers to goods subject to excise  duty as those listed in Section 3 of the Act on Excise Duty on Alcohol and Alcoholic Beverages (1471/94), in Section 2, subsection 1 of the Act on Excise Duty on Manufactured Tobacco (1470/94) and in Section 2, subsection 1 of the Act on Excise Duty on Liquid Fuels (1472/94) and Section 2, subsection 2, lines (a) and (c) of the Act on excise duties on electricity and certain fuels  (1260/1996), with the exception of gas delivered via a natural gas system situated within the territory of the EU or any network connected to such a system (Section 26 e, Value-Added Tax Act).

The distance selling of the above mentioned goods to private individuals in other EU countries are taxed in the country of destination regardless of the amount of sales. This means that the businesses that have such distance sales must register for VAT in the country of destination, and pay VAT there under local VAT rules.

However, distance selling rules do not apply if you sell the goods to customers other than private individuals. In this case your sales are intra-Community supplies and your customer will make intra-Community acquisitions in the country of destination.

4 Invoicing obligations

As Value Added Tax Act requires, whenever you supply goods or services to a business, or to a legal entity, you must issue a VAT invoice. As an exception from this general invoicing rule, you must issue a VAT invoice to your customer whenever you distance sell goods to them, even if they are private individuals.

Simplified invoicing requirements cannot be applied to distance sales. Instead, all invoices must include the usual information required. For more information, please see “VAT invoice requirements”.

5 Reporting obligations

5.1 Distance selling from other EU countries to customers in Finland

If your sales exceed the threshold of EUR 35 000 you must register for the Finnish VAT. You have to report your distance sales to Finland on line “Tax on domestic sales by tax rate (24%, 14% or 10 %)”  of the VAT Return form. 

5.2 Distance selling from Finland to customers in other EU countries

If your sales of goods  stay below the threshold that has been set in the country of your customers you must report your distance sales on line “Tax on domestic sales by tax rate (24%, 14 % or 10 %)” of the VAT Return form. As soon as your sales exceed the set threshold you must register for VAT in the country concerned. Then you report your distance selling on line  “Sales taxable at zero VAT rate”. When you make purchases that serve or are connected with your distance selling operations you are entitled to deductions of input VAT on them in the usual way.

Guidance

The Telephone Service on questions that concern VAT is on 029 497 008 (standard call rates apply). When calling from other countries, dial +358 29 497 008. For service in English, please dial “Tax service for businesses” +328 29 497 051.

Guidance letters and forms are available at tax offices and on the Website of the Finnish Tax Administration www.vero.fi.

Table of thresholds for distance selling in each EU country

Table is compiled from the European Commission’s homepage (latest updated on April 2018).

Definition of new means of transport

A means of transport is any of the following, when intended for the transport of passengers or goods:

1. Motorised land vehicles with an engine displacement exceeding 48 cubic centimetres or with a power exceeding 7.2 kilowatts;
2. Vessels with a length exceeding 7.5 metres;
3. Aircraft with a take-off weight exceeding 1 550 kilograms.

“New” refers to:

1. Motorised land vehicles sold no more than six months and other vehicles no more than three months since the date of their first entry into service;
   
   or to:
2. Motorised land vehicles that have travelled no more than 6 000 kilometres, vessels that have sailed no more than 100 hours, and aircraft that have flown no more than 40 hours.

Vessels and aircraft exempt from VAT are not regarded as new means of transport. Vessels with hulls of at least 10 metres in length and which are not made primarily for recreation or sports are exempt from VAT. In addition, VAT is not levied on supply of aircraft to a business engaged mainly in international air traffic.