Value-added taxation of cross-border supply and acquisition of services

This is an English translation. The official instruction is available in Finnish (Palvelujen ulkomaankaupan arvonlisäverotus, record number VH/4150/00.01.00/2021) and Swedish (Momsbeskattningen av tjänster vid utrikeshandel). In case of divergence of interpretation, the versions in the two national languages will prevail.

The guidance concerns the VAT treatment of cross-border supply and acquisition of services. Updates have been made to the guidance regarding VAT special schemes, regarding transportation services that are exempt from VAT, and with a new chapter that addresses distance teaching. Some sections of the guidance have been re-edited due to technical changes. A number of examples were added.

1 General remarks

VAT rules regarding place of supply determine the country that has the taxing rights and the country whose VAT legislation must be applied on a supply of a service. In general, the place of supply is determined based on the nature of the service sold and whether the service is sold to a consumer or to a business. The place of supply is also dependent on the country where the seller’s or buyer’s domicile, place of establishment of a business, or fixed establishment is located.

64 to § 69 l of the Value Added Tax Act (the VAT Act) specify when a service is sold in Finland, i.e. when Finland is the place of supply for a service. When a service is sold in Finland, Finnish VAT must be paid unless special rules have laid down that the particular supply is exempt. The seller is the party that pays the VAT unless the supply is subject to the reverse charge mechanism. The corresponding EU rules concerning the place of supply of services are found in Articles 43 to 59 of the VAT directive (Council Directive 2006/112/EC). In addition, Council Implementing Regulation (EU) No 282/2011, amended with Council Implementing Regulation (EU) No 1042/2013, contains provisions on services that are directly applicable in Finland. This EU regulation is discussed in detail in the Tax Administration’s guidance Council Regulation 282/2011 to promote harmonised interpretation of the VAT directive (available in Finnish and Swedish, link to Finnish).

Often, the place of supply of services is determined differently depending on whether a service is sold to a business or to a non-business buyer (to a consumer). The general rule to be applied on services sold to businesses is not the same as the general rule applied on services sold to consumers. A general rule is applied whenever there is no special rule governing the service in question. According to the general rule, services sold to a business are subject to VAT in the country where the buyer is established (§ 65 of the VAT Act), and services sold to a consumer are subject to VAT in the country where the seller is established (§ 66 of the VAT Act). The general rule is applicable to most services.

When a service is sold to a business, rules concerning the place of supply of services, differing from the general rule, are applied in the following cases:

• Services connected to immovable property including real-estate intermediation
• Passenger transport services
• Hiring out means of transport for a short term
• Right of entry into educational, scientific, cultural, entertainment events, etc. and services directly associated with such entry
• Restaurant and catering services
• Travel agency services

Correspondingly, if a service is supplied to a consumer, rules differing from the general rule are applied in the following cases:

• Services connected to immovable property including real-estate intermediation
• Passenger transport services
• Goods transport services
• Services related to transportation
• Services connected to movable goods
• Hiring out means of transport for a short term
• Hiring out means of transport for a long term
• Hiring out a pleasure craft for a long term
• Cultural and entertainment services and the like
• Restaurant and catering services
• Brokerage services, intermediation services
• Supply of intangible services to non-EU countries
• Supply of radio and television broadcasting services, electronic services and telecommunications services

When the place of supply depends on the buyer’s status, the seller must check whether the buyer is a consumer or a business.

2 The concept of “services”

In accordance with the provisions of the VAT Act, “goods” means a tangible object as well as electricity, gas, heating and cooling energy and other comparable energy commodities. “Services” means everything else that can be sold in the form of a business (§ 17 of the VAT Act). For example construction work, offering movable goods for rent, assignment of a patent, assignment of the right to take gravel, obligation to refrain from carrying out a specific act, or endure a certain act or state, and intermediation of goods in the name of and on behalf of another person are considered as services.

Normally, goods and services can be separated from one another. However, there are occasions where a transaction comprises several elements, the question arises whether it is to be regarded as consisting of a single supply or of several distinct and independent supplies which must be assessed separately from the point of view of VAT. For VAT purposes, a supply is regarded as a single economic supply if it consist of a principal supply in relation to which the other supplies are ancillary. Thus, for VAT purposes the supply consisting both services and goods, can be treated as a single supply of a service or a single supply of goods.

Manufacturing and assembling of a movable good is a single supply of services if the buyer has first given the materials to the seller. If all materials are not provided by the buyer, the VAT treatment of transaction should be assessed on a case-by-case basis. For example, to assemble a machine or a piece of equipment, from parts provided by the customer, is a supply of service (Article 8 of the Council Implementing Regulation No 282/2011). Repair work is also a supply of service. Packing work is a supply of service, even the supply includes packing material. Rental of goods is a supply of service. However, if agreed that the ownership of the rented property or item will transfer to the lessee or if the lessee is obliged to buy the rented property or item, the transaction is considered as a supply of goods.

If the proportion of service in a supply of goods is negligible, it is regarded entirely as a supply of goods. Making photocopies and selling an entire print run of books are regarded as a supply of goods when the material used in the copying and printing is owned by the seller but the content photocopied or printed is provided by the buyer (ECT re. C-88/09, Graphic Procédé; the Supreme Administrative Court’s rulings no KHO 2013:125 and KHO 5.7.2013, record 2304). If a service is not limited to copying or printing as described above, a case-by-case decision must be made on whether the portion of service is principal in relation to the materials used in the copying or printing. According to the judgment of the Court of Justice of the European Union, attention must be paid to the time spent for the service performance, the nature of the services and the proportion of services in the total price.

If a supply of service contains different services whose places of supply are determined in different ways, the place of supply must be decided by reference to the service’s principal nature. If a supply of service consists many parts and does not clearly contain a principal supply, the place of supply is determined by the general rule. When a supply of service consists of separate services, each one of services is governed by a VAT rule on the place of supply relevant to that particular service. In case of uncertainty, the liable to tax can request a written guidance or apply for an advance ruling on the matter from the Finnish Tax Administration.

3 Businesses

When the place of supply of services rules are applied, the concept of “business enterprise” is understood in the broad sense. It covers all the operators of trade or business, irrespective of whether their activities are subject to VAT. For example, sellers of VAT-exempt financial services, and sellers of healthcare and nursing services are businesses. Non-profit organisations are businesses as referred to in the VAT rules on services, if the non-profit organisation sells goods or services in exchange for a consideration, even when its operations are exempt from VAT (§ 4 of the VAT Act). If a non-profit organisation does not conduct any activity for which it charges money or another consideration, e.g. if its operation is entirely financed with general aid or through donations, it is not a business as referred to by the VAT rules on services. However, an operator of small-scale business (§ 3 of the VAT Act) is a business operator. When a small-scale business buys services from a foreign seller that is not liable for VAT in Finland, and the services fall under the scope of the general rule, the small-scale business must pay VAT on the services based on the reverse charge mechanism. For VAT purposes, the State and municipalities are regarded as businesses when applying the place of supply of services rules.

According to the place of supply of service rules, the definition of “businesses” also covers legal persons registered for VAT (§ 64, subsection 1.2 of the VAT Act). Businesses include not only the legal persons registered for VAT for conducting business activities, but also the legal persons on the register for which the entry into the VAT register has been effected due to some other reason. When a legal person that is not otherwise liable for VAT is entered in the VAT register for private use of real-estate management services, for restaurant and catering services, or because the threshold of intra-Community acquisitions has been exceeded, they are regarded as a business due to VAT registration. However, when a legal person is not otherwise liable for VAT but has obtained a VAT registration due to the reverse charge mechanism, because of items purchased from a foreign national, the applied rules on place of supply are the rules applicable to consumers.

If a business also carries out other operations in addition to the sale of goods and services, it is treated as a business for purposes of the place-of-supply rules with respect to all the services rendered to and received by that business. For example, a non-profit organisation running a café is also regarded as a business with regard to any services it receives for use in its other activities, such as its non-profit sports activities, etc. In the same way, a Finnish municipality is also treated as a business, with regard to services rendered to it for use in its activities as a local authority, even if all those services do not fall within the scope of the VAT Act.

However, the place of supply of service rule is applied only to the business operators that act in the capacity of a business. The requirement to “act in the capacity of a business” is not fulfilled if a service is rendered for the business operator’s private use, or for the employees’ private use. If a service is partially for private use and partially for business use, the supply is subject to the general rule for businesses. For example business operators act in the capacity of a business if they receive services intended for representational purposes or services intended for the non-profit activities of a VAT registered non-profit organisation.

If the place of supply for services depends on the buyer’s status, the seller must ascertain whether the buyer is a consumer or a business. Article 17 to Article 25 of the Council Implementing Regulation No 282/2011 lay down the rules for how the “status of the customer” – the buyer’s status should be determined. In general, it is regarded as a sufficient proof of the buyer being a business established in the EU that the buyer can produce a valid VAT number matching their name and address. If a buyer established in an EU country does not give its VAT number and the seller has no reason to make the conclusion that the buyer would actually be a business, the seller can treat the buyer as a consumer. When the buyer is an operator of small-scale business established in another EU country and the seller does not have the buyer’s VAT number but receives other proof that the buyer is a business, the place of supply rules for businesses are applied.

If the buyer is established outside of the EU, the seller must rely on some other method in order to verify that the buyer is a business. Examples of sufficient proof include a certificate, issued by the buyer’s home-country authorities for confirming the buyer’s eligibility for a VAT refund to foreigners, the buyer’s trade register extract, VAT number, or other tax number identifying the buyer (Article 18 of the Council Implementing Regulation No 282/2011).

If the nature of the service to be rendered or another comparable circumstance leads the seller to make the conclusion that the buyer is not a business, the seller must ask the buyer to provide proof of its status. For purposes of the general place of supply rule, the seller must also ask the buyer to provide proof of its status as a business enterprise if there is reason to believe that the buyer does not have the status of a business.

If a business, not liable for VAT, buys a service from another EU country or from a non-EU country, and the service is subject to VAT in Finland by virtue of the general rule, the business must submit an application for VAT registration for the purchase, based on the reverse charge mechanism.

4 Fixed establishment

4.1 The concept of the “fixed establishment”

Under the general rule for businesses, the place of supply is the country where the fixed establishment receiving the services is located. If a service is not rendered to any fixed establishment for receival there, the service is regarded as being supplied in Finland if the buyer’s place of establishment of a business is in Finland (§ 65 of the VAT Act; for more information, see section 7.1). Under the general rule regarding supply of services to a consumer, the place of supply is the country where the seller’s fixed establishment supplying the service is located. If a service is not supplied from a fixed establishment, its place of supply is Finland if the seller has a place of establishment of a business in Finland (§ 66 of the VAT Act; for more information, see section 7.1). The questions that often need to be settled are, whether the buyer’s fixed establishment has received the services rendered, and whether the services were supplied from the seller’s fixed establishment. To settle the question without difficulty, we must define the concept of fixed establishment.

The Finnish VAT Act contains no definition for a fixed establishment. Instead, the concept has been defined in Article 11 of the Council Implementing Regulation (EU) No 282/2011. In accordance with Article 11, a fixed establishment is any establishment, other than the business’s place of establishment, characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs; or to enable it to provide the services which it supplies.

In order that a company could have a fixed establishment, it must have an establishment for conducting business. Such establishments include business premises, other office spaces of various sizes, industrial plants and equipment used in the company’s business. A fixed establishment must be permanent, i.e. have a fixed geographical location, but it does not have to be permanently fastened to the ground. Foreign companies may be treated as having a fixed establishment in Finland even if they merely supply a service consisting of transport services in Finland involving a route and time schedule that are consistent. However, it should be noted that the renting out of real estate or movable goods and the assignment of incorporeal rights do not, as such, give rise to a fixed establishment.

For VAT purposes, a fixed establishment is required to have sufficient resources for receiving or supplying services. The company must have staff or other people under its control who carry out the operations of the fixed establishment in the country where the fixed establishment is located. In addition, the company must have sufficient technical resources to receive services or to render services to other parties. The resources may include items such as machinery and equipment, information technology, software, servers and other machines or devices required by the service. A fixed establishment does not have to operate without interruption but it has to operate on a regular basis.

If the above criteria for a fixed establishment and its permanent nature and human and technical resources are met, a fixed establishment may be a branch, an office, an industrial plant, etc., a place of purchase or sale, or a place where natural resources are recovered, such as a mine. In addition, it is possible for a fixed establishment to be located on another company’s business premises. As such, the existence of warehouses located in Finland does not constitute a fixed establishment. Instead, to give rise to a fixed establishment, even the warehouses would have to meet the above criteria. For more information, see “VAT registration of foreigners in Finland” - Ulkomaalaisen rekisteröinti arvonlisäverovelvolliseksi Suomessa (available in Finnish and Swedish).

4.2 Fixed establishments at receipt and supply of services

The question of whether a fixed establishment exists is resolved differently when services are supplied and when they are purchased. Service is supplied from a fixed establishment if the existing human and technical resources in that establishment are sufficient for performing the service. Service is rendered to the buyer’s fixed establishment, and as received there, if the human and technical resources of the buyer’s establishment are sufficient for receiving the service.

Under § 65 of the VAT Act, services supplied to a business are taxed in Finland if the services are rendered to a fixed establishment located in Finland. However, if the services are rendered to the buyer’s fixed establishment located in a foreign country and that establishment uses the service for its own needs, VAT must be paid in the country where the fixed establishment that uses the service is located. If services are not rendered to any fixed establishment, the place of supply is Finland if the buyer’s place of establishment of a business is in Finland. If the buyer has more than one fixed establishments and the relevant fixed establishment cannot be identified based on the nature or the use of the service, particular attention should be given to the following factors in order to identify the right fixed establishment: the contract, the order form, the buyer’s VAT number as reported to the seller, and the party that is paying for the service (Article 22 of the Council Implementing Regulation No 282/2011). If a fixed establishment receiving a service uses it for its own needs, VAT on the service is to be paid in the country where the fixed establishment is located. After the buyer has given the seller a VAT number, valid in another EU Member State, and no other factors point to another conclusion, the services rendered to the buyer are treated as having been rendered to the buyer’s fixed establishment in that Member State. If it is still not possible to determine the fixed establishment, the place of supply is the country where the buyer has its place of establishment of a business. The place of supply is decided on the basis of the date when the services are performed. Later changes to the use of the service have no effect on the matter unless the circumstances indicate any abusive practice (Article 25 of the Council Implementing Regulation No 282/2011).

Under § 66 of the VAT Act, services sold to consumers are taxed in Finland if they are supplied from a fixed establishment located in Finland. However, if the service is supplied from a fixed establishment located in another country, the place of supply for the service is the country where that fixed establishment is located. When a service is not supplied from a fixed establishment, it is regarded as being sold in Finland if the seller’s place of establishment of a business is in Finland.

When a service is being supplied, the seller’s fixed establishment can be considered to be any establishment with a sufficient degree of permanence and with human and technical resources that enable it to provide the services. Even when the seller has a fixed establishment and a VAT number valid in the country of location of the fixed establishment, the company is not necessarily considered to supply services from that particular fixed establishment. A fixed establishment is not considered to participate in the supply unless the human and technical resources of the establishment are used in the provision of the services. Such participation does not mean that the fixed establishment merely deals with administrative activities such as invoicing, bookkeeping, and debt collection. If a fixed establishment located in Finland is not considered to participate in the supply of service, the place of supply is not Finland under the§ 66 of the VAT Act and accordingly, the supply is not subject to VAT in Finland.

The fact alone that a VAT number is issued to the seller does not provide sufficient proof that the seller has a fixed establishment in the EU country that has issued the VAT number. However, if the seller has given the buyer an invoice on the services rendered, and the invoice indicates a VAT number of a fixed establishment in Finland, then the fixed establishment has participated in the supply.

5 “Place of establishment of a business” for VAT purposes

When the general rules on businesses and consumers are applied, the fixed establishment is normally the primary factor in making a decision on place of supply. If a service is not supplied from a fixed establishment, or rendered to a fixed establishment for receival, or if it is not possible to determine what fixed establishment is related to a service supply, the place of supply is determined on the basis of the place of business. By virtue of the provision on supply to businesses, if a service is not rendered to the buyer’s fixed establishment, the service is supplied in Finland if the buyer has its place of establishment of a business in Finland. As for consumers, services sold to a consumer that are not supplied from the seller’s fixed establishment are supplied in Finland if the seller has its place of establishment of a business in Finland.

The “place of establishment of a business” concept is defined in the implementing regulation (Article 10 of the Council Implementing Regulation (EU) No 282/2011). Accordingly, the place is where essential decisions concerning the general management of the business has been made, the place where the registered office of the business is located and the place where company management meetsexist. If the place of establishment of a business cannot be determined based on these criteria with certainty, the place where essential decisions concerning the general management of the business are taken shall take precedence. The mere presence of a postal address may not be taken to be the place of establishment of a business of a taxable person.

6 VAT reverse charge

The reverse charge mechanism of VAT means that the buyer, instead of the seller, is the party liable to pay VAT on the supply. Reverse charge is applied in all EU countries in circumstances that involve a business that sells a service, the VAT treatment of which is controlled by the general rule, to a business established in another EU country. However, the reverse charge mechanism, as it is applied in Finland, has a wider scope. Accordingly, reverse charge is also applied on a number of other services, not only those governed by the VAT general rule on services.

According to the main rule of the reverse charge mechanism, the buyer is liable to pay VAT for goods or services sold by a foreign party in Finland if the foreign seller does not have a fixed establishment in Finland and has not registered for VAT in Finland on a voluntary basis (§ 9 of the VAT Act). This means that Finnish buyers must pay reverse-charge VAT for services bought from foreign sellers. The “foreign seller” above refers to a business enterprise that has its place of establishment of a business in another country (§ 10 of the VAT Act). The place of establishment of a business of a business enterprise, for VAT purposes, is its actual place of establishment of the business, or if no such place exists, the place where the business operator lives or stays on a permanent basis.

If a Finnish individual operating a business, or a legal person operating a business, is liable to pay VAT based on the reverse charge mechanism but is not registered for VAT, they must register for VAT due to the goods or services that were bought. Where a sale of services, according to the general rule for businesses is concerned, the reverse charge mechanism can be applied only if the buyer is a business within the meaning indicated by the VAT rules that apply on services (see section 3). When a Finnish business buys a service that by virtue of the general rule on sales between businesses is subject to VAT in Finland, the buyer must pay VAT in Finland based on the reverse charge mechanism.

When a service is bought by a legal person who is not a business operator, the general rule for businesses does not apply. Additionally, in this case, the legal person has no obligation to submit an application for VAT registration which would be required due to the reverse charge. Instead, if a legal person who is not a business operator buys services, other than those under the general rule, from a foreign seller, e.g. services connected to immovable property located in Finland (§ 67 of the VAT Act; for more information, see section 7.2), the legal person must register for VAT, based on the reverse charge mechanism.

The reverse charge mechanism is not applied if the foreign seller has voluntarily registered for VAT in Finland or has a fixed establishment in Finland and the establishment participates in the supply of the service. In the above cases, the foreign seller pays VAT in Finland. However, reverse charge is applied if the foreign seller has a fixed establishment in Finland but the establishment does not participate in the supply (for more information, see section 4). If the invoice issued for the services contains the VAT number of a fixed establishment in Finland, then the fixed establishment is considered to participate in the supply. As a result, the fixed establishment is liable for VAT, and reverse charge mechanism does not apply.

Moreover, reverse charge is not applied if the seller’s business has its place of business in Finland, not even if that place of business in Finland would not participate in the supply. 

When a Finnish business sells services, which by virtue of the general rule for businesses are taxable in another EU country, the buyer is liable for VAT instead of the seller. The seller must submit an EU recapitulative statement (see section 9) to report these supplies. However, reverse charge is not applied if the Finnish seller has registered for VAT in another EU country and has a fixed establishment in that country, and that fixed establishment participates in the supply.

If the place of supply is another EU country for a reason other than the general rule, the seller must solve whether the reverse charge mechanism should be applied to the supply, or alternatively, should the seller submit an application for VAT registration in that country. In the case of services supplied to a non-EU country, and irrespective of whether the supply is taxable under the general or special rules, the seller must solve whether liability for VAT exists, and whether it is necessary to submit an application for VAT registration in the non-EU country.

6.1 Exceptions to the application of reverse charge

The reverse charge mechanism is not applied if the buyer is

• a private individual or
• a foreigner with no fixed establishment and no VAT registration in Finland.

However, the reverse charge mechanism applies to the supply of construction services between two foreign businesses (§ 8 c of the VAT Act), provided that the buyer is a business enterprise that sells construction services on a regular basis. For more information about VAT reverse charge in the construction sector, see “Reverse charge in value added taxation in the construction sector” - Rakennusalan käännetty arvonlisäverovelvollisuus (available in Finnish and Swedish).

The reverse charge mechanism is not applied to the following supplies of services:

• Passenger transport services
• Services connected to access to educational, scientific, cultural, entertainment and sports events, fairs, exhibitions, etc. and services directly associated with such entry into events.

Foreigners must register for VAT for supply of goods and services sold in Finland, if the reverse charge mechanism cannot be applied. As for services rendered to consumers in different countries, the seller can participate in a VAT special scheme to submit VAT returns and pay the VAT as appropriate. For more information about the special schemes, see the Tax Administration’s “VAT special schemes” - Arvonlisäveron erityisjärjestelmät guides (in Finnish and Swedish).

6.2 Prevention of double taxation

There are two VAT rules relating to the reverse charge mechanism that aim for the prevention of double taxation. If the supply of services is connected with a delivery of goods a non-EU country to Finland, the buyer – to whom the reverse charge mechanism is applied – must also pay VAT for the import of the goods. Where services consisting of the renting out of a movable good are concerned, the buyer can deduct the VAT paid for the import of the rented item (§ 113 of the VAT Act). When services that fall under the general rule (§ 65 of the VAT Act) that are other than rental services are supplied to a business, double taxation is eliminated as follows: the buyer need not pay VAT on the service insofar as the buyer has paid VAT on the import of the good related to the service (§ 72 of the VAT Act).

7 VAT rules on the place of supply

7.1 General rules on the place of supply

The place of supply in the case of services is determined either by the general rule or by the special rule. If the rendering of a service is not controlled by any VAT special rule, the general rule is applied. Different general rules are applicable to the supply of services to businesses and to consumers. However, most services fall within the scope of the general rule.

7.1.1 The general provision for businesses

Under the general rule for businesses, the place of supply is the country where the fixed establishment receiving the services is located. Accordingly, if a business is the buyer, services are supplied in Finland if they are supplied to the buyer’s fixed establishment located in Finland. If the service is not supplied to a fixed establishment located in Finland, or to a fixed establishment located in a foreign country, the place of supply is Finland if the buyer’s place of establishment of a business is in Finland (§ 65 of the VAT Act). The general rule is also applied when goods or services are sold to the State or to municipalities.

7.1.2 The general provision for consumers

The place of supply of a service within the meaning of the VAT general rule for consumers is the country where the seller’s fixed establishment supplying the service is located. Accordingly, the place of supply for VAT purposes of services provided to a consumer is Finland if the services are supplied from the seller’s fixed establishment located in Finland. If the service is not supplied from a fixed establishment located in Finland or from a fixed establishment located in a foreign country, the place of supply is Finland if the seller’s place of establishment of a business is in Finland (§ 66 of the VAT Act).

7.2 Services connected to immovable property

Services connected to immovable property are supplied in Finland if the property is located in Finland. The place of supply is determined in the same way for services sold to businesses and services sold to consumers. Examples of services connected to immovable property include various specialist services in the real estate sector and intermediation in the sale, leasing or letting of immovable property, hotel accommodation services, real estate rental and construction service (§ 67 of the VAT Act).

The concept of immovable property – real estate – was harmonised in all EU countries as of 2017. Accordingly, for VAT purposes, the concept is no longer defined as it is in the Finnish VAT Act. Instead, the definition is in Article 13 b of the Council Implementing Regulation (EU) No 282/2011. Under the Regulation, immovable property is:

• Any specific part of the earth, on or below its surface, over which title and possession can be created;
• Any building or construction fixed to or in the ground above or below sea level which cannot be easily dismantled or moved;
• Any item that has been installed and makes up an integral part of a building or construction without which the building or construction is incomplete, such as doors, windows, roofs, staircases and lifts;
• Any item, equipment or machine permanently installed in a building or construction which cannot be moved without destroying or altering the building or construction.

For more information, see “Concept of real estate for VAT purposes 1 January 2017” - Kiinteistön käsite arvonlisäverotuksessa 1.1.2017 (available in Finnish and Swedish only).

In order that a service could be seen as being connected to immovable property, it must have a sufficiently direct connection with it. Accordingly, the connection is sufficiently direct with the immovable property when at least one of the following conditions is met (Article 31 a of the Council Implementing Regulation No 282/2011):

• The services are derived from an immovable property and that property makes up a constituent element of the service and is central to, and essential for, the services supplied; or
• The services are provided to, or directed toward, an immovable property, having as their object the legal or physical alteration of that property.

The above services include:

• The drawing up of plans for a building or parts of a building designated for a particular plot of land
• The provision of on-site supervision or security services
• The construction of a building, parts of a building or permanent structures, as well as construction and demolition work performed on them
• Work on land, including agricultural services
• Surveying and assessment of the risk and integrity of the property
• The renting out, leasing and letting of immovable property, including storage services for which a specific part of the property is assigned for the other contracting party’s exclusive use
• The provision of accommodation in the hotel sector, etc.
• The assignment or transfer of rights to use the whole or part of an immovable property, such as fishing and hunting rights, the right to use a bridge or a tunnel, or the right to access lounges in airports
• The maintenance, renovation and repair of a building, parts of a building and its permanent structures
• The installation or assembly of machines or equipment which, upon installation or assembly, qualify as immovable property
• The maintenance and repair, inspection and supervision of machines and equipment if those machines or equipment qualify as immovable property
• Building management and other services of property management and operation
• Intermediation in the sale, letting, leasing or rental of immovable property, and valuation of immovable property
• Legal services related to the transfer of a title to immovable property, and to the assignment or transfer of rights to an immovable property.

The following services are among those not treated as connected to immovable property: intermediation of hotel rooms, supply of advertising space on the property, provision of a stand location at a fair or exhibition site together with other related services to enable the exhibitor to display items, and portfolio management of investments in real estate (Article 31 a, paragraph 3 of the Council Implementing Regulation No 282/2011).

Only the legal services that relate to the establishment or transfer of certain interests in immovable property or rights-in-rem over immovable property are connected to immovable property. Examples include notary work, or drawing up a contract to sell or acquire immovable property, and drafting of rental and construction contracts. Instead, legal consultation services related to certain terms of contract are not treated as being connected to immovable property. Examples of legal services that are not connected include legal advice on subjects like the property’s taxes, the issuance of pledges and mortgages, and on questions of insolvency.  The service is considered to relate to immovable property only if the legal consultation about a certain term of contract is directly connected with transfer of title or assignment or transfer of certain rights to immovable property. Services for arranging funding for the purchase of immovable property, and services related to investments in real estate are not services connected to immovable property.

Installation and assembly of machines and equipment for an immovable property are treated as being connected if they are performed on the site of the property. Installation and assembly performed elsewhere, prior to the transportation of the goods to the site of the property, are not connected, and the rules on place of supply do not lay down that the property’s location would determine the place of supply of installation and assembly services.

For more information, see the Tax Administration’s guide “Council Regulation 282/2011 to promote harmonised interpretation of the VAT directive” - Euroopan unionin asetus 282/2011 yhdenmukaistaa arvonlisäverodirektiivin tulkintaa (see the section on supply of services; available in Finnish and Swedish).

7.3 Passenger transport services

Passenger transport services are supplied in Finland if the transportation takes place in Finland. The place of supply is determined in the same way for services sold to businesses and services sold to consumers. The transportation takes place in Finland if the points of departure and destination are in Finland (§ 68 of the VAT Act). The reverse charge mechanism is not applied on passenger transport services (§ 9 of the VAT Act). When transport takes place in Finland and the seller is a foreign business, the foreign seller must submit an application for VAT registration in Finland for passenger transport services. If the services are provided to consumers only, the seller can use the VAT special scheme to handle the VAT filings and payments. For more information about VAT special schemes, see “Arvonlisäveron erityisjärjestelmät” - VAT special schemes (in Finnish and Swedish).

Passenger transport services from Finland directly to another countries, from abroad directly to Finland and via Finland, are exempt from VAT (§ 71, subsection 1.11 of the VAT Act). It is not relevant whether the destination is in an EU country or a non-EU country. This way, cruises to international waters are seen as transport of passengers directly to other countries, and are therefore tax-exempt. If a company providing transportation services sells a contract involving a final point of departure in Finland, specified in the transport contract, and the journey’s destination is in a foreign country, the service is treated as a direct transport of passengers to other countries. A transport service directly from a foreign country means a service from abroad to a first destination in Finland, as specified in the contract. Also in this case, the seller should only be one single company providing transportation services.

Where passenger transport is concerned, generally the departure or destination are indicated on the ticket; so the last point of departure or the first destination can be determined based on the ticket. If, however, the transport is interrupted for other than technical reasons, for example for an overnight stay, the final point of departure and the first destination of a direct transport would be the place where the transport was interrupted. Technical problems relating to means of transport, and other unexpected reasons such as weather conditions can be referred to as “technical reasons”. In other words, the interruption of a transport service due to technical reasons does not make it a VAT taxable transport service if, were it not for the interruption, it would otherwise be VAT exempt. 

The seller of a direct transport to or from abroad need not carry out the transport. The seller of a direct transport can buy the whole transport service or part of the service from other entrepreneurs. The issue of place of supply is settled based on the transport contract signed by the transport company in question. In this context, each one of the contracts is examined separately.

7.4 Transportation of goods

If supplied to a business, goods transport is subject to the general rule on place of supply (§ 65 of the VAT Act; for more information, see section 7.1). The general rule is applied to transport within Finland, transport within another EU country, and transport between EU countries.  It is also applied to transport services that take place entirely outside the EU.

A goods transport sold to a consumer is supplied in Finland if it is performed in Finland (§ 69 of the VAT Act). An EU goods transport sold to a consumer is supplied in Finland if the point of departure is in Finland. “EU goods transport” refers to a transport service where the departure and destination are in different Member States. The point of departure of a goods transport service is the place, before departure, where the goods are located and from where their transportation to another EU country begins. The destination is the place where the transport ends (§ 69 a of the VAT Act).

7.4.1 Tax-exempt goods transport services

Direct transport from Finland to a non-EU country and from a non-EU country to Finland is exempt from tax. VAT-exempt transports of imported goods to Finland are taxed in connection with the importation of goods (§ 71, subsection 1.2 of the VAT Act).

If a company providing transportation services sells a contract involving a (final) point of departure in Finland, specified in the transport contract, and the journey’s destination is in a foreign country, the service is treated as a direct transport of goods to other countries. A transport service directly from a foreign country means a service from abroad to a (first) destination in Finland, as specified in the contract. .

For goods transport, the last point of departure or the first destination are normally the points of departure or destination indicated on the documentation such as the consignment note, bill of lading, etc. This main rule is not applied, however, if the actual place of departure or destination is a place other than the one indicated in the consignment note or other document. For example, if the transport company has a contract to first bring the imported goods to a temporary storage facility in Finland and, afterwards to another place in Finland, the first destination is the location of the temporary storage.

The European Court of Justice has handed down a judgment that concerns sub-contract transport services of goods destined for export, Case C-288/16, "L.Ĉ." IK. The circumstances involved a third-party provider of the driver service, which had signed a sub-contract with the transport company that operated deliveries of goods to a destination outside of the EU. The trucks belonged to the transport company, but the subcontractor rented them to itself. The party that bought the transport services would only see the transport company as the transporter of its goods. The European Court of Justice first observed that Member States must provide VAT exemption for services of goods transportation to a destination outside the Community. However, the judgment’s conclusion is that the services supplied by the subcontractor do not fall within the scope of the exemption; those services, although they consisted of transport of goods to a destination outside the Community, are not provided directly to the consignor or the consignee of those goods. As a result, the VAT exemption on “export” transport services (as set out in § 71, subsection 1.1 of the VAT Act) does not apply on the kind of transport that is supplied through a subcontract because this cannot be viewed as a direct transport from Finland to a non-EU country.  This means that VAT must be paid on the subcontractor’s service performance, which is one of the components of a larger transportation service package that the seller of the service has sold to the consignor. An example of a subcontractor-performed service is the driver service or a shorter leg of the transport journey inside Finland. Under the circumstances, the subcontracted services are not directly rendered to the consignor or consignee. Moreover, the subcontracted services, in themselves, cannot be treated as being a direct transport service from Finland to a destination outside the EU.

The provision on tax exemption of transport services of goods destined for export (§ 71, subsection 1.1 of the VAT Act) does not apply on transports between two non-EU countries outside of the EU and to transportation taking place inside a non-EU country.  

Transportation of goods from a non-EU country to Finland is VAT-exempt if the value of the transport service must be included in the taxable base of the imported goods (§ 71, subsection 1.2 of the VAT Act). The transport costs relating to the importation of goods are included in the taxable value up to the first destination specified in the transport contract or, if it is known that the goods will be transported on to a further destination in the EU, all the way to that second destination (§ 91 of the VAT Act). No VAT is payable on the supply of goods-transport services related to importation of goods and included in the VAT base of the imports, irrespective of whether the transport services concerned VAT-exempted goods or VAT-taxable goods. For example, transport services connected with the importation of movable objects carried out as part of a change of residence are exempt from tax (Article 46 of the Council Implementing Regulation No 282/2011). For more information on imports and related transport expenses, see the Tax Administration’s “VAT on importation” - Maahantuonnin arvonlisäveron peruste guide (available in Finnish and Swedish).

In addition, VAT is not payable on the sale of transport of goods subject to an external transit procedure or of imported goods subject to an internal transit procedure (§ 71, subsection 1.1 of the VAT Act).

VAT exemptions related to goods transport are applicable to both businesses and consumers when they are in the role of buyers.

7.4.2 Services related to goods transport

Services related to goods transport include loading, unloading and the handling of loads. Services related to goods transport services sold to a business are subject to the general rule on place of supply (§ 65 of the VAT Act; for more information, see section 7.1). Services related to goods transport services sold to a consumer are regarded as being sold in Finland if the services are provided in Finland (§ 69 b of the VAT Act).

The provision of loading, unloading and other services directly associated with the transport of goods to a non-EU country is a VAT-exempt service (§ 71, subsection 1.1 of the VAT Act). Acceptable proof of goods export to a non-EU country may include the consignment documents, or a release decision from Customs presented together with an electronically confirmed certification of exit. When the supply is taxed in Finland, the exemption rules are applied irrespective of whether the buyer is a business or a consumer.

The provision of loading, unloading and other services directly associated with the transport of goods, subject to an external transit procedure, or imported goods subject to an internal transit procedure, is a VAT-exempt service (§ 71, subsection 1.1 of the VAT Act).

When goods are imported, the taxable value includes the transport costs, loading, unloading and insurance costs, and other costs associated with the importation up to the first destination specified in the transport contract. If it is known at the time when the liability to pay VAT arises – i.e. at the time when the goods are imported –  that the goods will be transported to a second destination in the EU, the above expenses up to that second destination are included in the VAT base (§ 91 of the VAT Act). If the service’s value must be included in the base for the VAT on importation, then the supply of this service is exempt from VAT (§ 71, line 2 of the VAT Act). Other costs associated with goods importation may be a forwarding commission, container handling and freight-terminal charges, and goods charges levied at the port. For more information on imports and related transport expenses, see the Tax Administration’s “VAT on importation” - Maahantuonnin arvonlisäveron peruste guide (available in Finnish and Swedish).

7.5 Services connected with movable goods

Services connected with movable goods, if supplied to a business, are subject to the general  place of supply rule (§ 65 of the VAT Act; for more information, see section 7.1).

If supplied to a consumer, these services are supplied in Finland if the services are provided in Finland (§ 69 b of the VAT Act).

Services connected with movable goods include:

• Valuation work
• Testing work
• Cleaning
• Repairs
• Installation
• Dismantling
• Alteration work, and
• Manufacturing

The rules are not applied to storage and transport services and to any services associated with those.

If the seller’s service performance is to assemble a device from components provided by the buyer, we have a service connected with a movable object. When such a service is sold to a consumer, its place of supply is the country where the device is assembled. At the same time, if the service is rendered to a business, its place of supply is the country where the buyer is established. When the assembled device becomes an integral part of immovable property, however, the service is connected to immovable property. Accordingly, its place of supply must be determined in accordance with the guidelines presented in section 7.2 (Article 8 and Article 34 of the Council Implementing Regulation No 282/2011).

When a movable object is sold with installation included, we do not have a supply of service. Instead, we have a sale of goods with installation, where the supply of goods is the primary performance and the installation is a secondary performance. However, if the supplier turns to another business enterprise to buy installation services from that enterprise, the installation is a supply of a service. Furthermore, if the movable good is installed in such a way that it becomes an integral part of immovable property, we have a supply of a service connected to immovable property.

7.5.1 VAT-exempt services connected with movable goods

When the place of supply is Finland, and a service connected to movable good has been rendered, VAT is payable in Finland unless special tax rules apply on the particular type of supply making it exempt from value-added tax. According to the special rules, if work performance related to a movable good, which will later be exported to a non-EU country, located in the free zone or in a customs or tax warehouse, is supplied, it is exempt from VAT (§ 71, subsection 1.5 and § 72 h, subsection 1.5 of the VAT Act). 

Work performance connected to movable goods is exempt from VAT in Finland if the good is exported from the EU immediately after the work is done, without using it here. The movable goods may be exported by the seller of the work performance or by an agent. If the buyer of the work performance is a foreign business, the party that exports the good away from the EU can also be the buyer (§ 71, subsection 1.5 of the VAT Act). The rules outlined above can only become applicable if Finland is the work performance’s place of supply. The place-of-supply rules in the case of an item of movable property, supplied to a business, are as laid down in the general rule (§ 65 of the VAT Act). Accordingly, no performance of work connected to movable property supplied to a business not established in Finland can have its place of supply in Finland. From this, it follows that the supply is already exempted from VAT.

Goods imported for a work performance can be subjected to “inward customs processing” and exported from the EU after the work performance in line with the preconditions set by Customs. In this case, the seller of the work performance can prove that the sale qualifies for VAT exemption by presenting documentation issued by the Customs. This VAT-exemption rule is of little significance today, as is also the exemption mentioned above, because in any case, under the general rule, a work performance supplied to a foreign business that does not have a fixed establishment in Finland is not subject to Finnish VAT (§ 65 of the VAT Act).

The sale of a work performance connected to movable goods and carried out in the free zone or in a customs or tax warehouse is VAT-exempt if the work is performed on items of merchandise that are later exported, or which have been imported but are undeclared or located in a tax warehouse. However, work performances related to the fixed assets of a company conducting warehouse operations or the like in the above zones and places are subject to VAT (§ 72 h, subsection 1.5 of the VAT Act).

7.6 Renting out means of transport

For purposes of the rules on place of supply related to the renting out of means of transport, “means of transport” refers to vehicles and to equipment designed and used for transporting people or goods; and these vehicles and equipment may additionally have the necessary running gear so they can be pulled or pushed by other vehicles. The above means of transport include automobiles, vessels and aircraft, trailers, semi-trailers and railway carriages. Containers and permanently immobilised vehicles with no registration are not means of transport (Article 38 of the Council Implementing Regulation No 282/2011).

The place of supply for renting out means of transport is determined in different ways depending on whether the means of transport is rented for a short or long term. Where short-term renting is concerned, continuous possession or use of a means of transport cannot last longer than 30 days. For vessels, short-term renting cannot last longer than 90 days. If the above thresholds are exceeded, we have long-term renting.

In general, the rental contract contains the necessary information to determine whether a means of transport is rented for a short or long term. When the rental period changes, it may affect the place of supply. When a short-term rental contract is extended, and the rental period goes over the threshold of long term, the place of supply must be reconsidered. However, reconsideration is not necessary, and the rental does not turn into long-term rental, for purposes of the rules on place of supply, if the extension is clearly attributable to external circumstances. The term length of several consecutive rental contracts is their combined duration. If a means of transport is first rented out under a short-term contract and the rental is then extended so that the threshold of a long-term contract is exceeded, the duration of the short-term contract will not be called into question afterwards unless any abuse is involved (Article 39 of the Council Implementing Regulation 282/2011).

Short-term rental of a means of transport is supplied in Finland if the means of transport is made available to the buyer for use in Finland (§ 69 c, subsection 1 of the VAT Act). The provision is applied irrespective of whether the buyer is a business or a consumer.

The place of supply is the place where the means of transport is actually handed over to the customer. The place where the rental contract is written up and signed, or for example, the car keys are handed over, has no effect on the place of supply.

Long-term rental of a means of transport to a business is subject to the general rule (see section 7.1; § 65 of the VAT Act). The general rule is applied to the long-term rental of both a pleasure craft and other means of transport.

Long-term rental of a means of transport other than a pleasure craft, supplied to a consumer, is supplied in Finland if the consumer is established in Finland or if his or her domicile or habitual residence is in Finland (§ 69 c, subsection 2 of the VAT Act).

When long-term rental of a means of transport other than a pleasure craft is supplied to a consumer, the seller must determine the consumer’s place of establishment, domicile or habitual place of residence, based on the information provided by the consumer who rents the means of transport. If the place of establishment, domicile or permanent address cannot be determined with certainty from the information provided or if it is impossible to determine it, the place of establishment is decided based on presumptions. This means that the seller must reach an adequate conclusion regarding the buyer’s place of establishment based on 2 items of non-contradictory evidence (Articles 24 c and 24 e of the Council Implementing Regulation 1042/2013). Such items of evidence include:

(a) The address that has been indicated as the buyer’s address for sending an invoice for the services

(b) Bank information such as the location of the bank account used for payment, or the buyer’s address as kept on record at that bank

(c) Registration details of the vehicle rented by the buyer if registration is required in the place where the vehicle is operated or other similar information

(d) Other commercially relevant information

This list is not exhaustive because commercially relevant information will vary from case to case. The presumptions can be rebutted where there are indications of misuse or abuse by the supplier (Article 24 d of the Council Regulation 282/2011).

Long-term rental of a pleasure craft provided for a consumer customer is supplied in Finland if the craft is handed over to the buyer in Finland from the seller’s place of establishment of a business, or the seller’s fixed establishment, located in Finland. If a pleasure craft is rented to a consumer under a long-term contract such that the service is supplied to the buyer from the seller’s place of establishment of a business, or from a fixed establishment of the seller, located in another EU country, and the pleasure craft is also handed over to the buyer in that country, the service is not supplied in Finland (§ 69 c, subsections 3 and 4 of the VAT Act).

7.7 Cultural and entertainment services and the like

Right of entry into educational, scientific, cultural, entertainment and sports events, fairs, exhibitions, etc. granted to a business – and services directly associated with such entry – are supplied in Finland if the event takes place in Finland (§ 69 d, subsection 1 of the VAT Act). Other services, rendered to a business, associated with cultural or entertainment events or the like – such as services associated with the organisation of such events – are subject to the general rule for businesses (§ 65 of the VAT Act; for more information, see section 7.1) or subject to a special rule that may apply to the services.

Services rendered to consumers that relate to educational, scientific services, cultural, entertainment and sports events, fairs and exhibitions and other similar services and their organisation are supplied in Finland if the activity takes place in Finland (§ 69 d, subsection 2 of the VAT Act).

The reverse charge mechanism is not applied to a service, referred to in § 69 d of the VAT Act, supplied to a business or to a consumer (§ 9 of the VAT Act). A foreign supplier selling the above services in Finland must submit an application for VAT registration in Finland. If a foreign seller only sells those services to consumers, the VAT special schemes are available for the seller as a method of VAT filing and payment. This eliminates the need to submit an application for VAT registration in Finland. Because such services, supplied to businesses, that are not services entitling to entry and not services directly associated with such entry are subject to the general rule or a special rule as the case may be, the reverse charge mechanism of VAT can be applied to the supply.

For more information about the value added tax on cultural and entertainment services and the like can be found in the Tax Administration’s guide “on the Council Regulation 282/2011” — Euroopan unionin asetus 282/2011 yhdenmukaistaa arvonlisäverodirektiivin tulkintaa (available in Finnish and Swedish). For more information on educational services, see “VAT on educational activities” - Koulutustoiminnan arvonlisäverotus (available in Finnish and Swedish).

7.7.1 Provision of teaching services from a remote location

The services that consist of teaching, where course content is delivered to students from a remote location, are divided into electronically provided teaching and other teaching. The first step in order to determine the VAT treatment is to examine the type of the teaching services.

Provision of distance teaching electronically

This category of remote teaching involves delivering the course content over the Internet or an electronic network, and the nature of this delivery makes the teaching essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology. The following are included among electronically provided teaching services under Council Regulation 282/2011 (Article 7, paragraph 2, line f):

• Automated distance teaching, dependent on the Internet or similar electronic network to function, and the supply of which requires limited or no human intervention, including virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student;
• Workbooks completed by pupils online and marked automatically, without human intervention.

If teaching is provided electronically as a service, which is supplied to a business, the general rule on place of supply is applied (§ 65 of the VAT Act). The service is then regarded as being sold in the country where the buyer is established. If teaching is provided electronically to a buyer who is a consumer, the special rule on place of supply (§ 69 i of the VAT Act) is applied. The services are supplied in Finland if the consumer is established in Finland or his or her habitual residence is in Finland. For more information on electronic services in general, see section 7.12 Telecommunications, broadcasting and electronically provided services.

Other distance teaching services, not provided electronically

Sellers can supply teaching services across a distance not only electronically but through other means. Teaching services, where the course content is delivered by a teacher over the Internet or an electronic network, namely via a remote link (as laid down in Article 7, paragraph 3 of the Council Implementing Regulation No 282/2011) are not treated as electronic services. Examples of the non-electronic type include seminars, conferences and similar events, which traditionally are arranged in physical locations but remote online links are provided for the participants.

Rights of entry into educational events, given to a business and to a consumer, are supplied in Finland if the event takes place in Finland (§ 69 d, subsection 1 of the VAT Act). When the organiser of a distance-teaching event is in Finland, and the teachers, other instructors, and participating students are also in Finland, the place where the event is taking place is Finland, and consequently, Finnish VAT is payable on the supply. This concerns both businesses and consumers in the role of buyers.

In some circumstances, it may be that the teachers, instructors and students are established in more than one EU Member States. In that case, Finland cannot be treated as the place where the event takes place although its organiser may have its place of establishment of a business in Finland. For VAT purposes, the service would fall under the scope of the general rule. This means that when businesses are in the role of the buyer of the service, the place of supply depends on the buyer’s country of establishment (§ 65 of the VAT Act); as for consumers as the buyer of the service, the place of supply depends on the seller’s country.

7.7.2 Events, teaching and education, and scientific services

Educational, scientific, cultural, entertainment and sports events, fairs and exhibitions and other such events typically take place in a certain place, are of a predetermined duration and are subject to an admission fee. The events discussed here are often organised for a random group of people but the events may also include occasions such as a seminar organised exclusively for the members of an association, etc. An example of an event may be a single concert, theatre performance or the showing of a movie. On the other hand, there may be a series of events, each arranged with a loosely defined schedule. Some events may be repeated at regular intervals.

Educational events with teaching include training courses, training sessions that last a few days, seminars, symposia and conferences. However, if instruction or teaching is offered as a service, we have a supply of teaching services. This activity includes driving lessons, language courses and computer courses, and it does not fall under the category of educational events. An essential part of such services is to learn things in practice, and the participant is required to perform assignments and take part in activities.  How long the training lasts is not important. After completed training, participants often receive a certificate.  Participation in the above type of training is not regarded as entry into an educational event as referred to in § 69 e, subsection 1 of the VAT Act. When a training service is supplied to a business, the supply is subject to the general rule (§ 65 of the VAT Act; for more information, see section 7.1). The service is then supplied in the country where the buyer is established.

Services connected to teaching, provided for a consumer, are supplied in Finland if the activity takes place in Finland (§ 69 d, subsection 2 of the VAT Act). To be connected to teaching not only refers to educational events, such as the seminars mentioned above, but also to all other services that are connected to teaching and instruction. This way, any instruction that requires active participation and is provided for a consumer is also treated as a connected service, and the place of supply is Finland if the activity takes place in Finland. For example, training for an MBA certificate, which is supplied to a consumer and requires active participation is regarded as being sold in Finland if it is organised in Finland (Supreme Administrative Court ruling 2017:79).

In addition to services related to scientific events sold to consumers, other than scientific services are regarded as being sold in Finland if they are carried out in Finland. Scientific services include examinations, research work and surveys. The place to which the results of a scientific service are delivered has no effect on the place of supply.  If a research project was carried out in Finland, the service is subject to VAT in Finland even if the results were supplied to another country.

7.7.3 Admission fees and services directly associated with the entry

A service entitling to entry into an event means grant of a right of admission in exchange for a ticket or payment (Article 32 of the Council Implementing Regulation 282/2011). The place of supply of the tickets, sold to a business or to a consumer, is the country where the event is organised (§ 69 d, subsection 1 of the VAT Act). The tickets can be paid on entry, or in advance through e-services, etc.  In addition, rights of admission may be based on season tickets, season fees, etc.

Services granting the rights of entry into an event include entry into shows, theatrical performances, circus performances, fairs, amusement parks including their rides and attractions, into concerts and into exhibitions. They also include entry into sports events, such as matches and competitions, and participation fees for symposia, conferences and seminars.  However, it is not regarded as a right of entry into an event if the supplied services essentially give the customer an opportunity for physical exercise, such as the right to use a gym, weight training facilities, etc.

Services directly associated with entry include cloakroom services, and the right to use the toilet or an internet connection. These services are sold separately to the participants of an event. The above services, if sold to consumers and business operators, are regarded as being supplied in Finland if the event is organised in Finland. However, services such as catering and the intermediation of admission tickets, etc. are not services directly associated with entry.

7.7.4 Services associated with the organisation of an event

Depending on the service, the services associated with the organisation of an event are subject to the general rule for businesses (§ 65 of the VAT Act; for more information, see section 7.1) or the special rule on the service in question.  The place of supply of services associated with the organisation of events and other services related to events that are supplied to a consumer is Finland if the activity takes place in Finland (§ 69 d, subsection 2 of the VAT Act). Services associated with the organisation of an event do not refer to the right of entry into the event or services directly connected with the entry (§ 69 d, subsection 1 of the VAT Act).

Services associated with the organisation of events include the services relating to an exhibition, supplied by the organiser, to the parties that have items to present at the exhibition, such as a participation fee that covers a required registration fee and rent for exhibition space. Other services supplied by the organiser include design, construction, decoration, marketing, communication, rental, catering and dismantling services relating to the stand. Services associated with the organisation of an event also include services supplied to the organiser, such as arrangement services, and the staging, lighting and sound reproduction services.

Rental of exhibition space in association with one or more services related to the event is not a service connected to immovable property (Article 31, paragraph 3, subparagraph e of the Council Implementing Regulation No 282/2011). Rental of an exhibition space means providing a defined area, including a movable desk, for use during participation in a fair or exhibition. Other services associated with the event allow the exhibitor to exhibit objects or advertise services or products. These services would include the design of the exhibition space, cabling, insurance policies, advertising, transport, and storage of the exhibited objects. When supplied to businesses, the rental of exhibition space and the other services discussed above are subject to the general rule (§ 65 of the VAT Act) or the special rule applicable to the service in question. When supplied to a consumer, they are subject to the special rule on the organisation of an event (§ 69 d, subsection 2 of the VAT Act).

7.8 Restaurant and catering services

Restaurant and catering services are supplied in Finland if they are performed in Finland (§ 69 e of the VAT Act). The above is applicable irrespective of whether the buyer is a business or a consumer. “Restaurant service” refers to services taking place on the supplier’s premises. “Catering service” refers to services that take place on premises specified by the buyer.

Restaurant and catering services performed on a vessel, aircraft or train, during passenger transport taking place in the EU, are regarded as being supplied in Finland if the point of departure is in Finland (§ 69 f of the VAT Act). If the transport takes place between Finland and a non-EU country, in either direction, the place of supply of the restaurant and catering services sold during the transport is Finland if the services are performed in Finland (§ 69 e of the VAT Act). However, services for a person travelling abroad are exempt from VAT when performed on a vessel or aircraft in international traffic (§ 71, subsection 1.3 of the VAT Act).

7.9 Travel agency services

When a tour operator sells a travel agency service (package tours) to a business, the supply of the service is subject to the special rule (§ 69 g of the VAT Act). When the service is sold to a consumer, it is subject to the general rule (§ 66 of the VAT Act). Whether supplied to a business or to a consumer, a travel agency service is supplied in Finland if it is supplied from a fixed establishment located in Finland. If the service is not supplied from a fixed establishment, the place of supply is Finland if the seller’s place of establishment of a business is in Finland.

The VAT margin scheme (§ 80 of the VAT Act) and the special rule on travel agency services (§ 69 g) are applied when the tour operator sells, in their own name, services and goods they have bought from another business operator. The special rule that controls the place of supply for travel agency services is applicable only when the VAT margin scheme is applied to the supply of the services. For more information, see the Tax Administration’s “guidance on VAT in the travel services sector” - Matkailualan arvonlisäverotus (in Finnish and Swedish).

7.10 Brokerage services

A brokerage or intermediation service, sold to a business, is subject to the general rule on VAT place of supply, i.e. it is treated as supplied in Finland if it is supplied to a business established in Finland (§ § 65 of the VAT Act; for more information, see section 7.1). A brokerage service sold to a consumer is regarded as being supplied in Finland if the underlying services or goods, i.e. those that were brokered, are sold in Finland (§ 69 l of the VAT Act). Brokerage (also, intermediation) refers to assignments to sell or buy goods or services in the name of and on behalf of the broker’s customer.

Brokerage services for real estate selling and rentals are subject to the place-of-supply rules on services connected to immovable property, i.e. the place of supply is Finland if the immovable property is located in Finland (§ 67 of the VAT Act; for more information, see section 6.2). Brokerage of hotel rooms or comparable accommodation services does not fall under the category of services connected to immovable property. Brokerage of an accommodation service sold to a business is subject to the general rule (§ 65 of the VAT Act), and the place of supply is the country where the buyer is established. If accommodation services are brokered to a consumer, the place of supply is the country where the accommodation is located (Article 31 of the Council Implementing Regulation No 282/2011).

As a rule, brokerage services are subject to VAT even when the underlying goods or services that are being brokered are exempt from VAT. Brokerage services are VAT-exempt only if a specific tax rule lays down an exemption for the brokerage. Examples of VAT-exempt brokerage and intermediation services include those that relate to exports of tax-exempt goods to a non-EU country; tax-exempt international supply of services; sale, rental or freightage of tax-exempt vessels; or work on tax-exempt vessels.

7.11 Intangible services

Supply of an intangible service to a business is subject to the general rule on place of supply. In other words, the service is regarded as being supplied in Finland if it is supplied to a buyer that has its place of establishment of a business in Finland (§ 65 of the VAT Act).

Intangible services sold to a consumer are also subject to the general rule (§ 66 of the VAT Act), with the exception of services supplied to a non-EU country. If intangible services are supplied to a consumer who is established in a non-EU country or whose domicile or permanent place of residence is in a non-EU country, the service is not supplied in Finland (§ 69 h of the VAT Act). This special rule in the Finnish VAT Act lists the services that fall under the category of intangible services as follows.

Intangible services include:

1. Assignment of copyright, patents, licences, trademarks and other similar rights;
2. Advertising and announcement services;
3. Consultancy, product development, design and planning, accounting, auditing, writing, drawing and translation services, legal services and other similar services;
4. Automatic data processing, and computer software or system design and programming services;
5. Disclosure of information;
6. Services relating to financial and insurance activities, with the exception of rental of safe-deposit boxes;
7. Leasing or hiring out of employees;
8. The hiring out of movable property, except rental of means of transport;
9. The obligation to refrain, in whole or in part, from exercising a right referred to in paragraph 1, or from carrying out a particular activity of business, and
10. The provision of access to a natural gas network or a network connected to it or to an electric power network or a heating or cooling network located in the European Union, the transfer and distribution of electricity, gas, and heating and cooling power through such networks, and other services directly associated with these operations.

7.12 Telecommunications, broadcasting and electronic services

As a rule, telecommunications services, radio and television broadcasting services and electronic services are taxable in the country where the buyer is established. Telecommunications services, sold to a business, are subject to the general rule on place of supply (§ 65 of the VAT Act; for more information, see section 7.1). If sold to a consumer, these services are subject to a special rule (§ 69 i of the VAT Act). Services supplied to a consumer are supplied in Finland if the consumer is established in Finland, or if his or her domicile or habitual residence is in Finland. By way of exception, a supply to consumers is subject to the general rule on the supply of services (§ 66 of the VAT Act) if a seller, established in only one EU country, sells telecommunications, broadcasting or electronic services to a consumer established in another EU country, for max. €10,000 during the calendar year, and the selling also stayed below the 10,000-euro threshold the previous year.

To settle the question of correct VAT treatment, the seller must determine whether the buyer is a consumer or a business, and also determine the country where the buyer is established. Some circumstances require that the seller must rely on presumptions in order to determine the correct place of supply, both for supplies directed to consumers and for supplies to businesses. This means that the buyer must presume the place where the buyer is treated as having its place of establishment. In addition, the seller will have to determine whether the services are telecommunications, broadcasting or electronic services. For more information, see the Tax Administration’s guide on “Value added taxation of telecommunications, broadcasting and electronic services” - Tele-, lähetys- ja sähköisten palvelujen arvonlisäverotus (in Finnish and Swedish) (see the definitions of different services under section 2, see the place-of-supply rules under section 3, and reliance on presumptions in sections 6.1 and 6.2).

The seller must submit an application for VAT registration in Finland due to the supply to consumers of telecommunications, broadcasting and electronic services; unless the seller already has a registration in the Union scheme or in another VAT special scheme. For more information about VAT special schemes, see “Arvonlisäveron erityisjärjestelmät” - VAT special schemes (in Finnish and Swedish). If services are supplied to a legal person that is not a business, VAT reverse charge must be applied (§ 9 of the VAT Act).

8 Special status of the Åland Islands

With regard to value added taxation, the Åland Islands are comparable to a third country in relation to mainland Finland and other EU countries. Supply of goods between the EU VAT area and the Åland Islands is not subject to the value added tax system involving intra-Community supplies and acquisitions. Instead, the VAT rules that control import and export with third countries apply. In some circumstances, the special status of the Åland Islands also has an effect on the VAT treatment of service supply. A business in Åland cannot use a VAT number with the “FI” prefix when buying services that will be supplied to the Åland Islands, or when selling services from the Åland Islands. The business in Åland, in the above situation, would have no purchases reportable on the value added tax return under “Services purchased from other EU Member States”, nor any sales reportable under “Services sold to other EU Member States”. The above supplies and acquisitions must be reported on the VAT return in the same way as services bought from non-EU countries and services sold to non-EU countries are reported.

However, a business in Åland can use its VAT number when purchasing a service from a supplier established in another EU country, provided that the Åland business being the buyer is also established elsewhere in Finland and that the service, on which the general rule of § 65 of the VAT Act applies, is supplied to a fixed establishment located elsewhere in Finland. The business would have to fill in the “Services purchased from other EU Member States” space on the VAT return to report the purchase.

Because of the VAT boundary, the exceptions listed below apply on the supply of services between Åland and mainland Finland. The list only contains the main exceptions.

• Goods transport services between the Åland Islands and mainland Finland are VAT-exempt. At the same time, passenger transport services are subject to VAT.
• Postal deliveries between the Åland Islands and mainland Finland are VAT-exempt.
• Under § 71, line 12 of the VAT Act, the tax-free brokerage of goods and services relating to international trade is exempt. In the brokerage service sector, similar VAT exemptions are applied on commercial operations between Åland and mainland Finland.

More information about the special status of the Åland Islands can be found in the Tax Administration guidance “Åland tax boundary in value added taxation” - Ahvenanmaan veroraja arvonlisäverotuksessa.

9 VAT reporting

The VAT return must submit to the Tax Administration for every tax period. The most common tax period and reporting period is a month. The VAT return must be filed, for example, by parties that are VAT-liable for their business activity, parties that have registered for VAT on a voluntary basis, and parties that are VAT-liable under the reverse charge mechanism, or because of their being the buyer in an intra-Community acquisition. In addition, a foreign party concerned by the VAT notification duty must submit the VAT return on intra-Community acquisitions or on intra-Community supplies that the foreign party has carried out in Finland. For purposes of controlling intra-Community supplies and acquisitions, the VAT EU Recapitulative Statement must be submitted to the Tax Administration on any intra-Community supplies. The Recapitulative Statement must be filed monthly and itemised buyer-by-buyer.

When the supply of services to a business in another EU country is subject to the general rule, it must be reported as “Services sold to other EU Member States” on the VAT return.  Items reportable under “Turnover taxable at zero VAT rate” include services sold to non-EU countries, services sold to consumers in other EU countries, and services sold to businesses in the EU except for services subject to the general rule. For more information about VAT special schemes, see “Arvonlisäveron erityisjärjestelmät” - VAT special schemes (in Finnish and Swedish) (section 5 of the guide).

Such services, bought from another EU country, for which the buyer is liable to pay Finnish VAT based on the reverse charge mechanism must be entered as “Services purchased from other EU Member States” on the VAT return, and the VAT payable under “Tax on services purchased from other EU Member States”. If a service has been bought for a purpose that qualifies for VAT deduction, the amount must be entered under “Tax deductible for the tax period”. Where services other than those according to the general rule are concerned, reversely charged VAT is reported as “Tax on domestic sales by tax rate” and, where deductible purchases are concerned, under “Tax deductible for the tax period”. Reversely charged VAT paid for a service bought from a non-EU country is reported in the same way. For more information about the filing of services sold or bought and of related purchases, see Instructions for completing the VAT return.

When the sale of services to a business operator in another EU country is subject to the general rule and the buyer is liable for VAT payment, based on reverse charge, the services have to be reported on the EU Recapitulative Statement. Read more about submittal of the Recapitulative Statement in the Tax Administration guidance File an EU VAT Recapitulative Statement to give details on your sales to EU countries.

10 Allocation with regard to time

For businesses that buy services and pay VAT in Finland, the month when the supply of a service takes place – or when an advance payment is made – is generally the tax period where the VAT on the service must be allocated (§ 135a and  § 15, subsection 1 of the VAT Act). VAT payable for any period within the fiscal year may be allocated to the calendar month when the invoice was issued to the buyer. However, time-allocation based on invoicing cannot be applied to a buyer who, based on the reverse charge mechanism, is liable to pay VAT for a service that is subject to the general rule for business operators. In those cases, the VAT relates to the calendar month when the service was rendered or an advance payment was made. The allocation is the same for supplies of services according to the general rule for which the buyer is liable to pay VAT in another Member State based on the reverse charge mechanism. Correspondingly, in the case of a purchase or supply as above, the time-allocation cannot be based on the date when the buyer pays for the services (§ 138 of the VAT Act).

If the seller performs a continuous supply of service, the end date of every “period of settlement” determines the date of supply. “Goods or services sold as a continuous supply” refers to a contract of sale that determines the price as a function of time elapsed, as with rental contracts, etc. This way, the above would be applicable in situations where a taxpayer whose tax period is one month has agreed to make rent payments every two months. In this case, VAT must be filed and paid at intervals of 2 months, at end dates of the periods that determine the rent payments. It is not a continuous supply when the prices depend on delivered quantities, i.e. the prices depend on how many items were sold, or on how extensive the services are. These prices have no connection to the time elapsed. Building contracts are a typical example of a service not considered continuous.

A service sold as a continuous service lasting more than 12 months and not including any settlements during that period is regarded as supplied at the end of each calendar year; until the service is completed in full (§ 15, subsection 3 of the VAT Act). The above only concerns supplies covered by the general rule, sold to a business or to a legal person having a VAT registration, for which the buyer must pay VAT based on reverse charge.

Table for determining the place of supply

Place of supply of services sold to businesses

SERVICE	PLACE OF SUPPLY
General rule	Buyer's country
Services connected to immovable property	Country of location
Passenger transport services	Country of performance
Short-term rental of a means of transport	Country where the means of transport is handed over
Right of entry into educational, scientific, cultural, entertainment and sports events, fairs, exhibitions, etc., and services directly associated with such entry as of 1 January 2011	Country where the event takes place
Restaurant and catering services Within the EU, during passenger transport (vessel, aircraft, train)	Country of performance  Place of departure
Travel agency services	Seller’s country

Place of supply of services sold to consumers

SERVICE	PLACE OF SUPPLY
General rule	Seller’s country
Services connected to immovable property	Country of location
Passenger transport services	Country of performance
Transportation of goods Intra-Community transport	Country of performance Country of departure
Loading, unloading, handling of loads, and other services related to goods transport	Country of performance
Valuation work relating to movable property, and work related to such a movable item	Country of performance
Short-term rental of a means of transport	Country where the means of transport is handed over
Long-term rental of a means of transport Long-term rental of a pleasure craft	Buyer's country Seller’s country, where handed over to the buyer
Services related to educational, scientific, cultural, entertainment and sports events, fairs and exhibitions, etc., as well as organisation of such events as of 1 January 2011	Country where the activity takes place
Restaurant and catering services Within the EU, during passenger transport (vessel, aircraft, train)	Country of performance  Place of departure
Brokerage services	The brokered commodity’s place of supply
Intangible services Sale, with the seller and buyer in the EU Sale to non-EU countries	Seller’s country Buyer's country
Radio and TV broadcasting services, electronic services and telecommunications services Sale, with the seller and buyer in the EU Seller’s country, when total supply does not exceed €10,000 during the calendar year and the seller has not requested application of a special place of supply Buyer’s country, when total supply exceeds €10,000 during the calendar year, or the seller has requested application of the special place of supply rule Sale to non-EU countries Sale from a non-EU country to Finland	Buyer's country Buyer's country Buyer's country