Value added taxation of foreign service trade

This is an unofficial translation. The official instruction is drafted in Finnish (Palvelujen ulkomaankaupan arvonlisäverotus, record number VH/439/00.01.00/2019) and Swedish (Momsbeskattningen av tjänster vid utrikeshandel, record number VH/439/00.01.00/2019) languages.

This guidance document concerns value added taxation of international service trade.

The guidance has been updated with changes made after 1 January 2010. In addition, technical changes have been made and examples added.

1 General information

Provisions on the country of supply of services specify the country that has the taxation right and the country whose VAT legislation must be applied. In service trade, the country 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 operator. The country of supply also depends on the place where the vendor’s or buyer’s place of establishment or fixed establishment is located.

§ 64 to § 69 l of the Value Added Tax Act specify when a service is sold in Finland, i.e. when the country of service supply is Finland. When a service is sold in Finland, Finnish value added tax must be paid, unless the sale has been separately prescribed as tax-exempt. The value added tax is paid by the vendor, unless the sale is subject to the reverse charge procedure. In the VAT directive (Council Directive 2006/112/EC), the corresponding provisions on service trade are found in Art 43 to 59. In addition, Council Implementing Regulation (EU) No 282/2011, amended with Council Implementing Regulation (EU) No 1042/2013, contains provisions on service trade that are applicable as such in Finland. More information about the implementing regulation and its amendment is provided in the Tax Administration guidance Council Regulation 282/2011 to promote harmonised interpretation of the VAT directive (available in Finnish and Swedish, link to Finnish).

Often, the country of supply of services is determined differently depending on whether a service is sold to a business operator or to another buyer (consumer). Different general provisions are applied to services sold to business operators and to those sold to consumers. A general provision is applied whenever there is no special provision governing the service in question. According to the general provision, services sold to a business operator are taxable in the country where the buyer is established (§ 65, Value Added Tax Act), and services sold to a consumer are taxable in the country where the vendor is established (§ 66, Value Added Tax Act). The general provisions are applicable to most services.

When a service is sold to a business operator, a provision on the country of supply differing from the general provision is applied in the following cases:

• real estate related services, including real estate intermediation
• passenger transport services
• short-term hiring of a means of transport
• right of entry into educational, scientific, cultural, entertainment events, etc. and services directly associated with such entry
• restaurant and catering services
• travel agency services.

When a service is sold to a consumer, a provision on the country of supply differing from the general provision is applied in the following cases:

• real estate related services, including real estate intermediation
• passenger transport services
• goods transport services
• services related to transport
• services related to movable objects
• short-term hiring of a means of transport
• long-term hiring of a means of transport
• long-term hiring of a pleasure boat
• cultural and entertainment services and the like
• restaurant and catering services
• intermediation services
• selling of incorporeal services to non-EU countries
• selling of radio and television broadcasting services, electronic services and telecommunications services.

When the country of supply of services depends on the buyer’s status, the vendor must check whether the buyer is a consumer or a business operator.

2 Concept of service

According to the Value Added Tax Act, ‘goods’ can refer to immovable and movable objects, electricity, gas, heat or cooling energy and the like. ‘Service’ covers everything else that can be sold in the conduct of business (§ 17, Value Added Tax Act). Service includes, for example, construction work, hire of goods, assignment of a patent, assignment of the right to take gravel, obligation to refrain from or endure a certain act or situation, and intermediation of goods in the name of and on behalf of another person. Goods and services can usually be separated. Sometimes goods and services are sold together and are closely associated. A sale is regarded as a single transaction, if one part of the supply is the primary part and the other parts are addition. In other words, even if the supply contained both services and goods, it could still be treated purely as a sale of service or purely as a sale of goods in value added taxation.

Manufacture and assembly of a movable object is a sale of service if the buyer provides the material for the vendor. If only part of the material is provided by the buyer, a case-by-case decision must be made whether we have a sale of goods or a sale of service. For example, assembling a machine or device from parts provided by the customer is a sale of service (Art 8, Council Implementing Regulation No 282/2011). Repairs are also a sale of service. Packing is a sale of service, even when the packing material is also supplied. Hire of goods is a sale of service. However, if according to the agreement the hired object transfers to the renter’s ownership when the hiring period expires or if the renter is obliged to redeem the object, we have a sale of goods. 

If the proportion of service in a sale of goods is negligible, the sale is usually regarded entirely as a sale of goods. Copying operations and selling of a book edition are regarded as a sale of goods, when the material used in the copying and printing is owned by the vendor but the content copied or printed is provided by the buyer (EUT re. C-88/09, Graphic Procédé, Supreme Administrative Court decisions KHO 2013:123 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 whether the portion of service is dominant in relation to the material used in the copying or printing. According to the Court of Justice of the European Union, things that can be taken into account in the consideration include the time used for the service, the nature of service and the proportion of service in the total price.

When a service includes features of various services whose country of supply is determined in different ways, the country of supply must be decided in accordance with the primary nature of service. If a service entity does not clearly contain a primary service, the country of supply is determined in accordance with the general provision. When a service entity consists of separate services, each service is governed by a provision on the country of supply relevant to that particular service. In case of uncertainty, the taxpayer can request written guidance or an advance ruling from the Tax Administration.

3 Business operators

For the purposes of the provisions on the country of supply of services, the concept of business operator is understood in the wide sense. It covers all the business operators and self-employed persons, irrespective of whether their activities are subject to VAT. For example, a vendor of VAT-exempt financial services and healthcare and nursing services is a business operator. A non-profit organisation is a business operator as referred to in the provisions on service trade when the organisation sells goods or services in exchange for consideration, even when its operations are exempt from VAT (§ 4, Value Added Tax Act). If a non-profit organisation does not provide any service in exchange for consideration, for example if all its activities are financed with general aid or donations, it is not a business operator as referred to in the provisions on service trade. An operator of small-scale business (§ 3, Value Added Tax Act) is still a business operator. When an operator of small-scale business buys services according to the general provision from a foreign vendor who is not liable for VAT in Finland, the small-scale operator must pay the VAT on the services based on the reverse charge procedure. The State and municipalities are regarded as business operators when the country of service supply provisions are applied.

For the purposes of the provisions on the country of supply of services, business operators usually also include legal persons entered in the VAT register (§ 64, subsection 1 (2), Value Added Tax Act). Business operators include not only legal persons entered in the VAT register for business but also legal persons entered in the VAT register for some other reason. When a legal person who is not otherwise liable for VAT is entered in the VAT register for private use of real estate management services or restaurant and catering services or because the threshold of intra-Community acquisitions has been exceeded, they are regarded as a business operator because of this VAT registration. However, when a legal person is not otherwise liable for VAT but has registered for VAT based on the reverse charge procedure because of items purchased from a foreign national, the provision on the country of supply applicable to consumers is applied.

If a business operator carries out other operations in addition to selling goods and services, they are regarded as a business operator for the purposes of the provisions on the country of supply with respect to all the services supplied to them. For example, a non-profit organisation running a café is also regarded as a business operator with regard to services supplied to it for use in non-profit sports activities. Similarly, a municipality is also regarded as a business operator with regard to services supplied to it for use in its authority activities that do not fall within the scope of the Value Added Tax Act.

However, the general provision on the sale of service to a business operator is applied only to business operators acting in the capacity of business operator. A business operator does not act in the capacity of business operator if a service is provided for the business operator’s or their staff’s private use. If a service is partly for private use and partly for use in the capacity of business operator, the sale of the service is subject to the general provision for business operators. A business operator acts in the capacity of business operator if services are intended for entertainment purposes, for example, or for non-profit activities of a non-profit organisation that has registered for VAT.

If the country of supply of services depends on the buyer’s status, the vendor must carefully check whether the buyer is a consumer or a business operator. Art 17 to 25 of Council Implementing Regulation No 282/2011 describe the determination of the buyer’s status. It can usually be regarded as a sufficient proof of the buyer’s being a business operator 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 their VAT number and the vendor has no reason to suspect that the buyer is actually a business operator, the vendor may treat the buyer established in the EU as a consumer. When the buyer is an operator of small-scale business established in another EU country and the vendor does not have the buyer’s VAT number but receives other proof that the buyer is a business operator, the provisions on the country of supply applicable to business operators are applied.

If the buyer is established outside the EU, the vendor must verify in some other way that the buyer is a business operator. Sufficient proof is, for example, a certificate provided by authorities of the buyer’s home country for a VAT refund to foreigners, a trade register extract, a VAT number or other tax number identifying the buyer (Art 18, Council Implementing Regulation No 282/2011).

If the nature of service or another reason leads the vendor to suspect that the buyer is not a business operator, the vendor must ask the buyer to provide proof of their business operator status. For the purposes of the general provision on the country of supply, the vendor must also ask the buyer to provide proof if there is reason to suspect that the buyer does not act in the capacity of business operator.

If a business operator not liable for VAT buys a service from another EU country or from a non-EU country and the service is taxable in Finland by virtue of the general provision for business operators, then the business operator must register for VAT for the purchase based on the reverse charge procedure.

4 Fixed establishment

4.1 Concept of fixed establishment

According to the general provision for business operators, a service is sold in the country where the fixed establishment receiving the service is located. If a service is not supplied to a fixed establishment, the service is regarded as being sold in Finland if the place of establishment of the buyer's business is in Finland (§ 65, Value Added Tax Act; see section 7.1). A service according to the general provision sold to a consumer is sold in the country where the vendor’s fixed establishment supplying the service is located. If a service is not supplied from a fixed establishment, the service is regarded as being sold in Finland if the place of establishment of the vendor’s business is in Finland (§ 66, Value Added Tax Act; see section 7.1). For the purposes of the provisions on the country of supply of services, it is often necessary to determine whether a service has been supplied to the buyer’s fixed establishment or from the vendor’s fixed establishment. Because of this, we must define the concept of fixed establishment.

A fixed establishment is not defined in the Value Added Tax Act. It is defined in Art 11 of the Council Implementing Regulation (EU) No 282/2011. According to the regulation, a fixed establishment is any establishment, other than the place of establishment of the business, 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 provide the services which it supplies.

In order that an enterprise could have a fixed establishment, it must have an establishment for conducting business operations. Such establishments include apartments, business premises, industrial plants and equipment used in the enterprise’s business. A fixed establishment must be permanent, i.e. have a fixed geographical location, but it need not be permanently fastened to the ground. For example, an enterprise is considered to have a fixed establishment if it sells transport services in Finland following a certain schedule and route. However, it should be noted that the hiring of real estate or movable objects and the assignment of use of incorporeal rights do not, as such, give rise to a fixed establishment.

In value added taxation, a fixed establishment is required to have sufficient resources for receiving or supplying services. The enterprise 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 enterprise must have sufficient technical resources to receive or supply services. Technical resources refer to, for example, 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, for example, a branch, an office, an industrial plant, a place of purchase or sale, or a place where natural resources are recovered, such as a mine. A fixed establishment may also be located on another enterprise’s business premises. Warehouses located in Finland do not as such constitute fixed establishment but they too must meet the above criteria. Read more in the Tax Administration guidance VAT registration of foreigners in Finland.

4.2 Fixed establishment in the receipt and supply of services

A fixed establishment is assessed differently depending on whether a service is sold or bought. A service is sold from a fixed establishment, if the human and technical resources of the establishment are sufficient for supplying the service. A service is supplied to the buyer’s fixed establishment, if the human and technical resources of the establishment are sufficient for receiving the service.

According to § 65 of the Value Added Tax Act, services sold to a business operator are taxed in Finland, if they are supplied to a fixed establishment located in Finland.  However, if a service is supplied for use in the buyer’s fixed establishment located in another country, the service is taxable in the country where the said fixed establishment is located. When a service is not supplied to a fixed establishment, the service is regarded as being sold in Finland if the place of establishment of the buyer's business is in Finland. If the buyer has more than one fixed establishment, and the relevant fixed establishment cannot be decided based on the nature or use of the service, matters such as the following can be taken into account: the contract, order form, buyer’s VAT identification number reported to the vendor, and the payer of the service (Art 22, Council Implementing Regulation No 282/2011). If a fixed establishment receiving a service uses it for its own needs, the service is taxed in the country where the fixed establishment is located. When the buyer has given the vendor a VAT number valid in another EU country and the circumstances do not imply otherwise, the service is usually regarded as being supplied to a fixed establishment located in that other EU country. If it is still not possible to determine the fixed establishment, the country of supply is considered to be the country where the place of establishment of the buyer’s business is located. The place of service supply is decided based on the time of supply of service. Later changes to the use of the service have no effect on the matter, provided there is no abusive practice (Art 25, Council Implementing Regulation No 282/2011).

According to § 66 of the Value Added Tax Act, services sold to consumers are taxed in Finland, if they are supplied from a fixed establishment located in Finland. However, if a service sold is supplied from a fixed establishment located in another country, the service is sold in the county of location of the said fixed establishment. When a service is not supplied from a fixed establishment, it is regarded as being sold in Finland if the place of establishment of the vendor's business is in Finland.

When a service is being supplied, the vendor’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 it supplies. Even when the vendor has a fixed establishment and a VAT number valid in the country of location of the fixed establishment, the enterprise is not necessarily considered to supply services from that particular fixed establishment. A fixed establishment is not considered to participate in a sale unless the human and technical resources of the establishment are used in the provision of the service. Participation does not mean that the fixed establishment deals with invoicing, bookkeeping, debt collection or other such administrative tasks. If a fixed establishment located in Finland is not considered to participate in a sale, the country of supply of services is not Finland (§ 66, Value Added Tax Act) and the sale is not taxable in Finland.

A VAT number granted to the vendor does not as such provide sufficient proof that the taxpayer has a fixed establishment in the EU country that has granted the said VAT number. However, if the vendor has issued an invoice on a service sold and specified a VAT number of a fixed establishment in Finland, then the fixed establishment has participated in the supply of the service.

5 Place of establishment of the business

For the purposes of the general provisions on the business operator and consumer, the country of supply is usually determined based on the fixed establishment. If a service is not supplied from or to a fixed establishment or if it not possible to determine from or to which fixed establishment a service is supplied, the country of supply is determined on the basis of the place of establishment of the business. By virtue of the provision on a sale to a business operator, if a service is not supplied to the buyer’s fixed establishment, the service is regarded as being sold in Finland if the place of establishment of the buyer’s business is in Finland. A service sold to a consumer and not supplied from the vendor’s fixed establishment is regarded as being sold in Finland if the place of establishment of the vendor’s business is in Finland.

The concept of place of establishment of the business is specified in the implementing regulation (Art 10, Council Implementing Regulation (EU) No 282/2011). The place of establishment of the business is a place where essential decisions concerning the general management of the business are taken, the place where the registered office of the business is located and the place where management meets. Where these criteria do not allow the place of establishment of a business to be determined with certainty, the place where essential decisions concerning the general management of the business are taken shall take precedence. A postal address does not as such provide sufficient proof of the location of the place of establishment of the business.

6 Reverse charge procedure

The reverse charge procedure means that the buyer, instead of the vendor, is liable to pay VAT. The reverse charge procedure is applied in all EU countries to situations where a business operator sells a service according to the general provision to a business operator established in another EU country. In Finland, the reverse charge procedure is applied more widely. In Finland, the reverse charge procedure is also applied to many other services, not only to those according to the general provision.

According to the main rule of the reverse charge procedure, the buyer is liable to pay VAT for goods or services sold by a foreign party in Finland if the foreign vendor does not have a fixed establishment in Finland and has not voluntarily registered for VAT in Finland (9, Value Added Tax Act). The Finnish buyer therefore pays VAT for a service bought from a foreign vendor based on the reverse charge procedure. Foreign party refers to a business operator whose place of establishment of the business is in another country (§ 10, Value Added Tax Act). The business operator’s domicile is the place of establishment of his business, or if no such place exists, the place where the business operator lives or stays on a permanent basis.

If a Finnish business operator or legal person is liable to pay VAT based on the reverse charge procedure but is not registered for VAT, they must register for VAT for goods or services bought. Where a sale of service according to the general provision for business operators is concerned, the reverse charge procedure can be applied only if the buyer is a business operator as referred to in service trade (see section 3). When a Finnish business operator buys a service that by virtue of the general provision on sales between business operators is taxable in Finland, the buyer pays VAT in Finland based on the reverse charge procedure.

When a service is bought by a legal person who is not a business operator, the general provision for business operators does not apply. Neither is the legal person obliged to register for VAT based on the reverse charge procedure. Instead, if a legal person who is not a business operator buys a service other than a service under the general provision from a foreign vendor, for example a service related to real estate located in Finland (§ 67 of the Value Added Tax Act; see section 7.2), the legal person must register for VAT based on the reverse charge procedure.

The reverse charge procedure is not applied if the foreign vendor 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 vendor pays VAT in Finland. However, the reverse charge procedure is applied when the foreign vendor has a fixed establishment in Finland but the establishment does not participate in the said supply (see section 4). If the invoice issued on the sale of the service specifies a VAT number of a fixed establishment in Finland, then the fixed establishment is considered to participate in the supply of the service. In that case, the fixed establishment is liable for VAT and the reverse charge procedure is not applied. The reverse charge procedure is not applied if the place of establishment of the vendor’s business is located in Finland, not even if the place of establishment of the business in Finland does not participate in the supply of the service. 

When a Finnish enterprise sells a service that by virtue of the general provision on sales between business operators is taxable in another EU country, the buyer is liable for VAT instead of the vendor. In the case of a sale like this, the vendor issues an EU recapitulative statement (see section 9). However, the reverse charge procedure is not applied if the Finnish vendor has registered for VAT in another EU country and has a fixed establishment in that country that participates in the supply of the service.

If the country of supply of services is another EU country for a reason other than the general provision, the vendor must check whether the reverse charge procedure should be applied to the sale or whether the vendor should register for VAT in the said country. When a service is sold to a non-EU country and irrespective of whether it is taxable under a general provision or a special provision, the vendors themselves must check if they are liable for VAT or obliged to register for VAT abroad.

6.1 Exceptions to the application of the reverse charge procedure

The reverse charge procedure 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 procedure is applied to sales of construction services taking place between two foreign business operators (§ 8 c, Value Added Tax Act), provided that the buyer is a business operator that sells construction services on a regular basis. More information about the reverse charge procedure in the construction sector is provided in the guidance Reverse charge in value added taxation in the construction sector (available in Finnish and Swedish, link to Finnish).

The reverse charge procedure is not applied to the following supply of services:

• passenger transport services
• right of entry into educational, scientific, cultural, entertainment and sports events, fairs, exhibitions, etc. and services directly associated with such entry.

A foreign party must register for VAT for goods or services sold in Finland, if the sale is not subject to the reverse charge procedure.

6.2 Prevention of double taxation

There are two provisions relating to the reverse charge procedure whose purpose is to prevent double taxation. If goods related to sale of services are supplied from a non-EU country to Finland, the buyer – to whom the reverse charge procedure is applied – must also pay VAT for the import of goods. Where hiring of a movable object is concerned, the buyer can deduct the VAT paid for the import of the hired object (§ 113, Value Added Tax Act). When such services under the general provision (§ 65, Value Added Tax Act) that are other than hiring services are sold to a business operator, double taxation is eliminated such that the buyer need not pay VAT on the service insofar as the buyer has paid VAT on the import of the goods related to the service (§ 72, Value Added Tax Act).

7 Provisions on the country of supply

7.1 General provisions

In service trade, the country of supply of services is determined based on either the general provision or the special provision on the service in question. If no special provision on the sale of the service exists, the general provision is applied. Different general provisions are applied to services sold to business operators and to services sold to consumers. Most services fall within the scope of the general provisions.

7.1.1 General provision for business operators

According to the general provision for business operators, a service is sold in the country where the fixed establishment receiving the service is located. A service supplied to a business operator is regarded as being sold in Finland if it is supplied to the buyer’s fixed establishment located in Finland. If a service is not supplied to a fixed establishment located in Finland or abroad, the service is regarded as being sold in Finland if the place of establishment of the buyer’s business is in Finland (§ 65, Value Added Tax Act). The general provision is also applied when goods or services are sold to the State or municipalities.

7.1.2 General provision for consumers

A service according to the general provision for consumers is sold in the country where the vendor’s fixed establishment supplying the service is located. A service supplied to a consumer is regarded as being sold in Finland if it is supplied from the vendor’s fixed establishment located in Finland. If a service is not supplied from a fixed establishment located in Finland or abroad, the service is regarded as being sold in Finland if the place of establishment of the vendor’s business is in Finland (§ 66, Value Added Tax Act).

7.2 Real estate related services

A real estate related service is regarded as being sold in Finland if the real estate is located in Finland. The country of supply of the real estate related services is always determined in the same way, irrespective of whether the service is sold to a business operator or to a consumer. Real estate related services include, for example, experts and estate agents services, accommodation services, real estate hiring and construction services (§ 67, Value Added Tax Act).

The concept of real estate, or immovable property was harmonised in all EU countries as of the beginning of 2017. The concept is no longer specified in the Value Added Tax Act but in Art 13 b of the Council Implementing Regulation (EU) No 1042/2013.  According to the regulation, immovable property refers to:

• 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.

More information about the concept of immovable property (real estate) is provided in the Tax Administration guidance: Concept of real estate for VAT purposes 1 January 2017 (available in Finnish and Swedish, link to Finnish).

In order that a service could be regarded as a real estate related service, it must have a sufficiently direct connection with the property. A service has a sufficiently direct connection with immovable property when at least one of the following conditions is met (Art 31 a, Council Implementing Regulation No 1042/2013):

• 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 towards, an immovable property, having as their object the legal or physical alteration of that property

Real estate related 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
• survey and assessment of risks and integrity related to immovable property
• the hiring of immovable property, including storage services when a specific part of the property is assigned for the exclusive use of the renter
• the provision of accommodation
• the assignment or transfer of rights to use an immovable property, such as the 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 permanent structures
• the installation or assembly of machines or equipment which qualify as immovable property
• the maintenance and repair, inspection and supervision of machines or equipment if those machines or equipment qualify as immovable property
• building management and other property management services
• intermediation and evaluation 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.

Real estate related services do not include, for example, intermediation of hotel rooms, supply of advertising space on the property, hiring out of an exhibition space as part of a service package, and management of a real estate portfolio (Art 31 a, paragraph 3, Council Implementing Regulation No 1042/2013).

Only such legal services that relate to assignment or transfer of a right to immovable property are real estate related services. Such services include trust services, drafting of a deed of sale, and drafting of hiring and construction contracts. Instead, legal consultation services related to certain terms of contract are usually not regarded as real estate related services. Such services include, for example, legal consultation about the property’s tax matters, pledges, mortgages and 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 real estate investment activities are not regarded as real estate related services.

Installation and assembly of machines and equipment for an immovable property are real estate related services if they are performed on the site of the property. Installation and assembly performed elsewhere before the goods are supplied to the site of the property are not regarded as relating to the property and their country of supply is not determined based on the location of the property.

The Tax Administration guidance Council Regulation 282/2011 to promote harmonised interpretation of the VAT directive (see the section on the supply of real estate related services) specifies when a service is regarded as a real estate related service (available in Finnish and Swedish, link to Finnish).

7.3 Passenger transport services

Passenger transport services are regarded as being sold in Finland, if the transport takes place in Finland. The country of supply of passenger transport services is always determined in the same way, irrespective of whether the service is sold to a business operator or to a consumer. Transport takes place in Finland, if the place of departure and the place of destination are in Finland (§ 68, Value Added Tax Act).  The reverse charge procedure is not applied to passenger transport services (§9, Value Added Tax Act). When transport takes place in Finland and the vendor is a foreign business operator, the foreign vendor must register for VAT in Finland for passenger transport services.

Passenger transport services from Finland directly to abroad, from abroad directly to Finland, and via Finland are exempt from tax (§ 71, subsection 1, paragraph 11, Value Added Tax Act). It is not relevant whether the destination is in an EU country or a non-EU country. For example, cruises to international waters are regarded as transport of passangers directly to abroad and are therefore tax-exempt. A transport service directly to abroad means a transport service from the last place of departure in Finland specified in the transport contract to abroad, supplied by one and the same transport company. A transport service directly from abroad means a transport service from abroad to the first place of destination in Finland specified in the transport contract, supplied by one and the same transport company.

Where passenger transport is concerned, the last place of departure or the first place of destination is, as a rule, the place of departure or destination indicated on the ticket. If, however, the transport is interrupted for other than technical reasons, for example for an overnight stay, the last place of departure and the first place of destination is considered to be the place where the transport was interrupted.   Technical reasons include, for example, technical problems relating to means of transport, and other unexpected reasons, such as weather conditions. Interruption of a transport service due to technical reasons does not turn it from tax-exempt into taxable transport service. 

The vendor of a direct transport to or from abroad do not need to carry out the transport. The vendor of a direct transport can buy the whole transport service or part of the service from other self-employed persons. The country of supply of each transport service sold by a transport enterprise is decided based on the transport contract signed by the transport company in question.

7.4 Transport services of goods

A transport service of goods sold to a business operator is subject to the general provision  concerning the country of supply (§ 65, Value Added Tax Act; see section 7.1). The general provision is applied to transport within Finland, transport within another EU country, and transport between EU countries.  The general provision is also applied to transport taking place entirely outside the EU.

A transport service of goods sold to a consumer is regarded as being sold in Finland if it is performed in Finland (§ 69, Value Added Tax Act).  An EU cross-border transport service of goods sold to a consumer is regarded as being sold in Finland if the place of departure is in Finland. An EU cross-border transport of goods refers to a transport service where the place of departure and the place of destination are in different EU Member States.  The place of departure of a transport service is the place where the goods to be transported are located and from where their transport to another EU country begins. The place of destination is the place where the transport ends (§ 69 a, Value Added Tax Act).

7.4.1 Tax-exempt transport service of goods

Direct transport from Finland to and from a non-EU country to Finland is exempt from tax. Tax-exempt import transport to Finland is taxed in connection with importation of goods (§ 71, subsection 1, paragraph 2, Value Added Tax Act).

A transport service directly to abroad means transport from the last place of departure in Finland specified in the transport contract to abroad, supplied by one and the same transport company. A transport service directly from abroad means transport from abroad to the first destination in Finland specified in the transport contract, supplied by one and the same transport company.

Where goods transport is concerned, the last place of departure or the first place of destination is, as a rule, the place of departure or destination indicated in the consignment note or other transport documentation. 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. For example in a situation where the transport company is committed to transporting imported goods first to a temporary warehouse located in Finland and, after storage, to another place in Finland, the first place of destination is the location of the temporary  warehouse.

In addition to the direct transport services mentioned above, exempt from tax are also internal transport services in Finland when associated with direct transport from Finland to a non-EU country. In these cases, a condition for the exemption from tax is that the vendor of the transport service can prove that the transport is associated with direct transport. Proof may be, for example, a consignment note. The provision on tax exemption applied to the above export transport services (§ 71, subsection 1, paragraph 1, Value Added Tax Act) does not apply to transport between two non-EU countries outside the EU, nor to transport within a non-EU country.

Transport of goods from a non-EU country to Finland is exempt from tax when the value of the transport service must be included in the taxable amount of the imported goods (§ 71, subsection 1, paragraph 2, Value Added Tax Act). The transport costs for goods import are included in the taxable amount up until the first place of destination specified in the transport contract or, if it known that the goods will be transported to another destination within the EU, up until that second destination (§ 91, Value Added Tax Act). The sale of transport services related to importation of goods and included in the taxable amount of the imports is exempt from VAT, irrespective of whether the transport service is associated with the importation of tax-exempt goods or taxable goods. For example, transport services connected with the importation of moveable property carried out as part of a change of residence are exempt from tax (Art 46, Council Implementing Regulation No 282/2011). More information about transport costs relating to goods import can be found in the Tax Administration guidance VAT on importation (available in Finnish and Swedish, link to Finnish).

In addition, tax is not payable on the sale of transport services relating to goods subject to an external transit procedure or imported goods subject to an internal transit procedure (§ 71, subsection 1, paragraph 1, Value Added Tax Act).

Tax exemption of goods transport is applied irrespective of whether the buyer is a business operator or a consumer.

7.4.2 Services related to goods transport

Services related to goods transport include loading, unloading and handling of loads. Services related to goods transport services sold to a business operator are subject to the general provision concerning the country of supply (§ 65, Value Added Tax Act; 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, Value Added Tax Act).

The sale of loading, unloading and similar activities directly associated with the transport of goods to a non-EU country is exempt from tax (§ 71, subsection 1, paragraph 1, Value Added Tax Act). Acceptable proof of goods export to a non-EU country is, for example,  a decision on release with confirmation of exit, or consignment documents. When the country of taxation is Finland, the tax exemption rules are applied irrespective of whether the buyer is a business operator or a consumer.

The sale of loading, unloading and similar activities directly associated with the transport of goods subject to an external transit procedure or imported goods subject to an internal transit procedure is exempt from tax (§ 71, subsection 1, paragraph 1, Value Added Tax Act).

When goods are imported, the taxable amount includes the transport costs, loading, unloading and insurance costs, and other costs associated with the importation up until the first place of destination specified in the transport contract. If it is known, when the tax liability arises (i.e. when the goods are imported), that the goods will be transported to a second destination within the EU, the above costs up until the second destination are included in the taxable amount (§91, Value Added Tax Act). If the value of the service must be included in the taxable amount of the importation, then the sale of this service is exempt from tax (§ 71, paragraph 2, Value Added Tax Act). Other costs associated with the importation of goods include, for example, a forwarding  charges, container handling and terminal charges, and goods charges levied at the port. More information about costs associated with goods import can be found in the Tax Administration guidance VAT on importation (available in Finnish and Swedish, link to Finnish).

7.5 Services related to movable objects

Services related to movable property that are sold to a business operator are subject to the general provision concerning the country of supply (§ 65, Value Added Tax Act; see section 7.1).

Services related to movable property that are sold to a consumer are regarded as being sold in Finland if the services are provided in Finland (§ 69 b, Value Added Tax Act).

Services related to movable property include:

• valuationtesting
• cleaning
• repair
• installation
• dismantling
• modification, and
• manufacturing.

The provision is not applied to storage services, nor to transport services and services associated with them.

When the  vendor assembles a device from components provided by the buyer, we have a service related to a movable property. When an assembling service is sold to a consumer, the service is regarded as being sold in the country where the device is assembled. When the service is sold to a business operator, it is regarded as being sold in the country where the buyer is established. When the assembled device becomes an integral part of immovable property, however, the service is a real estate related service and the country of supply is decided in accordance with section 7.2 (Art 8 and 34, Council Implementing Regulation No 282/2011).

When a movable property is sold installed, we do not have a supply of service. Instead, we have a sale of goods with installation, where the sale of goods is the primary performance and the installation is a secondary performance. If the goods supplier buys the installation from another business operator, the installation performed by this other business operator is, however, a supply of service. However, if the object is installed such that it becomes an integral part of immovable property, we have a supply of a real estate related service.

7.5.1 Tax-exempt services related to a movable object

When the country of supply of a service related to a movable object is Finland, VAT is payable in Finland, unless the sale of the service has been separately prescribed to be exempt from tax. According to the special provisions, the sale of a movable object exported to a non-EU country and of work performances related to a movable object located in the free zone or in a customs or tax warehouse is exempt from tax (§ 71, subsection 1, paragraph 5 and § 72 h, subsection 1, paragraph 5, Value Added Tax Act).

Work performances related to a movable object are exempt from tax in Finland, if the object is exported from the EU immediately after the work performance without using it here. The movable object may be exported by the - vendor of the work performance or by an agent. If the buyer of a work performance is a foreign business operator, the exporter may also be the buyer (§ 71, subsection 1, paragraph 5, Value Added Tax Act). For example, the supply of repair and maintenance for a Russian operator’s vehicle is exempt from tax if the vehicle is exported from the EU immediately after the work performance. The  vendor of the work performance must have accounting records showing that the vehicle has exited the EU.

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 vendor of the work performance can prove that the sale qualifies for tax exemption by means of Customs documentation. This provision on tax exemption is of little significance today, because under the general provision, a work performance sold to  foreign businesses that does not have a fixed establishment in Finland is not taxable in Finland (§ 65, Value Added Tax Act).

The sale of a work performance related to a movable object and carried out in the free zone or in a customs or tax warehouse is exempt from tax, if the work is performed on commercial goods that are to be exported or that have been imported but are undeclared or located in a tax warehouse. Work performances related to the fixed assets of a enterprise conducting warehouse operations or the like in the above zones and places are subject to VAT (§ 72 h, subsection 1, paragraph 5, Value Added Tax Act).

7.6 Hiring out a means of transport

For the purposes of the provisions on the country of supply applied to the hiring out of means of transport, ‘means of transport’ refers to vehicles and to such other equipment and devices designed and used for transporting people or goods that can be pulled or pushed by vehicles.  The above means of transport include cars, vessels and aircraft, trailers, semi-trailers and railway wagons. Containers and permanently immobilised vehicles are not means of transport (Art 38, Council Implementing Regulation No 282/2011).

The country where the service of hiring out a means of transport is sold is determined in different ways depending on whether the means of transport is hired for a short or long term. Where short-term hiring is concerned, continuous possession or use of a means of transport cannot last longer than 30 days. Where vessels are concerned, short-term hiring cannot last longer than 90 days. If the above time limits are exceeded, we have long-term hiring.

Usually t contract states whether a means of transport is hired for a short or long term. When the hiring period changes, it may affect the country of supply of the service. When a short-term hiring contract is extended such that it must be regarded as a long-term contract, the country where the service of hiring out a means of transport is sold must be reconsidered. However, reconsideration is not necessary and the hiring does not turn into long-term hiring from the point of view of the provisions on the country of supply if the extension is clearly attributable to external circumstances. The duration of several consecutive contracts is their combined duration. When one and the same means of transport is first hired out under a short-term contract and the hiring is then extended under a long-term contract, the duration of the short-term contract will not be called into question afterwards provided there is no abusive practice (Art 39, Council Implementing Regulation No 282/2011).

Short-term hiring of a means of transport is regarded as being sold in Finland if the means of transport is supplied to the buyer in Finland (§ 69 c, subsection 1, Value Added Tax Act). The provision is applied irrespective of whether the buyer is a business operator or a consumer.

The place of supply is the place where the means of transport is actually handed over to the renter. The place where the hiring contract is concluded or, for example, the car keys are handed over has no effect on the country of supply.

Long-term hiring of a means of transport to a business operator is subject to the general provision (see section 7.1; § 65, Value Added Tax Act). The general provision is applied to the long-term hiring of both a pleasure boat and other means of transport.

Long-term hiring of a means of transport other than a pleasure boat supplied for a consumer is regarded as being sold in Finland if the renter is established in Finland or if their permanent address or usually resides is in Finland (§ 69 c, subsection 2, Value Added Tax Act).

When long-term hiring of a means of transport other than a pleasure boat is supplied to a consumer, the  vendor must determine the renter’s place of establishment,  permanent address or usually resides based on the information provided by the renter. If the place of establishment, permanent address or usually resides cannot be determined with certainty based on the information provided or if it is impossible to determine it, the place of establishment is decided based on presumptions. This means that the  vendor must decide the buyer’s place of establishment based on two items of non-contradictory evidence (Art 24 c and 24 e, Council Implementing Regulation No 1042/2013). Such items of evidence include:

1. the buyer’s billing address
2. bank details, such as the location of the bank account used for payment or the buyer’s billing address held by that bank
3. registration details of the vehicle hired by the buyer if registration is required in the place where the vehicle is used, or other such details
4. other commercially relevant information.

This list is not exhaustive, because commercially relevant information varies from case to case. Presumptions can be rebutted where there are indications of misuse or abuse by the supplier (Art 24 d, Council Implementing Regulation No 1042/2013).

Long-term hiring of a pleasure boat provided for a consumer customer is regarded as being sold in Finland if the boat is handed over to the buyer in Finland from the vendor's business permanent address or fixed establishment located in Finland. If a vessel designed for pleasure is hired to a consumer under a long-term contract such that the service is supplied to the buyer from the vendor's business permanent address or fixed establishment located in another EU country and the vessel is also handed over to the buyer in that country, the service is not sold in Finland (§ 69 c, subsections 3 and 4, Value Added Tax Act).

7.7 Supply of cultural, entertainment

Right of entry into educational, scientific, cultural, entertainment and sports events, fairs, exhibitions, etc. granted to a business operator, and services directly associated with such entry, are regarded as being sold in Finland if the event takes place in Finland (§ 69 d, subsection 1, Value Added Tax Act). Other services associated with cultural or entertainment events or the like provided for a business operator, such as services associated with the organisation of such events, are subject to the general provision on a sale to a business operator (§ 65, Value Added Tax Act; see section 7.1) or the special provision applicable to the said service.

Services provided for consumers that relate to educational, scientific services, cultural, entertainment and sports events, fairs and exhibitions and  similar services and their organisation are regarded as being sold in Finland if the activity takes place in Finland (§ 69 d, subsection 2, Value Added Tax Act).

The reverse charge  procedure is not applied to a service according to § 69 d of the Value Added Tax Act supplied to a business operator or a consumer (§ 9, Value Added Tax Act). A foreign supplier selling the above services in Finland has to register for VAT in Finland. Because such services supplied to a business operator that are not services entitling to entry and not services directly associated with such entry are subject to the general provision or some other special provision, the reverse charge procedure can be applied to the supply of these services.

More information about the value added tax on cultural and entertainment services and the like can be found in the Tax Administration guidance Council Regulation 282/2011 promotes harmonised interpretation of the VAT Directive (available in Finnish and Swedish, link to Finnish). More information about the value added tax on educational services can be found in the Tax Administration guidance VAT on educational activities (available in Finnish and Swedish, link to Finnish).

7.7.1 Events, education and scientific services

Education, scientific, cultural, entertainment and sports events, fairs and exhibitions and  similar events typically take place in a certain place, are of a predetermined duration and are subject to an admission fee. Events are often organised for a largish undefined group of people, but also a seminar organised for the members of a certain association is regarded as an event. An event may be a single concert, theatre performance or movie, or one that is organised randomly or repeatedly.

Educational events include, for example, courses, training sessions, seminars, symposiums and conferences. Instead, supply of instruction services, such as driving lessons or language and IT courses, is not regarded as an educational event. An essential part of such services is to learn things in practice, and the participant is required to take active part, for example to do assignments.  The duration of the service has no significance. Participants often receive a certificate at the end.  Participation in the above type of training is not regarded as entry into an educational event as referred to in § 69 d, subsection 1 of the Value Added Tax Act. When a training service is supplied to a business operator, the sale is subject to the general provision (§ 65, Value Added Tax Act; see section 7.1). The service is then regarded as being sold in the country where the buyer is established.

Instruction related services provided for a consumer are regarded as being sold in Finland if the activity takes place in Finland (§ 69 d, subsection 2, Value Added Tax Act). Instruction related services refer not only to educational events such as seminars mentioned above but also to all other instruction related services. Instruction that requires active participation and is provided for a consumer is thus also regarded as an instruction related service, and the country of supply is Finland if the activity takes place in Finland. For example, MBA training requiring active participation and supplied to a consumer 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 and surveys. The place to which the results of a scientific service are supplied has no effect on the country of supply.  If a survey a carried out in Finland, the service is taxable in Finland even when the survey results are supplied to another country.

7.7.2 Admission fees and services directly associated with entry

A service entitling to entry into an event means grant of a right of admission in exchange for a ticket or payment (Art 32, Council Implementing Regulation No 282/2011). The country of supply of tickets sold to a business operator or consumer is the country where the event is organised (§ 69 d, subsection 1, Value Added Tax Act). The ticket can be paid for in connection with the entry or in advance for example through an e-service. Season tickets and season fees also qualify.

Services granting a right of entry into an event include for example entry into shows, theatre performances, circus performances, fairs, amusement parks (incl. devices), concerts and exhibitions. They also include entry into sports events, such as matches and competitions, and participation fees for symposia, conferences and seminars.  A service giving an opportunity to exercise, for example by granting a right to use the gym or the like, is not regarded as a right of entry into an event.

Services directly associated with entry include cloakroom services, and the right to use the toilet or the Internet. The services are sold separately to people participating in an event. The above services sold to consumers and business operators are regarded as being sold in Finland if the event is organised in Finland.  Instead, catering services and ticket brokerage services and the like are not services directly associated with entry.

7.7.3 Services associated with organisation of an event

Depending on the service, the services associated with the organisation of an event are subject to the general provision on a sale to a business operator (§ 65, Value Added Tax Act; see section 7.1) or the special provision on the service in question.  Services associated with the organisation of events and other services related to events that are supplied to a consumer are regarded as being sold in Finland if the activity takes place in Finland (§ 69 d, subsection 2, Value Added Tax 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, Value Added Tax Act).

Services associated with the organisation of events include, for example, fair services supplied by the fair organiser to exhibitors, such as a participation fee that covers a required registration fee and hire for exhibition space. Other services supplied by the organiser to exhibitors include, for example, design, construction, decoration, marketing, communication, hiring, 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, staging, lighting and sound reproduction services.

Hiring of exhibition space in association with one or more services related to the event is not considered a real estate related service (Art 31, paragraph 3, subparagraph e, Council Implementing Regulation No 1042/2013). Hiring of exhibition space means providing a defined area or for example a movable table for use during fair participation. Other services associated with the event allow the exhibitor to exhibit objects or advertise services or products. Such services include, for example, design of the exhibition space, cabling, insurance policies, advertising, transport and storage of exhibited objects. When sold to a business operator, the hiring of exhibition space and the other services discussed above are subject to the general provision (§ 65, Value Added Tax Act) or the special provision applicable to the service in question. When sold to a consumer, they are subject to the special provision on the organisation of an event (§ 69 d, subsection 2, Value Added Tax Act).

7.8 Restaurant and catering services

Restaurant and catering services are regarded as being sold in Finland, if they are  provided in Finland (§ 69 e, Value Added Tax Act). The provision is applied irrespective of whether the buyer is a business operator or a consumer. Restaurant service refers to service taking place on the supplier’s premises. Catering service refers to service taking place on premises specified by the buyer.

Restaurant and catering services provided on a vessel, an aircraft or a train during passenger transport taking place in the EU are regarded as being sold in Finland if the place of departure of the transport is in Finland (§ 69 f, Value Added Tax Act). If the transport takes place between Finland and a non-EU country, in either direction, restaurant and catering services sold during the transport are regarded as being sold in Finland if they are provided in Finland (§ 69 e, Value Added Tax Act). However, service for a person travelling abroad is exempt from VAT when performed on a vessel or an aircraft in international traffic (§ 71, subsection 1, paragraph 3, Value Added Tax Act).

7.9 Travel agency services

When a tour operator sells a travel agency service (package tours) to a business operator, the sale is subject to the special provision (§ 69 g, Value Added Tax Act)). When the service is sold to a consumer, it is subject to the general provision (§ 66, Value Added Tax Act). Whether supplied to a business operator or to a consumer, a travel agency service is regarded as being sold in Finland if it is supplied from a fixed establishment located in Finland. When a service is not supplied from a fixed establishment, it is regarded as being sold in Finland if the vendor's permanent address is in Finland.

The VAT margin scheme (§ 80, Value Added Tax Act) and the special provision 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 provision on the country of supply of travel agency services is applicable only when the VAT margin scheme is applied to the sale of the services. More information about the margin scheme is available in the Tax Administration guidance VAT margin scheme applied to travel agency services (in Finnish and Swedish, link to Finnish).

7.10 Brokerage services

A brokerage service sold to a business operator is subject to the general provision on the country of supply, i.e. the service is regarded as being sold in Finland if it is supplied to a business operator established in Finland (§ 65, Value Added Tax Act; see section 7.1). A brokerage service sold a consumer is regarded as being sold in Finland if the services or goods are sold in Finland (§ 69 l, Value Added Tax Act). Brokerage services refer to assignments to sell or buy goods or services in the name of and on behalf of the party buying the brokerage service.

A brokerage service relating to the sale or hiring of immovable property is subject to the country of supply provision on real estate related services, i.e. the service is regarded as being sold in Finland if the property is located in Finland (§ 67, Value Added Tax Act; see section 6.2). Brokerage of hotel rooms or other such accommodation services is not considered a real estate related service. Brokerage of an accommodation service sold to a business operator is subject to the general provision (§ 65, Value Added Tax Act), and the service is regarded as being sold in the country where the buyer is established. If accommodation services are brokered to a consumer, the brokerage service is regarded as being sold in the country where the accommodation is located (Art 31, Council Implementing Regulation No 282/2011).

As a rule, brokerage services are subject to VAT even when the goods or services brokered are exempt from tax. The brokerage service is exempt from tax only when so separately prescribed. Brokerage services are exempt from tax, for example, when they relate to exporting of tax-exempt goods to a non-EU country; tax-exempt international sale of services; sale, hiring or freightage of tax-exempt vessels; or work on tax-exempt vessels.

7.11 Incorporeal services

Incorporeal services sold to a business operator are subject to the general provision on the country of supply, i.e. the service is regarded as being sold in Finland if it is supplied to a business operator established in Finland (§ 65, Value Added Tax Act).

Incorporeal services sold to a consumer are also subject to the general provision (§ 66, Value Added Tax Act), with the exception of services supplied to a non-EU country. If incorporeal services are supplied to a consumer who is established in a non-EU country or whose permanent address or usually resides is in a non-EU country, the service is not regarded as being sold in Finland (§ 69 h, Value Added Tax Act). This special provision of the Value Added Tax Act includes a list of the incorporeal services.

The incorporeal services include:

1. the transfer of copyright, patents, licences, trademarks and other similar rights
2. advertising and publicity services
3. consulting, product development, planning, accounting, auditing, writing, drawing and translation services, legal services and other similar services
4. automatic data processing, and design and programming of IT programs and systems
5. the supply of information
6. services relating to financial and insurance activities, excluding hiring of safe-deposits
7. the hiring out of manpower
8. the hiring out of movable property, excluding hiring of transport equipment
9. the obligation to refrain, in whole or in part, from exercising a right referred to in paragraph 1, or from conducting a certain 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 within the EU, 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. A telecommunications service sold to a business operator is subject to the general provision on the country of supply (§ 65, Value Added Tax Act; see section 7.1). If sold to a consumer, the service is subject to the special provision (§ 69 i, Value Added Tax Act). A service supplied to a consumer is regarded as being sold in Finland if the buyer is established in Finland or if their permanent address or usually resides is in Finland. Exceptionally, a sale to consumers is subject to the general provision on the supply of services (§ 66, Value Added Tax Act), if a  vendor established in only one EU country sells telecommunications, broadcasting or e-services to a consumer established in another EU country for more than €10,000 during a calendar year, and if the threshold was not exceeded in the previous year, either.

To decide the correct VAT treatment, the vendor must determine whether the buyer is a consumer or a business and in what country the buyer is established. In certain situations, the country of supply of services sold to consumers and business operators is determined based on presumptions. Presumptions are used for determining the place where the buyer is considered to be established. In addition, the  vendorwill have to determine whether the services are telecommunications, broadcasting or electronic services. More information about telecommunications, broadcasting and electronic services can be found in the Tax Administration guidance Value added taxation of telecommunications, broadcasting and electronic services (in Finnish and Swedish, link to Finnish) (see service definitions in section 2, provision on the country of supply in section 3, and presumptions in sections 6.1 and 6.2).

The supplier of telecommunications, broadcasting and electronic services must register for VAT in Finland and if it sells services to Finnish consumers. If services are sold to a legal person who is not a business operator, the reverse charge procedure is applied (§ 9, Value Added Tax Act).

A business operator selling telecommunications, broadcasting and electronic services to consumers established in EU Member States may use the VAT special scheme. A business operator selling such services need not register for VAT separately in each Member State; instead, they can fulfil its obligations in a concentrated manner via the tax authority of one Member State. If a Finnish business operator wants to use the VAT special scheme, they can fulfil their obligations in a concentrated manner via the Finnish Tax Administration, in which case the Member State of identification is Finland. More information about the VAT special scheme can be found in the Tax Administration guidance  VAT special scheme (in Finnish and Swedish, link to Finnish).

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. The sale of goods between the EU VAT area and the Åland Islands is not subject to the value added tax system of Intra-Community trade. Instead, the import and export provisions on trading with third countries are applied. Under certain circumstances, the special status of the Åland Islands also has an effect on the value added taxation of the sale of services. A business operator on Åland cannot use a FI-prefixed VAT number when buying services that will be supplied to the Åland Islands, or when selling services from the Åland Islands. In such a case, the business operator does not have any purchases reportable on the value added tax return at 'Services purchased from other EU Member States', nor any sales reportable at Services sold to other EU Member States. The above sales and purchases are reported on the value added tax return in the same way as services bought from non-EU countries and services sold to non-EU countries.

However, a business operator on Åland can use the VAT number when buying a service from a supplier established in another EU country, provided that the buyer is also established elsewhere in Finland and that the service according to the general provision of § 65 of the Value Added Tax Act is supplied to a fixed establishment located elsewhere in Finland. In that case, the purchase is reported on the value added tax return at ‘Services purchased from other EU Member States’.

Because of the tax boundary, for example the exceptions mentioned below apply to service trade between the Åland Islands and mainland Finland.

• Transport services of goods between the Åland Islands and mainland Finland are exempt from tax. Passenger transport services, however, are taxable.
• Postal deliveries between the Åland Islands and mainland Finland are exempt from tax.
• According to § 71, paragraph 12 of the Value Added Tax Act, intermediation of certain tax-exempt sales relating to international trade is exempt from tax. Corresponding tax exemptions apply to trade between the Åland Islands 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 (in Finnish and Swedish, link to Finnish).

9 Filing VAT

A value added tax return must be filed with the Tax Administration for every tax period. As a rule, the tax period equals a calendar month. A VAT return must be filed, for example, by a party that is VAT-liable for business activity, a party that has voluntarily registered for VAT, and a party that is VAT-liable based on the reverse charge procedure or for being the buyer in an intra-Community acquisition. In addition, a foreign party obliged to file a tax return is obliged to file a VAT return on intra-Community acquisitions or intra-Community sales in Finland. For purposes of controlling intra-Community trade, an EU Recapitulative Statement on EU sales must also be filed with the Finnish Tax Administration. The Recapitulative Statement must be filed per calendar month and itemised by buyer.

When the sale of services to a business operator in another EU country is subject to the general provision, the services are reported on the VAT return at Services sold to other EU Member States.  The items reportable at zero rated sales include services sold to non-EU countries, services sold to consumers in other EU countries, and services sold to business operators in the EU except for services subject to the general provision.

Such services bought from another EU country for which the buyer is liable to pay Finnish VAT based on the reverse charge procedure are reported on the VAT return at ‘Services purchased from other EU Member States’, and the tax payable on them is reported at ‘Tax on services purchased from other EU Member States’. If a service has been bought for a purpose that qualifies for a deduction, the tax should also be reported at ‘Tax deductible for the tax period’. Where services other than those according to the general provision are concerned, reversely charged VAT is reported at ‘Tax on domestic sales by tax rate’ and, where deductible purchases are concerned, at ‘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. More information about the filing of services sold or bought and of related purchases can be found in the Tax Administration guidance Filing VAT and other self-assessed taxes ‒ detailed guidance.

When the sale of services sold to a business operator in another EU country is subject to the general provision and the buyer is liable for VAT based on the reverse charge procedure, the services are 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 Assignment to time

VAT on services sold payable by a business operator buying a service in Finland is assigned, as a rule, to the month during which the service has been provided or the interim payment has accrued (§ 135 a and § 15, subsection 1, Value Added Tax Act). VAT payable for the tax period can be assigned to the calendar month of the tax period during which an invoice was issued to the buyer. This assignment to time on the basis of invoicing cannot be applied to a buyer who, based on the reverse charge procedure, is liable to pay VAT for a service that is subject to the general provision for business operators. In those cases, tax must be assigned to the calendar month during which the service has been performed or the interim payment has accrued. A service sale according to the general provision for which the buyer is liable to pay VAT in another Member State based on the reverse charge procedure is assigned in the same manner. Payment-based assignment to time cannot be used, either, in the case of such purchases or sales (§ 138, Value Added Tax Act).

A service provided on a continuous basis is regarded as having been performed at the end of each remittance period associated with the service. Goods or services provided on a continuous basis refer to a sale of a continuous nature where the consideration is determined on the basis of time elapsed. An example of this is hiring business. The provision is applicable for example in a situation where a taxpayer whose tax period is one month has agreed on a hire payable every two months. In this case, tax will be remitted after the two-month period. When goods or services are sold by quantity, i.e. the consideration is not based on time elapsed, we do not have a sale of a continuous nature. Building contracts are a typical example of a service that is not considered to be of a continuous nature.

A service sold as a continuous service lasting more than 12 months and not including any remittance of payments during that period is regarded as performed at the end of each calendar year until the service is completed (§ 15, subsection 3, Value Added Tax Act). The provision concerns only such goods or services according to the general provision sold to a business operator or a legal person registered for VAT for which the buyer is liable to pay VAT based on the reverse charge procedure.

Table for determining the country of supply

Country of supply of services sold to business operators

Country of supply of services sold to business operators

Service	Country of supply
General provision	Buyer's country
Real estate related services	Country of location of real estate
Passenger transport services	Country from which a means of transport is supplied
Short-term hiring of a means of transport	Country from which a means of transport is supplied
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 provision Place of departure of transport
Travel agency services.	Vendor’s country

Country of supply of services sold to consumers

Country of supply of services sold to consumers

Service	Country of supply
General provision	Vendor’s country
Real estate related services	Country of location of real estate
Passenger transport services	Country of provision
Goods transport Intra-Community transport	Country of provision Country of departure of transport
Loading, unloading, handling of loads, and similar services related to goods transport	Country of provision
Valuation of a movable object, and work related to such a movable object	Country of provision
Short-term hiring of a means of transport	Country from which a means of transport is supplied
1. Long-term hiring of a means of transport 2. Long-term hiring of a pleasure boats	1. Buyer's country 2. Vendor’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 provision  Place of departure of transport
Brokerage services	Country of supply of the commodity brokered
Incorporeal services Sale, when vendor and buyer within the EU Sale to non-EU countries	Vendor’s country Buyer's country
Radio and television broadcasting services, electronic services and telecommunications services Sale, when vendor and buyer within the EU Vendor’s country, when the sale of services does not exceed €10,000 during the calendar year and the vendor has not requested application of a special country of supply Buyer’s country, when the sale exceeds €10,000 during the calendar year or the vendor has requested application of the special country of supply provision Sale to non-EU countries Sale from a non-EU country to Finland	1. Buyer's country 2. Buyer's country 3. Buyer's country