This article provides some guidance on how the new VAT rate applies to specific situations and what the practical implications for businesses are. It also provides some guidelines for applying the new Finnish VAT rate for e-commerce businesses that report their EU-wide VAT via the EU’s One Stop Shop (OSS).
Tax point rules
- The higher VAT rate of 25.5% per cent applies if a tax point occurs after 1 September 2024.
- For supplies of goods, the date of delivery generally determines the tax point and applicable VAT rate.
- For services, a tax point generally occurs when a service performance is completed.
- Special tax point rules apply for so-called continuous supplies.
Advance payments
If an advance is paid to the seller, the tax point occurs when the payment is made. This means that if the seller receives the advance before 1 September 2024, the VAT rate of 24% per cent is applicable even if the goods are delivered after 1 September 2024.
Implications for e-commerce businesses
E-commerce businesses paying VAT via the EU's One Stop Shop (OSS) need to apply the higher rate of 25.5% per cent from 1 September 2024 when the EU Member State (MS) of consumption is Finland.
Tax point when the VAT is paid via OSS
The VAT rate currently in force depends on the date of delivery of goods or the date of completed performance of a service. However, if the payment is received in advance, the VAT rate would depend on the point in time when the e-commerce business gets the advance amount.
In other words, if delivery is made before 1 September, VAT will be 24 per cent. If delivery is made on 1 September 2024 or later, VAT will be 25.5 per cent. However, if the seller receives an advance before 1 September, the VAT rate on this sale is 24 per cent.
However, when the Import Scheme of the OSS (IOSS) is used, the time when the buyer’s payment for the goods is accepted is the time that determines the VAT rate. This is a derogation from the usual rules outlined above. In the same way, when the Union scheme of the OSS is used by deemed suppliers (i.e. so-called platforms or electronic interfaces), the applicable VAT rate will also depend on the time when the buyer’s payment for the goods is accepted.
Impact on reporting
Taking account of the fact that quarterly periods are relevant to both the Union and Non-Union schemes of the OSS, the change will enter into force part way through the Q3 2024 period (1 July–30 September 2024). If the business is reporting any sales of goods/services for the Q3 period, and the applicable VAT rate will vary, it should fill in two different lines when completing the OSS VAT return for Q3 2024 (as in "sales of goods 24 per cent" on one line, and "sales of goods 25.5 per cent" on the next line).
Practical implications
Businesses will need to review their contracts and their VAT clauses. They also need to update their prices, invoices, websites, and accounting systems to reflect the new rate. It is important to also consider a tax point for changes and seek advice on how to apply the correct rate in transitional periods. The businesses should also implement checks on their purchase invoices to ensure that these include a correct Finnish VAT rate.
Since businesses have only a few weeks to implement the change, they need to act promptly to ensure compliance.
Contact
Would you like more information on VAT? Our specialists are happy to help you.
Contact us
