Finland to Raise VAT to 25.5% Starting 1 September 2024
The Finnish Ministry of Finance has confirmed an increase in the standard VAT rate from 24% to 25.5%, effective 1 September 2024. This decision, part of the 2025-2028 budget, has already been approved by Parliament and reflects the government’s strategy to strengthen public finances in response to ongoing economic challenges.
Key Changes and Implications:
- New VAT Rate Implementation: With the increase, Finland’s standard VAT rate will become the second highest in the European Union, behind only Hungary. The VAT hike is expected to generate significant revenue to help manage the country’s deficit and broader economic stability.
- Reclassification of Reduced VAT Rates: Starting 1 January 2025, several items currently taxed at reduced rates will face upward reclassification:
- Books, hotel services, public transport, pharmaceuticals, and cultural and sporting events will see their VAT rate rise from 10% to 14%.
- Tampons and nappies, currently taxed at 24%, will be moved to the 14% category.
- Beginning 1 June 2025, confectionary, including chocolate, will see a VAT increase from 14% to the new standard rate of 25.5%. Additionally, soft drinks, tobacco, and certain alcoholic beverages will also face higher taxes.
- VAT Return Filing Adjustments: For businesses filing VAT returns in Finland, there will be changes to the VAT return form starting 1 September 2024. For paper filings, both the 24% and 25.5% sales should be reported in the same box (Domestic sales 24%). However, the online VAT return form will include a new section specifically for reporting sales at the 25.5% rate. For the Q3 2024 VAT return, businesses will need to report sales under the respective VAT rates of 24% or 25.5%.
The Finnish Tax Administration has provided general guidance on how to manage the VAT rate change and its reporting implications, ensuring that businesses are prepared for this transition.
Remain VAT Compliant:
Non-compliance with regards to VAT may result in fines and penalties. Reach out to our VAT Experts with any questions you may have.
