Value added tax, or VAT, is added to almost all sales in Finland. From an entrepreneur's perspective, it is important to know which tax rate applies to which product or service in order to invoice correctly. There are four different VAT rates in Finland, each with its own purpose.
25.5% - General tax rate
- most goods and services
- tools and supplies
14% - Meal and exercise services
- food
- restaurant and café services
- catering services
- feed and food ingredients
- sports services
- passenger transport, e.g., taxi
10% - Reduced tax rate
- Public broadcasting
0% - Other tax rate
- performance fee
- international shipping
- work on watercraft
- exempt from value added tax (e.g., tips)
- sales of goods and services related to international trade
Reverse VAT liability in the construction industry
The construction industry has a special VAT practice called reverse VAT liability. It may sound complicated, but the idea is actually quite simple: the seller, i.e. you (the invoicer), does not add VAT to the invoice, but the buyer (your customer) calculates and reports it in their own VAT return.
In what situations does reverse tax liability apply?
The reverse VAT liability applies to construction services or the hiring of labor for construction services. For example:
- construction of buildings and structures
- repair and renovation work
- building services installation (electrical, HVAC, ventilation)
- earthworks
- building cleaning, if related to construction
In what situations does the reverse charge mechanism not apply?
The reverse VAT liability does not apply when:
- The work is done for the consumer (e.g., home renovation).
- The buyer does not sell construction services and does not operate in the construction contract chain.
- The service is not a construction service.
- This concerns the sale of building materials without labor.
Further information and specific restrictions can be found in the Tax Administration's guidelines.