25.5%

standard VAT rate

13.5%

reduced, from 1 Jan 2026

€20,000

VAT-liability threshold

12th

deadline, second month

VAT rates 2026

The standard rate rose from 24% to 25.5% on 1 September 2024. The reduced 14% rate fell to 13.5% on 1 January 2026 under act 1358/2025, and public broadcasting moved from the 10% class into 13.5% at the same time. The lower 10% class now holds only newspapers and magazines, both printed and electronic.

Zero-rated and exempt are not the same thing, even though the invoice shows zero euros of tax in both cases. Zero-rated sales keep the right to deduct VAT on purchases; exempt activity does not. So an exporter gets the VAT on its purchases back, while a provider of healthcare services does not – in exempt activity the input VAT stays a cost of the business and ends up in the price.

How to calculate VAT in a price

Adding the tax is straightforward: price with VAT = price without VAT × (1 + rate). A hundred-euro job at 25.5% costs the customer €125.50, and the tax share of that is €25.50.

Taking the tax back out of a VAT-inclusive price works the other way round, and this is where the arithmetic usually goes wrong: 25.5% is not 25.5% of the inclusive price. The Tax Administration formula is tax = rate × inclusive price ÷ (100 + rate), i.e. 25.5 × 125.50 ÷ 125.5 = €25.50. Taking the percentage straight off the inclusive sum overstates the tax by roughly a fifth.

The extraction multipliers are rounded: the exact values are 25.5 ÷ 125.5 and 13.5 ÷ 113.5. On a single invoice the difference is cents, but in bookkeeping it is safer to use the formula than a rounded multiplier.

The €20,000 threshold: two years, not one

A business may sell without VAT only if its turnover is at most €20,000 in both the current and the previous calendar year. This is the most important and least understood part of the change that took effect on 1 January 2025: one good year makes you VAT-liable for the following year too, even if sales then collapse.

Nor does the threshold split a sale in half. The sale that crosses the limit is taxable in full. If €19,800 has accumulated and you sell a €210 job, the taxable amount is not €10 but the whole €210 – and from that point VAT goes on every invoice. Registration runs from the moment of crossing, not from the start of the year and not from the following year.

The lower-limit relief (alarajahuojennus) was abolished entirely on 1 January 2025. It used to return part of the tax paid near the threshold, which softened the step; the edge is now hard. For a business selling to consumers that means 25.5% comes off the margin the moment the limit is passed, unless prices rise at the same time. Pricing is worth thinking through before the threshold rather than after it.

Voluntary registration

A business below the threshold may register for VAT voluntarily. There is no lower limit for voluntary registration, but the activity must have the character of a business – a hobby or occasional selling is not registered. Registration starts from the date the application arrives at the earliest; there is no retroactive entry in the register, so the application is worth filing before large purchases rather than after them.

• ·Worth it when your customers are VAT-liable businesses: they deduct the tax, so the price does not rise for them at all.
• ·Worth it when the start-up phase involves large purchases – the VAT on equipment, tools and software comes back.
• ·Usually not worth it when your customers are consumers: a price without tax is a direct competitive advantage.
• ·It brings a filing obligation: a return is due for every tax period, including periods with no activity at all.

What you can deduct, and what you cannot

The general rule is simple: VAT on a purchase is deductible if the purchase was made for VAT-liable business activity. The exceptions are a short list, but they are exactly where entrepreneurs go wrong most often.

• ·Passenger car: even minor private use removes the deduction right entirely, and commuting between home and work counts as private use. The exceptions are cars acquired for resale, for renting out, for professional passenger transport or for driving instruction.
• ·Van, lorry and bus: deductible to the extent the vehicle is used in activity that carries the deduction right. The split is evidenced by a driver log kept with the accounting records for at least six years.
• ·Entertainment costs: not deductible at all. Negotiation costs and joint events for staff are a different category, and the distinction is worth documenting on the receipt.
• ·Private use and purchases for exempt activity: no deduction. In mixed use only the share of taxable activity is deducted.

A deduction always requires a proper invoice from the seller; small purchases need only the lighter invoice details. A missing or incomplete document is the most common reason a deduction is disallowed after the fact, and also the easiest mistake to avoid.

Tax period and deadlines

The default tax period is a month. A longer period is available on the basis of turnover, but it has to be applied for: it does not arrive automatically just because turnover is small.

On a monthly or quarterly period the return and the payment fall due on the 12th day of the second month after the period: VAT for June is paid on 12 August, and the April–June quarter on the same day. On a calendar-year period the deadline is the last day of February of the following year. A deadline falling on a weekend or public holiday moves to the next business day.

A return is due for every tax period even if there were no sales at all. A return left unfiled eventually leads to tax assessed by estimation, and correcting an estimate is considerably more work than filing a nil return on time.

What filing late costs

The late-filing penalty is €3 for each day of delay, for a maximum of 45 days – so at most €135. After that, 2% of the tax reported late is added, and this tax-based component is capped at €15,000 per tax type per tax period.

The late-filing penalty does not replace late-payment interest: unpaid tax also accrues interest from the due date. So the return is worth filing on time even when the money for the payment is not there at that moment – the penalty arises from the late return, not the late payment. A payment arrangement for the tax itself can be requested in OmaVero.

EU trade, export and the reverse charge

A B2B sale to another EU country is 0% if the buyer VAT number is valid and you have checked it. The check is made in the European Commission VIES service and is worth saving: if the number turns out to be invalid, the tax falls on the seller. Intra-EU sales also require a recapitulative statement by the 20th of the following month – a separate return, not part of the VAT return.

Selling to consumers in other EU countries follows a different logic. Once such sales across the EU total more than €10,000 a year, the tax is paid to the country of the buyer at that country rate. In practice this is handled from Finland through the One Stop Shop, so separate registration in each country is not needed.

Export outside the EU is 0%. Construction services instead use the reverse charge: the buyer reports and pays the tax, not the seller. A subcontractor invoice then shows a reference to the reverse charge in place of a rate, and the sale is reported on its own line.

Light entrepreneurs and invoicing services

For someone working through an invoicing service, VAT depends on whether the payment is made as wages or as a work compensation. Paid as wages, the service stands in the position of an employer and the invoicer is not VAT-liable. Paid as a work compensation, this is business activity, and the €20,000 threshold applies to a light entrepreneur as well.

The same goes for the other obligations: routing invoices through a service does not release anyone from YEL insurance or from advance tax. What is actually left in hand only becomes visible when all three are counted together – the invoice-to-net calculation walks through the whole chain.