FINLAND: COVID-19 VAT IMPLICATIONS

FINLAND – update 9^th July

Zero VAT rate proposed for goods used for testing and preventing COVID-19

A temporary zero VAT rating on intra-Community acquisitions and local sales of goods used for testing and prevention of COVID-19 has been implemented in Finland by amendment 486/2020 to the VAT Act (1501/1993). The zero-rating applies retroactively from 30 January 2020 until 31 July 2020.

The zero rate would apply provided that:

• The goods are supplied to public healthcare service providers, public social welfare service providers, state organizations defined in European Commission decision (EU) 2020/491, organizations approved by the competent national authorities (i.e. Finnish Customs), non-profit organizations defined in article 4 of the Finnish VAT Act (1501/1993), or entities giving the goods free of charge to an entity described above; and
• The goods are intended to be:
  • Distributed free of charge to persons that have or are in danger of becoming infected with COVID-19 or who are participating in the prevention of the COVID-19 pandemic;
  • Made available free of charge to persons that have or are in danger of becoming infected with COVID-19 or who are participating in the prevention of the COVID-19 pandemic, where the goods remain the property of the healthcare provider or social welfare service; or
  • Given free of charge to be used for the purposes described above, under arrangements between Finnish municipalities and private healthcare providers.

The purpose of the amendment is to address the neutrality problem caused by the Commission’s earlier decision to zero-rate only the imports of these goods.

As a consequence of the zero-rating of these supplies, the seller would be entitled to deduct the related input VAT.

Source Credit – Deloitte

FINLAND – update 8^th June

Finland Announces Fourth Supplementary Budget Proposal Including VAT Exemption for PPE

The Finnish government has announced the fourth supplementary budget proposal for 2020 that includes EUR 1.4 billion COVID-19 support package. This includes a proposal that the sale of necessary protective equipment to the social and healthcare sector due to the coronavirus pandemic would, in specific respects, be temporarily exempted from VAT. This temporary arrangement would be applied to the period 30 January to 31 July. The exemption would apply to protective equipment used in coronavirus-related prevention, testing, and care.

A separate release on the fourth supplementary budget proposal also notes the continuation of urgent measures to combat the crisis, including the previously announced payment arrangement for VAT already paid in January–March 2020, as well as the further reduction of interest rate on payment arrangements from 4% to 3%.

Source Credit – Orbitax

FINLAND – update 5^th June

Finnish Government Proposes Temporary Return of VAT Paid and Further Reduction in Late Payment Interest Rate

Finland’s Ministry of Finance has issued a release on government proposals for a temporary return of VAT paid and a further reduction of the late payment interest rate. The interest rate has already been temporarily reduced from 7% to 4% to the end of August 2020 due to COVID-19.

Value-added tax paid by businesses in the first months of the year could be returned to them and rescheduled for later payment

The Government is proposing that value-added tax (VAT) already paid in the early part of 2020 could be returned to businesses as part of revised payment arrangements. Under these arrangements, a rescheduled payment scheme would be drawn up for the later payment of the returned amount of VAT to the Tax Administration.

“The temporary returning of VAT already paid is one of the Government’s measures for alleviating the situation for businesses that find themselves in financial difficulties as a result of the COVID-19 epidemic. I’m pleased that this is now moving forward,” said Minister of Finance Katri Kulmuni.

The Government is also proposing that it would not be possible for the returned VAT to be used towards tax arrears in an adjusted payment arrangement or deferral, but would instead be paid to the VAT-liable business, provided that there are no other obstacles to doing so.

It is also proposed that late-payment interest applicable to payment arrangements and deferrals would be lowered further to 3% from the already reduced level of 4%. This lower rate would apply to taxes due between the start of March and the end of August this year, and to VAT payable in early 2020 that is subject to adjusted payment arrangements.

The intention is that the proposed changes would enter into force as soon as possible.

Source Credit – Orbitax

FINLAND – update 26^th May

VAT paid earlier in 2020 can be claimed back and paid later

The company can claim back the VAT it paid in early 2020. In practice, the company makes a request for a payment arrangement and subsequently pays the refunded VAT back to the Tax Administration through the payment arrangement. The easiest way to request a payment arrangement is in OmaVero 26.5. onwards.

Taxes must be repaid later in the payment arrangement

By requesting a payment arrangement, you can reclaim the VAT paid by your business due in January, February, and March 2020. Please note that you will not be able to recover any late payment interest you paid at the beginning of the year. You will only receive a refund of the original VAT without interest on arrears.

If your VAT tax period is one year, you can request a refund of a quarter, or 25 percent, of your 2019 VAT.

However, a refund does not mean that your business should be able to keep refundable payments on a permanent basis. In the payment arrangement, your company undertakes to pay the VAT back to the Tax Administration later.

When you pay VAT back to the Tax Administration in accordance with the payment arrangement, you will also have to pay 3% default interest. Interest on arrears shall accrue from the original due date of the VAT. Interest is included in the payment arrangement items.

Source Credit – Veroskatt

FINLAND – update 29^th April

VAT loans allow for a temporary refund of VAT payments against an interest charge of 3%

Finland is to offer VAT loans during the coronavirus crises. This enables businesses to apply for a temporary refund of VAT payments they have made on their returns in 2020. There will be an interest charge of 3%.

Source Credit – Richard Asquith (Avalara)

FINLAND – update 17^th April

Businesses can request a removal of the late-filing penalty. However they advise to file VAT returns on time wherever possible.

Source Credit – Accordance VAT

FINLAND – update 17^th April

One-Month Tax Return Extension and VAT/Customs Exemption for Imported Medical Devices Due to COVID-19

The Finnish Tax Administration has announced that due to the current exceptional circumstances (as a result of COVID-19), the tax administration is providing companies more time to file their tax returns. The tax return can now be filed within five months from the end of the accounting period, instead of the normal four months. The one-month extension applies for accounting periods ending between December 2019 and February 2020 and will be displayed in MyTax in April. Despite the extensions, however, the Tax Administration wishes that all companies and organizations who can file their tax return by the normal filing deadline would do so.

It is further noted that this decision applies to all corporate entities, such as associations, housing companies, real estate companies, foreign corporations, cooperatives, and investment funds. The Tax Administration has also announced that, due to the COVID-19 situation, medical devices imported from outside the EU are exempt from customs duties and VAT.

Source Credit – Orbitax

FINLAND – update 7^th April

Finland Confirms Late Payment Interest Rate Reduction Due to COVID-19

Finland’s Ministry of Finance has issued a release confirming that the interest rate on late payments of taxes is temporarily reduced from 7% to 4%. The rate reduction applies retroactively for payments due after the beginning of March 2020 and will continue to apply for taxes due up to the end of August 2020 at the latest.

Source credit – Orbitax

FINLAND – Update 31^st March ⁽²⁾

• Actually, no changes to filing or payment due dates. Application for extension for corporate income tax return filing possible – not possible for VAT return.
• A company may not have to add late-payment interest to their payments if they are unable to pay the tax on time due to a special reason, such as illness. The removal of late-payment interest can be requested in electronically in MyTax.
• Late filing penalties and late payment interest related to VAT can be removed on specific reasons only and only if requested by the taxpayer.
• Companies with temporary financial difficulties can request payment arrangements with eased terms starting 25 March 2020.
• Property owners must pay attention that tenants will continue to be liable for VAT (in particular in bankruptcy situations), if agreed in the lease agreement. Otherwise, the VAT deductions on real estate investments may have to be paid back to the Tax Authorities.
• The Finnish Tax Authorities enhance the handling of VAT refunds to VAT registered companies but no practical measures have been taken yet.
• Timing of output VAT payments to the Tax Authorities can be optimized, if invoices issued at the end of the month could be transferred to the beginning of the following month. This would allow one month additional time for the payment of the VAT. Companies can also improve cash flow if they file taxes on a cash basis method, where possible, and thus, pay output VAT only when payment is received from the customers.
• If the actual income or expenses differ from the original estimates, the company may request a change to their prepayments. A refund related to prior year or a reduction of monthly prepayments related to current year can be applied for now.

FINLAND – Update 25^th March ⁽¹⁾

• Businesses can apply to the Tax Authority for penalties to be waived on late payments.
• Filings and payments must be submitted as usual and on time.

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