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Reverse Charge & “Call Off Stock” in Finland

If a Finnish business registered for Value Added Tax (VAT) receives services from a non-resident supplier and doesn’t supply from a fixed place of business in Finland, then it’s required to account for VAT on the supply under the “reverse charge” mechanism if Finland is the place of supply. This is according to Article 9 of the Finnish VAT Act.

Under the reverse charge method, the Finnish VAT-registered business is considered to have made a taxable supply of the imported services to itself, resulting in an output VAT liability and an equal input VAT credit. If the Finnish company only makes taxable supplies, then it won’t incur any cost, not even a cash flow cost, since these two sums will cancel out immediately.

Read more about Reverse Charge and “Call-off stock” in Finland in our comprehensive guide.

VAT guide Finland

Reverse Charge in Finland

However, suppose the Finnish business also makes exempt supplies. In that case, only a portion of the input VAT credit can be recovered, and the business is in the same position as if it had received the services from another business established in Finland.

In the following scenarios, the reverse charge mechanism is used:

  • Services provided by a non-established person to a taxable recipient in Finland
  • Work on tangible property provided by a VAT-registered person in another EU Member State for a receiver who is VAT-registered in Finland
  • A taxable recipient’s intra-community acquisitions
  • Domestic construction services and trash and scrap metal supplies to a construction company.

A VAT representative can be appointed by a company not based in Finland but must register for Finnish VAT. (This isn’t a replacement for registering; it’s just a different technique to manage the resulting liabilities.)

A Value Added Tax (VAT) representative is responsible for maintaining VAT records and accounts and accounting for Finnish VAT on behalf of a company. However, the VAT representative is not responsible for any VAT debts incurred by the company. The appointment of a VAT representative is necessary if the company is not registered in Finland and does not have a permanent establishment in Finland or any other European Union (EU) country.

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 Finland –  ‘call-off stock’ 

Consignment stock is, generally, stock that is sent by a transferor (or “consignor”) to a warehouse, to then be sold to a final customer by an intermediary called a consignee. The stock remains under the consignor’s control, and the title generally passes to the consignee just before the stock is finally sold.

 

Call-off stock is generally goods transferred by a supplier to a warehouse or storage facility, where a previously identified customer may take them at will. The warehouse is often owned or controlled by the customer.

 

When a foreign consignor transfers consignment stock to a warehouse in Finland from outside Finland, they are typically required to register for Finnish VAT. If the stock is transferred from another European Union (EU) member state, the transaction is considered an intra-Community acquisition under Article 26a of the Finnish VAT Act.

 

However, if the stock is transferred from a third country, the transaction is treated as an import, and the consignor is responsible for VAT if they are considered to be holding the goods for customs purposes. The consignee’s removal of the stock from the warehouse is treated as a domestic supply.

 

Sales of call-off stock that involve a movement of goods into Finland generally also trigger a registration requirement. However, suppliers of call-off stock registered in the EU Member States may be able to avoid registration in Finland under a simplification scheme if certain requirements are met. Different simplification schemes apply as of January 1, 2020, and before that date.

 

Simplifying the EU’s call-off stock regime

 

Starting from January 1, 2020, one of the “Quick Fixes” provided by Article 17a of the EU VAT Directive, which has been implemented into the Finnish VAT Act under Articles 18c-d, 26h-i, and related provisions, has harmonized call-off stock arrangements across the EU Member States. These regulations apply when a supplier in one EU Member State transfers stock to a warehouse in another EU Member State to satisfy a known purchaser.

 

Under this simplification rule, the transfer of stock to the warehouse is not a taxable event. However, the subsequent transfer of ownership of the goods to the recipient is a taxable event. This taxable transfer is treated as a zero-rated intra-Community supply of goods from the supplier to the recipient and an intra-Community acquisition in the Member State. This eliminates the requirement for the supplier to register for VAT in the Member State of destination.

 

However, the transfer must occur within 12 months. After 12 months, the obligation to register for VAT in the destination Member State is in place.

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Finland – Import VAT

In Finland, the VAT liability is based on the location where the goods or services are supplied rather than the supplier’s location. The VAT rate charged on goods or services obtained from outside Finland is the same as the rate applied if the goods or services were delivered in Finland. For imported goods, VAT (known as “import VAT”) is payable upon importation, while for services, the “reverse charge” mechanism or location of supply regulations are used to determine VAT liability.

 

Under Article 1 of the Finnish VAT Act, all products imported into Finland are subject to VAT.

 

 Liability for Import VAT

 

When items are imported from outside the EU, the importer usually pays VAT. An “importer” in this sense is a corporation that sells items in Finland and, as a result, is almost certainly necessary to register as a VAT payer.

 

If an importer is not VAT-registered, however, the Finnish recipient of the products must pay the import VAT and customs tax when the goods are received. If imported products are used to make other taxable goods or services, the Finnish recipient of the items is subject to the standard requirements for recovering input VAT.

 

Time of import

 

Under Article 86b of the VAT Code, goods are treated as imported when:

  • They arrive in Finland directly from outside the EU and enter free circulation in Finland or customs duty otherwise becomes chargeable on them; or
  • They have been placed under a customs suspension arrangement, and the goods are removed to free circulation in Finland, or customs duty otherwise becomes chargeable.

 

Last Updated: 14/12/2023

 

Disclaimer

The information provided by Global VAT Compliance B.V. on this webpage is intended for general informational purposes only. Global VAT Compliance B.V. is not responsible for the accuracy of the information on these pages, and cannot be held liable for claims or losses deriving from the use of this information. If you wish to receive VAT related information please contact our experts at support@gvc.tax

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