General VAT change: What should a light entrepreneur know?
The general VAT rate will increase from the current 24 percent to 25.5 percent, according to the decision of the Finnish government. The change will take effect on September 1, 2024 and it will also impact invoicing for light entrepreneurs. In this article, you will find the key information about the VAT change as well as guidelines on how to prepare for it.
Why is the general VAT rate increasing?
The Finnish government estimates that the VAT increase will generate approximately one billion euros in additional revenue for the state. This change is part of a broader tax reform aimed at ensuring the balance of public finances. The last increase in the general VAT rate was at the beginning of 2013, when it was raised from 23 percent to the current 24 percent.
When will the changes take effect?
The increase in the general VAT rate will take effect on September 1, 2024. Note that the increase only applies to the general VAT rate, which is currently 24%. Other VAT rates (0 %, 10 %) will not change at this stage.
All work performed on or after the first of September will be subject to the new VAT rate, regardless of when the contract was made or the invoice issued. It is important to note that even if the work was started before the first of September but completed in September or later, the new 25.5 percent VAT rate will apply.
How to prepare for the change?
Adjust your pricing
The VAT increase directly impacts your pricing. If you do not raise your prices, your margins will decrease. For example, if you previously invoiced 100 € (including VAT), the new price should be approx. 102 € to maintain the same margin.
The VAT change is a good opportunity to review your prices. Are you earning the salary you want? We encourage you to raise your prices more than the new VAT requires, as other entrepreneurs will also be raising their prices. Read our tips for increasing your prices (only in finnish).
Try our handy salary calculator to see how much of your invoiced amount you’ll take home after the VAT change.
Communication
It is important to inform your customers about pricing changes in a timely and clear manner. Explain openly why the price increase is happening and how it will affect them. Honest communication helps maintain good customer relationships.
Note that if you have agreed on a VAT-exclusive price with your customer in the form “xx € + VAT,” the final invoice price will automatically change for your customer. However, it is still good to inform your customer, even if the VAT-exclusive price does not change
Other considerations
Remember to update your contracts to reflect your new prices and the new VAT rate. You can use the industry-specific contract templates created by our lawyers, which are available on our online service: Menu ➡ Documents
If possible, make both your own purchases and those related to your work before September: this way, you save the amount of the VAT increase on your expenses.
We at Eezy Kevytyrittäjät will take care of all the necessary system changes for you when the VAT rate changes. You do not need to worry about technical updates – just make sure you select the correct VAT rate based on when the work was performed.
How to choose the correct VAT rate?
The VAT rate is determined by when the work was done or the service was delivered to the customer:
✅ Use the current 24 % VAT rate for all work completed before September.
✅ If your work is completed on or after September 1st, apply the new 25.5 % VAT rate, regardless of when the work began.
✅ If you are engaged in long-term contract work (e.g., a construction project), apply the 24 % VAT rate to parts of the contract completed before September and the new 25.5 % VAT rate to parts completed on or after September 1, 2024.
✅ If your client pays in advance before September for work you will do after September 1, 2024, charge the advance using the 24 percent VAT rate.
VAT rates in our online service
The new 25.5 percent VAT rate is now available for invoices. The current 24 percent VAT rate will remain in our system until the end of the year for potential credit invoices.
If you are using our EezyPay payment solution, you can create EezyPay payment pages with the new 25.5 percent VAT rate starting September 1, 2024. After this, creating payment pages with the 24 percent VAT rate will no longer be possible. Your existing EezyPay payment pages with the 24 percent VAT rate will remain open until September 7, 2024, after which they will be closed. Please ensure that your client makes the payment before this.
Summary: Act now!
Preparing for the impact of the VAT change should start immediately. Update your pricing and inform your customers in good time about the upcoming changes to ensure a smooth transition to the new VAT rate without major issues for your business. If you need help or advice on preparing, we are here for you – call or message us and we will assist you.
