VAT is an indirect consumption tax that is levied on consumers. Businesses selling their products and services must add VAT at the VAT rate used in their industry to their prices and remit the taxes they collect to the tax authorities. Paying VAT has been made easy for light entrepreneurs, as the light entrepreneur service will take care of it for you.
In this article, we will explain VAT liability, payment of VAT and related practices. We will look at whether a light entrepreneur is liable to VAT, why a light entrepreneur must add VAT to their invoice, and how the payment of VAT works in practice.
In Finland, VAT liability applies to all businesses with revenue exceeding EUR 15,000 during the financial year. However, a business can voluntarily join the VAT register before this and add VAT to the price of its products immediately.
It is quite profitable for businesses in Finland to join the VAT register on time because VAT can also be collected retroactively if you exceed the EUR 15,000 revenue limit.
For businesses, joining the VAT register also allows them to claim VAT deductions from their purchases subject to VAT.
Light entrepreneur’s VAT liability
Light entrepreneurs who invoice their work through Eezy or another light entrepreneur service and do not own a business ID are in a special position with regard to VAT, which we will explain next.
A light entrepreneur cannot be liable to VAT because they do not own a business ID. Nonetheless, light entrepreneurs must add VAT to their invoiced prices in accordance with the VAT rate used in their industry.
The position of light entrepreneurs is also different from that of ordinary entrepreneurs in that VAT must be charged to customers from the first euro invoiced. The EUR 15,000 limit for invoicing VAT does not apply to light entrepreneurs, as invoicing takes place with the business ID of the light entrepreneur service. As a result, the VAT limit is always met because the annual invoicing of all light entrepreneurs using the service is included in the revenue.
Payment of VAT
VAT is paid either once a month, quarterly or annually. Annual and quarterly VAT payments are longer tax periods that are especially intended for small entrepreneurs.
Businesses with an annual revenue of less than EUR 100,000 can apply to pay VAT quarterly, and businesses with an annual revenue of less than EUR 30,000 can apply to pay VAT once a year.
By default, the VAT accounting period is one calendar month. The aforementioned shorter tax periods must be applied for separately.
In the normal monthly VAT tax period, the VAT must be declared and paid no later than the 12th day of the second month following the end of the tax period. For example, the VAT for January must be paid by 12 March.
VAT-liable entrepreneurs with a business ID file VAT in the Tax Administration’s online service MyTax and pay VAT through the same service.
Payment of VAT as a light entrepreneur
This means that the light entrepreneur service, which is liable for VAT, takes care of the payment of the VAT collected by you to the tax authorities.
You do not have to worry about paying VAT on time or filing a VAT return and sending it to the tax authorities. The downside, on the other hand, is that you cannot take advantage of VAT deductions on purchases made for your business.