VAT register

In this article, we will tell you about the VAT register and when you have to register for VAT. We will also discuss the obligation of a light entrepreneur to join the VAT register.

What is the VAT register?

The VAT register is maintained by the Tax Administration. The register includes all businesses liable for VAT in Finland. Businesses that are registered for VAT must collect value added tax from their customers and remit it to the Tax Administration.

Being registered for VAT is also a prerequisite for deducting value added tax on business purchases. Joining the register should be done in time, as the registration may take up to three weeks.

When do you have to join the VAT register?

Joining the VAT register is generally mandatory for all Finnish businesses, but there are a few exceptions. In practice, joining the VAT register is not mandatory if the business only engages in operations that are not subject to value added tax or if the business’s turnover is small.

The business is considered to have a small turnover if it does not exceed EUR 15,000 during the accounting period. The business must estimate the turnover for the accounting period in advance in order to make a decision on joining the VAT register. It is better to overestimate than to underestimate the turnover. Your business will have to pay VAT retroactively if the turnover for the accounting period exceeds the EUR 15,000 limit.

If the turnover exceeds EUR 15,000 but is less than EUR 30,000, the business is granted a VAT relief. This way, part of the VAT paid by the business is returned to the business.

VAT-exempt business operations include, for example, health care services, general education services, financial services and copyrights. A more detailed list of VAT-exempt operations is available on the Tax Administration’s website. No VAT needs to be charged on these operations, but businesses cannot claim VAT deductions on their purchases either.

You can join the VAT register voluntarily

An entrepreneur running a business subject to value added tax can join the VAT register even before the aforementioned limits are met. It is possible to join the register already when the business is established or at a later time.

Joining the VAT register voluntarily gives the business the opportunity to deduct the VAT on business-related purchases subject to VAT. If the business’s annual turnover falls below the EUR 15,000 limit, the VAT charged by the business will be returned to the business in its entirety.

Does a light entrepreneur have to join the VAT register?

VAT works differently for a light entrepreneur compared to a regular entrepreneur with a business ID, but we will try to explain the difference in simple terms.

Simply put, light entrepreneurs must add value added tax to their prices and charge it from their customers, but light entrepreneurs themselves are not liable for VAT and do not need to join the VAT register.

Light entrepreneurs must also charge value added tax from the first euro they invoice. Therefore, the turnover limit is not applied to light entrepreneurs. This is because the turnover of all light entrepreneurs invoicing through the same light entrepreneur service is added together under the light entrepreneur service’s business ID. Light entrepreneurs cannot take advantage of VAT deductions or VAT relief either.

However, light entrepreneurs do not have to worry about joining the VAT register or filing VAT returns, as the light entrepreneur service handles these on their behalf. Even though light entrepreneurs are not eligible for VAT deductions, they can easily invoice the expenses arising from the work to the customer and receive expense reimbursement.

Light entrepreneur, here are some things to remember about value added tax and the VAT register

  • The VAT register is maintained by the Tax Administration, and all entrepreneurs liable for VAT must register.
  • Registering for VAT is mandatory if the business conducts operations subject to VAT and the turnover for the accounting period exceeds EUR 15,000.
  • You can voluntarily join the VAT register earlier.
  • VAT deductions require being registered for VAT.
  • Light entrepreneurs must invoice VAT from their customers but not join the VAT register.

Here are some useful links:

Light entrepreneur and VAT

VAT payment

VAT rates