Finland has decided to raise income through taxes, with an estimated increase of 3 billion euros. Therefore, from 1st January 2024, VAT rate will increase to 25.5% (+1.5), marking a significant fiscal reform affecting both companies and consumers. The rise, which will affect a wide range of goods and services, reflects the government’s effort to address fiscal challenges, stabilize public finances, and increase revenue. Additionally, it will ensure compliance with Eurozone requirements, which mandate that national debt must be below 3% of GDP.

The VAT hike will affect most industries, including hospitality, retail, and services, potentially leading to higher consumer prices. This change will make Finland’s VAT rate the second highest in the European Union, behind Hungary (27%). Therefore, businesses will need to adjust their pricing policies and accounting systems to accommodate the new tax rate, which could lead to short-term economic disruptions. 

Affected products 

This new rate will only apply to goods and services currently subject to a 24% VAT rate, while reduced rates (10% and 14%) will remain unchanged.

In other words, although the general VAT rate is increasing, it will not impact goods and services sold at reduced VAT rates, such as hotel accommodation and services related to physical exercise. However, there is ongoing discussion about possible additional changes to reduced VAT rates starting in 2025. The proposed reforms include:

• From 1st January 2025: Books, hotel accommodation, public transport, pharmaceutics goods and tickets for cultural and sports events will begin to be part of second tread: rising from 10% to 14%. At least, essential hygienical products as tampons and nappies will be reduced from 24% to 14%. 

• From 1st June 2025: sweets and chocolate will grow from 14% to new 25% 

VAT application 

Value-added tax on a service is allocated to the tax period when the service is provided to the recipient. If the service performance is in an unfinished state at the time when the VAT change comes into force, the percentage rate to be applied will be the one in effect at the date when the finished service is provided. This means the date when the result becomes available to the recipient of the service. 

So, if you need to improve your tax compliance, contact Auxadi for expert tax management. With extensive experience and operations in over 50 countries, we are ready to assist you. Let us help you achieve your goals.

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