VAT is a tax that almost every company has to pay on the sale of goods or services. Companies subject to VAT include the required tax rate in the selling price of the product or service they sell and periodically account for the taxes accrued on the sale to the state. VAT is called consumption tax and is intended to be paid by the consumer.
In business-to-business trading, the situation is, of course, different because the buyer is another company. In this case, the VAT included in the price of the product will be paid by another company. As a result, the tax is multiplied because, before the final sale of the product, the manufacture of the product or service may have included several intermediate products purchased from other companies. For this reason, when settling its final seasonal VAT, a company can deduct from the accounts the VAT that another entrepreneur has invoiced him during the period, for example in connection with purchases of raw materials or office supplies. This avoids duplication of tax and avoids paying VAT on the same product more than once. Many entrepreneurs talk about putting purchases into “tax deductions”. This refers to the deduction of VAT on purchases made for the name itself from VAT charged by the entrepreneur himself. Using s corp tax calculator is essential there.
What is reverse charge VAT?
In reverse VAT, the issue is that the taxable person in a business situation changes so that, instead of the seller, the buyer is liable to tax and is responsible for paying VAT to the State. In Finland, the reverse charge VAT is used only in the construction sector, when the buyer is a company that sells construction services other than occasionally. The reverse charge system has been in place for about five years and aims to increase transparency in the construction sector and prevent economic abuse in the construction sector. In the case of reverse charge VAT, the purchaser may deduct the VAT paid on his invoice which he has paid in accordance with the reverse charge liability.
How much is VAT?
In principle, VAT is paid in Finland at a rate of 24%. However, there are a few exceptions; 14% VAT is paid on food, feed and restaurant and catering services. For example, books, medicines and various sports and entertainment services operate at 10% VAT rates. A complete list of industries with reduced rates can be found on the Tax Administration website.
Are all companies subject to VAT?
Almost all companies that sell goods or services are subject to VAT. The exception to VAT is the smallest companies, which are completely exempt from VAT. A company is considered to be exempt from VAT if its turnover for a 12-month financial year is less than 10,000 dollars.