The Ultimate Guide to VAT (ALV) for Finnish Entrepreneurs (2025 Edition)
Confused by the 25.5% rate or the new €20,000 threshold? We break down everything you need to know about Value Added Tax in Finland and how to manage it effortlessly.
May 15, 2025
ALV Explained: The Basics
Value Added Tax (Arvonlisävero or ALV) is a consumption tax paid by the customer, not the business. However, as an entrepreneur, you are the government's unpaid tax collector. You collect it from your clients and pay it to the Tax Administration (Verohallinto).
If you mess this up, you face penalties. If you get it right—and track your deductions correctly—you can significantly lower your tax bill.
The New VAT Rates (Updated 2025)
Finland recently underwent significant changes to its VAT structure. It is crucial to ensure your invoicing software is updated to these new rates:
25.5% (General Rate): Applied to most goods and services. (Increased from 24% in Sept 2024).
14% (Reduced Rate): Applies to food, restaurants, animal feed, and—as of Jan 2025—books, public transport, and accommodation (hotels).
10% (Reduced Rate): Now strictly limited to newspapers, magazines, and medicines.
0% (Zero Rate): Export of goods, selling services overseas, and certain healthcare services.
Pro Tip: If you are still using old Excel templates with "24%" hardcoded, you are non-compliant. Finctra updates these rates automatically.
When Must You Register? (The €20,000 Rule)
As of January 1, 2025, the threshold for VAT liability has increased.
Under €20,000 Revenue: You are not required to register for VAT. You don't add tax to your prices, but you also cannot deduct tax from your purchases.
Over €20,000 Revenue: You must register. You must add VAT to your invoices and file periodic reports.
Strategy Note: Even if you are small, registering voluntarily can be smart if you have high startup costs (like buying a laptop or equipment), because registered businesses can reclaim the VAT they pay on business purchases.
The "Hidden Change": The End of VAT Relief
For years, small businesses relied on "VAT Threshold Relief" (Alarajahuojennus) to get some tax money back if their turnover was low. This was abolished on Jan 1, 2025.
What this means for you: You can no longer rely on a tax refund at the end of the year just for being small. The only way to lower your VAT bill now is to accurately track and deduct every single business expense throughout the year.
If you lose a receipt, you lose money.
Input vs. Output VAT (How to Pay Less)
The formula for what you owe the government is simple, but powerful:
VAT Collected from Sales (Output) MINUS VAT Paid on Purchases (Input) = Tax You Pay
Scenario: You sold €1,000 of services (Collecting €255 VAT). You bought a printer for €200 (Paying €51 VAT).
You Owe: €255 - €51 = €204.
If you forget to scan that printer receipt, you owe the full €255. This is why using a tool like Finctra to snap and digitize receipts instantly is not just convenient—it's profitable.
Automating Compliance with Finctra
Managing ALV manually is a recipe for errors. Finctra acts as your automated compliance officer:
Automatic Calculations: We apply the correct 25.5% or 14% rate to every invoice you create.
Expense Detection: Snap a receipt, and Finctra extracts the VAT amount to maximize your deductions.
VAT Report Generation: At the end of the month (or quarter), Finctra generates the figures you need for your OmaVero filing in seconds.
Stop worrying about the taxman. Start maximizing your deductions.
Start your free trial with Finctra today.
