VAT Increase: Entrepreneur’s Checklist

In June, the Finnish Parliament approved a change to the Value Added Tax (VAT) Act, increasing the standard VAT rate from 24% to 25.5%. This new rate will be implemented starting September 1, 2024.

In this article, we have compiled the key points that light entrepreneurs and entrepreneurs should check and remember to ensure the transition goes as smoothly as possible.

Checklist for Light Entrepreneurs

As a light entrepreneur, invoicing is done using a service provider’s invoicing platform, such as FREE.fi. This makes the transition easy, as the VAT rate update will be automatically handled by invoicing system.

The most important thing is to inform your customers about the VAT increase and that it will be reflected in the invoices. This minimizes the risk of misunderstandings, and new invoices with the increased VAT rate won’t lead to complaints.

Make sure to especially pay attention to the following to avoid surprises with the upcoming change:

• Inform your customers: Notify your customers about the upcoming change so they are prepared for an increase in the invoice amount due to the new VAT rate.
• Review your pricing: If your invoicing price includes VAT, it’s important to review and reassess your pricing. The increased VAT means that there will be deducted more if VAT is included in the total invoicing amount.
• Purchasing decisions: Plan significant purchases before September to take advantage of the current lower VAT rate.
• Familiarize yourself with exceptions: After the change, you can still invoice work completed before September 1, 2024, using the old 24% VAT rate. Check the examples below to understand when the old VAT rate can still be applied.

Checklist for Entrepreneurs

As an entrepreneur, it’s crucial to pay close attention to the upcoming change, especially if you handle VAT payments to the government yourself and manage your own invoicing system.

If you have an accountant, it’s also wise to review with them how this change will affect your operations in practice and whether it requires any additional actions from you.

The most significant practical effects will be ensuring that the correct VAT is applied on invoices and that the payments are properly forwarded to the Tax Administration.

Here’s what to keep in mind:

• Inform your customers: Notify your customers about the upcoming change so they are prepared for an increase in the invoice amount due to the new VAT rate.
• Update your invoice templates: If you use your own invoice template, update it to reflect the new 25.5% VAT rate.
• Check your VAT payments: If you handle VAT payments to the government yourself, make sure you’ve accounted for the VAT increase in your payment amounts.
• Ensure correct VAT in invoicing: After the change, in certain situations, you can still invoice using the 24% VAT rate. Refer to the examples below to understand when this applies.

Which VAT Rate Should I Use?

Even though the default VAT rate is increasing, you can still in some cases invoice using the old 24% VAT rate.

A good rule of thumb is that if the product or service was provided or delivered to the customer before September 1, 2024, you can invoice it using the 24% VAT rate. However, keep all possible documentation and receipts on hand, in case the Tax Administration requests them for verification.

Below are examples of common invoicing scenarios. We recommend familiarizing yourself with them and applying them to your own situation to ensure invoicing goes as smoothly as possible:

Example 1 (Invoicing in September for work done in August)

Pekka is a gardener who worked for a client during August. Pekka and the client agreed that Pekka would invoice in September for the work done in August.

The invoice date will automatically reflect the current creation date, but Pekka must manually set the invoice row dates to the dates when the work was performed.

Since the work was completed in August, Pekka sets the invoice row dates to August. Therefore, Pekka’s invoice falls under the 24% VAT rate.

Example 2 (Invoicing for work done in August and September)

Kalle is carrying out a project for a client that starts at the end of August and continues through September. The project ends on September 23, and Kalle sends the invoice to the client on September 26.

Kalle adds several invoice rows for the work done, each with different dates:

• The first invoice row, dated August 20, falls under the 24% VAT rate, as it was done before September 1, 2024.
• The second invoice row, dated September 1, falls under the new 25.5% VAT rate.
• The third invoice row, dated September 23, also falls under the new 25.5% VAT rate.

FREE.fi automatically calculates the VAT for each invoice row based on the date of the row.

Example 3 (Invoicing with a base price + VAT)

Matti is a consultant who invoices his work using FREE.fi. Matti has agreed with the client that he will invoice €3000 + VAT once a month.

Since Matti’s work falls under the general VAT rate, he creates the invoice normally and selects that VAT is not part of the net invoice amount (€3000).

VAT is automatically calculated by FREE.fi on the €3000 using the new 25.5% VAT rate and added to the invoice for the client to pay.

Example 4 (Invoicing with a base price INCLUDING VAT)

Sanna is working on a project for a client. Sanna and the client have agreed that she will invoice the client once a month for a total of €2000, VAT included.

Since the VAT rate changed on September 1, 2024, the 25.5% VAT will be automatically calculated and deducted from the net amount, as Sanna has chosen that VAT is included in the total invoiced amount.

For this reason, Sanna should consider raising her prices because the VAT rate is now higher.

Still have questions about the change?

If you still have questions related to the topic, you can contact our customer service! Our professional and friendly customer service team is happy to assist you with invoicing and operating as a light entrepreneur. You can find our customer service contact information here.

• 25.5%
• light entreprenur
• New VAT
• Old VAT
• VAT
• VAT increase

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