Legal Alerts, News/13 Dec 2024

Changes to the Reduced VAT rates in Finland

The Finnish Parliament has approved changes to the application of reduced VAT rates, which will take effect on 1 January 2025. These changes will apply to sales with a tax point on or after this date, as well as to intra-Community acquisitions and imports of goods allocated to calendar months starting in January 2025.

Details of the changes

Under the new legislation, goods and services currently subject to the lower reduced VAT rate of 10 per cent will transition to a higher reduced rate of 14 per cent. As of 1 January 2025, 10 per cent VAT rate will apply only to newspapers and magazines (both physical and digital) and VAT paid by Yleisradio Oy and Ålands Radio och TV Ab on their government-allocated appropriations. However, there is an intention that these appropriations will be transitioned to the higher reduced VAT rate as of 1 January 2026.

The VAT rate for the following goods and services will increase from 10 per cent to 14 per cent:

Passenger transport services
Accommodation and guest harbour services
Services that provide opportunities for physical exercise
Admission fees, including access to related streaming services, to:
- Performances
- Theatres
- Circuses
- Concerts
- Amusement parks
- Cinemas
- Exhibitions
- Sports events
- Zoos
- Museums
- Other cultural and recreational events and institutions
Use of sports facilities
Medicines
Books (both physical and digital)
Certain works of art
Performance fees charged by performing artists, other performers, and athletes who have opted for VAT liability
Compensation related to copyright when paid to an organisation representing copyright holders

In contrast, menstrual products, incontinence pads, and children's diapers will moved from the standard VAT rate of 25.5 per cent to the reduced rate of 14 per cent.

Other VAT rate adjustments

The changes are part of a broader realignment of Finnish VAT rates, which began with an increase in the standard VAT rate from 24 per cent to 25.5 per cent in September 2024. Additionally, there is a plan to increase the VAT rate on chocolate and sweets from the current 14 per cent to 25.5 per cent. The change is initially expected to come into force on 1 June 2025, but the exact timeline for this change is still uncertain. A government proposal on this matter is expected in February 2025.

If you have any questions about this Legal Alert, please feel free to contact the undersigned or your regular Borenius contact.