Insights | July 27, 2020

VAT implications in Finland due to the current coronavirus situation

The current COVID-19 emergency has caused various VAT implications in Finland. The situation has resulted in implications for example in regard to the VAT treatment of reservations that are cancelled due to COVID-19 and the leasing of real property. The Finnish Government has also issued some exceptional procedures and reliefs concerning VAT payable by Finnish companies.

Special arrangements regarding VAT payment schedules and relending of paid-in VAT

The COVID-19 emergency has also caused other VAT implications, for example regarding liability and timing to notify and settle the VAT. The Finnish Tax Administration has stated that they cannot grant more time for filing VAT returns or other tax returns for self-assessed taxes. However, there is an additional interim possibility to request the removal of late-filing penalties and late payment interests, if there is a justified reason, such as illness or quarantine, for not filing the tax return by the due date or for not paying the tax on time. The removal request can be conducted by contacting the Tax Administration on the return’s due date (general due date on the 12th of the month) or immediately after.

The Finnish Government has also implemented measures relating to tax payment arrangements. Under normal circumstances, the Tax Administration may grant payment arrangements for a taxpayer who has temporary (no long-term) financial difficulties concerning VAT, and when the Tax Administration estimates that granting the payment arrangements will help the taxpayer in their tax payments. However, due to the COVID-19 situation, the Finnish Tax Administration does not re-evaluate or challenge the nature of the taxpayer’s financial difficulties or the benefits of the payment arrangements. Therefore, if the taxpayer has difficulties paying VAT due to the current situation, they can request a payment arrangement.

Due to the COVID-19 situation the terms of payment arrangements have eased, if the arrangements have been requested between 25 March 2020 and 31 August 2020. The rate of late-payment interest on taxes included in a payment arrangement has been lowered from seven (7) percent to two and half (2,5) percent. The lowered interest rate will only apply to taxes that are included in a payment arrangement and that are due after 1 March 2020 (i.e. it does not have a retroactive impact on payments due by the end of February 2020).

The Finnish Government has opted to grant a possibility to relend paid-in VAT back starting 26 May. Under this procedure, it is possible to request that the VAT paid in January, February and March is returned. The paid-back VAT should then be repaid within two years and there is also a 2,5% late-payment interest. Additionally, there is a possibility to request that the use of tax refunds on unpaid taxes in April, May and June are cancelled and that refunds are paid back. The paid-back procedure requires that payment arrangements are requested by 31 August.

Temporary exemption regarding supplies of medical goods

The Finnish Government has also recently granted interim procedures according to which medical goods supplies (including the selling, import and Intra-Community acquisitions) are VAT exempted if the purchaser is a public healthcare or social welfare operator and the goods are used for COVID-19 prevention, testing or treatment. It is also possible to deduct input VAT relating to these supplies. The exemption can only be applied to supplies made between 30 January and 31 July 2020. However, as the exemption can only be applied to supplies intended towards public operators, its scope seems rather limited.

There are also other exemptions from import duties and VAT concerning certain medical equipment and supplies that are imported from outside of the EU and are intended for release for free circulation by or on behalf of State organizations or other charitable operators. As the exemption is also meant to be in force only between 30 January and 31 October 2020 and it only applies to import by or behalf of State organizations, its scope is limited.

New business cost support

The Finnish Government has also introduced new business costs support measures that are intended to help businesses that have had financial difficulties and have faced a decrease in turnover due to coronavirus. The support measures can be requested between 7 July 2020 and 31 August 2020. The support measures should not be subject to VAT, as they are meant to support companies generally and the support does not relate to any particular goods or services provided by the recipient of the support.

Leasing of real property

It is also important to notice that the COVID-19 emergency could have severally impacted VAT treatment of leasing of real property located in Finland. Under the main rule, the leasing transactions concerning real property are exempt from VAT. However, the taxable persons, especially companies engaged in business operations subject to VAT, have normally opted for taxation of the leasing of real property by voluntary registration and gain the right to deduct VAT on goods or services used for its taxable transactions. The registration requires that the tenant uses, at least partly, the premises for activities subject to VAT.

COVID-19 has caused situations where the tenant has been unable to pay the rent or the payment is postponed due to tenant’s financial difficulties or temporarily closed business. However, even under such circumstances it should be possible to continue leasing-activities subject to VAT and deduct input VAT relating to property investments and other general cost as long as the tenant continues to use premises for activities subject to VAT. Only if the tenant leaves the premises permanently, the taxable person may be required to adjust VAT deductions. Therefore, it is important to ensure the ability to demonstrate that the intention was to continue to pursue taxed activities for example by showing that the taxable person has sought continuously to rent the non-occupied premises or that the disruptions have only been temporary.

Cancellation of reservations

COVID-19 caused situation where nearly all reservations were cancelled due to the virus. In standard situations VAT is included in the taxable amount of the reservation as a part of the consideration if the amount is paid as a prepayment and there is a direct link between the supply and the service for consideration. Therefore, when the seller cancels the reservation and returns the amount, there should be no additional VAT implications.

However, if the customer cancels the reservation, leaves the service provided unused or is even unable to use the service because of COVID-19, it can sometimes be unclear whether the amount already paid for the reservations is a taxable transaction or outside the scope of the VAT. Usually the prepayment is subject to VAT and the cancellation has no effect to the VAT treatment of the situation. Therefore, the amount can rarely be outside the scope of VAT but it may be possible, if the sum retained by the seller is considered to be a fixed cancellation charge paid as a compensation for the loss suffered as a result of customer default and which has no direct connection with the supply of any service for consideration.

Due to the COVID-19 emergency there have been many cancellations and terminations which took place under varying circumstances in Finland. As the correct VAT treatment of the cancellation situation depends on the circumstances and fixed terms, the assessment has to be conducted case by case.


The Finnish Tax Administration has provided the companies under the still ongoing COVID-19 circumstances with some readily available options to maintain a healthy cash flow and to ensure the continuity of otherwise healthy business operations despite temporary difficulties and challenging times. Furthermore, the current COVID-19 situation highlights the importance of conducting careful case by case -analysis of the VAT treatment in current scenarios. If the current exceptional situation continues, it is important to conduct a careful analysis of the situation and to acknowledge possible changes concerning VAT. We are happy to discuss with and help our clients to resolve various VAT implications and their possible influence and prospects to your current business-activities, as well as to utilize the special arrangements to the best possible extent.