Standard rate rises from 24% to 25,5%

Effective September 1, 2024, Finland will implement new VAT rates as part of a broader tax reform. These changes are designed to modernize the tax system and adapt to current economic challenges and needs. The general VAT rate will be adjusted from 24% to 25.5%, meaning most goods and services will become slightly more expensive for consumers.

However, the reduced VAT rates of 10% and 14% will remain largely unchanged, covering items such as food, medicine, books, and certain cultural and social services. There are plans to increase the VAT on confectionery—sweets and chocolate—from the current 14% to the general rate of 25.5%. Here we are still awaiting the final decision.

Finnish authorities consider it imperative to strengthen public finances. The Ministry of Finance has stated that these adjustments are necessary to improve the sustainability of public finances, create conditions to curb national debt growth, and secure critical sectors through investments in employment, security, and education. The increase is a response to inflationary pressures and the need to balance budgets in a time of economic uncertainty. Finland is following a trend in Europe where several countries are considering VAT adjustments as a way to ensure economic stability in challenging times.

General Recommendations for Exporting Companies:

• Analyze Price Sensitivity: Assess how the increased taxes and VAT will affect the pricing of your products and services in Finland.
• Build Local Partnerships: Consider strategic partnerships with Finnish companies to benefit from their increased R&D investments.
• Focus on Innovation: Increase investments in research and development to remain competitive, especially in sectors where Finland is also boosting its investments.
• Monitor Political Changes: Keep an eye on further details and implementations of the economic reforms that may affect market conditions.

By adapting strategies and operations to the new economic realities in Finland, exporting companies can continue to maintain and expand their presence in the Finnish market.

TIMEVAT recommends that companies update their systems and inform their customers about the changes well before September 1, 2024.