Finland VAT Rate Increase: What Businesses Need to Know

Starting September 1, 2024, Finland will increase its Value-Added Tax (VAT) rates, impacting both small and large businesses. The standard VAT rate will rise from 24% to 25%, while the reduced rates of 10% and 14% will increase to 11% and 15%, respectively. These changes aim to boost government revenue but will affect businesses' operations, pricing, and financial planning

Impact on SMEs

For small and medium-sized enterprises (SMEs), the VAT increase poses several challenges:

• Higher Costs: SMEs operating on tight margins may struggle to pass on the additional 1% VAT to customers, risking reduced competitiveness.

• Cash Flow Strain: SMEs will need to remit more VAT to the government, potentially straining cash flow, especially for businesses with extended payment cycles.

• Administrative Burden: Updating accounting systems and pricing models to reflect the new VAT rates may require extra resources, particularly for businesses without dedicated financial staff.

• Consumer Demand: Higher prices due to the VAT increase may dampen consumer spending, affecting sales.

Impact on Large Enterprises

Larger businesses, while better equipped to handle these changes, will also face challenges:

• Pricing Adjustments: Large companies may need to carefully adjust prices to maintain demand without losing market share.

• Supply Chain Costs: The increased VAT may raise costs throughout supply chains, requiring renegotiations with suppliers and customers.

• Compliance: System updates and employee training will be necessary to ensure accurate VAT reporting and avoid penalties.

Preparing for the Change

Businesses should take the following steps to prepare for the VAT rate increase:

• Assess Financial Impact: Analyze how the VAT increase will affect your pricing, cash flow, and overall financial performance.

• Update Systems: Ensure that accounting and invoicing systems are updated to comply with the new VAT rates.

• Communicate: Clearly inform customers, suppliers, and employees about the VAT changes and how they will affect pricing.

• Seek Expert Help: Consult VAT compliance specialists to ensure your business smoothly navigates these changes.

Conclusion

The upcoming VAT rate increase in Finland will impact businesses of all sizes, requiring adjustments in pricing, cash flow management, and compliance. At Taxavia, we specialize in VAT compliance and advisory work and can help your business prepare for these changes. Contact us today for expert assistance with the upcoming VAT adjustments.

Contact us

Whether you have a request, a query, or want to work with us, use the form below to get in touch with our team.