General VAT rate changes from 24 % → 25.5 % on September 1st
The VAT rate for most common goods and services increases to 25.5% on September 1st. – Read from the article about the effects of the VAT change on entrepreneurs.
Published on:
26.6.2024
Written by:
Miikka Ihalainen
The government has decided to raise the general VAT rate from 24 percent to 25.5 percent. The VAT rate change takes place on September 1, 2024, and affects the value-added tax on the most common products and services. The reduced VAT rates will remain the same in the future, but some of the services at 10-rate will move to the 14-rate in January 2025.
The VAT change in a nutshell
- The most common goods and services will be sold with a 25.5% VAT rate starting from September 1st.
- The OP Light Entrepreneur service takes care of the VAT rate change on invoices and account sales.
- The previous 24% rate may have to be used after the change, as the VAT rate is determined by the performance or delivery date.
- For example, if you are invoicing for a kitchen renovation that was handed over to the customer on August 20, mark the date August 20 on the invoice line — the general VAT rate is 24%, which can be selected when creating the invoice.
- Check your agreements and other marketing materials, such as price lists well in advance and inform your customers about the change.
Read from this article how the rise in VAT rate affects you as an entrepreneur and how practical matters are handled after the change. We are always here to help you and ensure that everything goes right in terms of VAT on your behalf.
Impact of VAT Increase on Price Calculator
The calculator is indicative and is provided solely to illustrate the impact of the VAT change. The calculator does not take into account the service fee cap (€30,000) or the amount of any prepayment tax.
You should charge a total of €0.00 with a VAT rate of 25.5% starting September 1st to keep the VAT-free price the same.
- Service fee incl. 24%
- €0,00
- Service fee incl. 25.5%
- €0,00
- Difference in VAT effect after VAT change
- €0,00
- Difference in VAT effect after VAT deduction The VAT on the service fee also increases to 25.5%, which reduces the VAT payable if you are VAT liable.
- €0,00
VAT on general products and services
| Product or service | VAT rate until 31.8. | VAT rate from 1.9. onwards | VAT rate 1.1.2025 |
|---|---|---|---|
| General products and services | 24% | 25,5% | 25,5% The VAT rate will not change at the turn of the year. |
| Sports and fitness services | 10% | 10% | 14% Increases from 10 % → 14 % on 1.1.2025. |
| Grocery sales | 14% | 14% | 14% (sweets 25.5%) The VAT on sweets rises to the general 25.5 % on 1.1.2025. |
Open the comprehensive VAT table in full
| Product or service | VAT rate until 31.8. | VAT rate from 1.9. onwards | VAT rate 1.1.2025 |
|---|---|---|---|
| VAT liable performing artist or athlete’s remuneration | 10% | 10% | 14% Increases from 10 % → 14 % on 1.1.2025. |
| Newspapers and magazines | 10% | 10% | 10% Remains at 10 % 1.1.2025 |
| Taxi services | 10% | 10% | 14% Increases from 10 % → 14 % on 1.1.2025. |
| Admission to cultural and entertainment events | 10% | 10% | 14% Increases from 10 % → 14 % on 1.1.2025. |
| Consulting etc. | 24% | 25.5% | 25.5% |
| Barber and hairdressing services | 24% | 25.5% | 25.5% |
| Cleaning services | 24% | 25.5% | 25.5% |
| Photography | 24% | 25.5% | 25.5% |
OP Light Entrepreneur takes care of changes for you and assists you with questions
The service makes all the required changes on behalf of the entrepreneurs in terms of accounting and invoicing and ensures the correct VAT rate is used when creating an invoice. The VAT rate of the invoice depends on the date of performance, i.e. when the service was carried out, or when the sold goods were handed over to the customer. Therefore, you do not need to ponder the VAT rate on the invoice line yourself, as the correct VAT rate will be automatically available for selection on the invoice line based on the date entered.
So, if you are invoicing for work done or products sold in August, enter the date for August on the invoice line, and the correct VAT rate of 24% will be available for selection. We will enable the use of the new VAT rate in the service during August.
When you sell service:
VAT is determined by the date of performance or when it ended.
- Window cleaning is done on August 30th and invoiced in September → the VAT rate is 24 %.
- A kitchen renovation starts on August 20 and ends on September 2 when the kitchen is handed over for use → the VAT rate is 25.5 %.
- Consultation is carried out from August 25 to September 2 → the VAT rate is 25.5 %.
When you sell goods:
VAT is determined by the delivery date of the product.
- A product is handed over to a customer on August 30 and invoiced in September → the VAT rate is 24 %.
- A product is shipped to a customer at the end of August and handed over to the customer at the beginning of September → the VAT rate is 25.5 %.
- A product is delivered to a transport company on August 30, which the customer has procured. The VAT rate is 24 %, even though the customer receives the product on September 1.
Prepayments from the perspective of VAT rate
Although otherwise the VAT rate is determined by performance or delivery, prepayments are an exception to the rule. The VAT rate for a prepayment is determined by the payment date.
For example, if a customer pays in advance their personal training fees for the rest of the year in August 2024, the entire sale is subject to a 24 % rate, even if part of the payment would be allocated for the period after September.
What Does the VAT change require from an Entrepreneur?
We handle almost everything for you regarding the VAT change, but you should take into account the VAT increase in pricing. Here is a handy list for the summer so that you are ready for the change in the fall.
We also offer help and tips to support the list at the end of our article. You can also contact us in chat if you need more personal support.
Entrepreneur’s checklist for the VAT rate increase
- Ensure the correct VAT rate is used in invoicing according to the above instructions. Pay attention to the date on the invoice line.
- Check brochures, quotation templates, and other marketing materials. Put new prices and terms into print materials as soon as possible.
- Now is a good time to check your own pricing – have your costs quietly risen, but your own price remained the same? Calculate the costs of the VAT rate change and raise your prices if you can. Help on pricing in our comprehensive article (in Finnish) and from our VAT change calculator.
- Tell your customers about the price change as soon as possible. Check your possible terms of contract regarding the price change. Download and utilize the commission contract template curated by our lawyer in our support article.
What costs does the VAT rate change bring to entrepreneurs?
The VAT increase to 25.5 % can affect the entrepreneur’s finances in other ways than just a larger VAT slice to the state. For example, the VAT change can cause printing costs or pricing and contract changes that require the entrepreneur’s working time. The VAT rate increase must be taken into account in invoicing and accounting programs to avoid tax risk.
OP Light Entrepreneur takes care of the correct VAT rate on your behalf when the date on the invoice line is set correctly. Therefore, set the invoice date to the day when your customer has received the product, paid the prepayment, or when you have completed the service.
The VAT rate is determined by the day the when the performance is completed or when the goods have been handed over.
VAT rate for purchases
Primarily, the seller is responsible for presenting and calculating the correct VAT rate on the receipt or invoice, and the expense is added to accounting based on the payment date according to the VAT rate shown on the receipt.
VAT Rate for reverse charges, i.e., purchases from abroad at 0 % VAT
Reverse Intra-community acquisitions (in Finnish) will continue to be purchased at 0 % VAT in reverse, i.e., the expense is added at 24 % reverse or 25.5 % reverse VAT rate according to the performance or product delivery date. However, do not worry, our accountants will check the expenses and provide a comment or correct the VAT rate if needed.
Help with pricing as the VAT rate increases
As September approaches, it is now worth checking your own work pricing and taking into account not only the VAT increase but also any other costs and effects on your work as an entrepreneur. You can find help with pricing in our comprehensive guide to pricing your own work (in Finnish).
You can also utilize a handy calculator and calculate different scenarios what the VAT increase would mean for you, and how much the VAT-inclusive price should be raised after the change.
Do you invoice companies?
When invoicing companies and other VAT-liable entities, you can breathe a little easier in terms of pricing. Usually, in business-to-business transactions, prices are discussed without VAT, as companies can deduct VAT in their own taxation, henceforth a bit more. Therefore, the agreed VAT 0 % price does not need to be, nor should it be, automatically reduced.
Also, take into account the abolition of the VAT threshold relief (in Finnish) coming at the turn of the year. Raise prices if you can.
Making offers
We recommend to already offer jobs with the general VAT rate to companies at VAT 0 % + the current VAT. For private customers, the price should include VAT, so calculate it when you are delivering the work or goods to the customer. If the completion of the work or the delivery of the goods is going beyond August, it is advisable to calculate the offer according to the new VAT rate.
Informing customers
Customers will understand the VAT increase, as it affects us all. However, it is good to update the price list with a note of the current VAT. Check any agreements and react in time to possible price changes. If the terms of the agreement do not specify a more precise time when the price change should be announced, a safe delay can be considered one month.
Also, reserve time for mail delivery if you traditionally inform by letter. Allow an extra 5-7 days if you approach your customers by paper mail.
Can we help in any way?
The experts at OP Light Entrepreneur are here to help. You can ask us anything about the VAT change or entrepreneurship in general; we are here to support you on weekdays from 8-16 also throughout the entire summer.