VAT threshold relief to be abolished 1.1.2025 – Read about the change to the threshold relief

This article has been updated regarding the change in the threshold of VAT-free operations on 20.6.2024.

Changes are coming to the VAT benefits and VAT taxation of small entrepreneurs, such as light entrepreneurs with a business ID, based on a government bill. The most significant of these changes is the abolition of the VAT threshold relief from 1.1.2025 onwards. VAT threshold relief is a tax relief for entrepreneurs whose turnover, i.e. the sum of VAT-free sales, remains below €30,000 during the calendar year.

Abolition of the threshold relief

Once the government bill has been ratified, from the start of 2025, it will no longer be possible to receive VAT threshold relief, even if your turnover from the 12-month financial year remains below €30,000. However, the abolition of the relief will not affect VAT deductions. Therefore, a VAT-registered entrepreneur can still deduct VAT from their procurements and other VAT purchases.

The threshold relief is set to be abolished on 1.1.2025 according to the government’s proposal, meaning that no VAT threshold relief would be paid in the VAT return submitted later in 2026.

VAT exemption for minor business operations remains

Even though the VAT threshold relief is being abolished, small entrepreneurs can still take advantage of the opportunity to invoice without VAT, provided their turnover does not exceed €20,000 per year. The threshold for minor business operations is set to rise from the previous €15,000, as entities such as the Tax Administration and Suomen Yrittäjät have proposed raising the threshold to make it easier for entrepreneurs conducting minor business operations.

This could mean that especially small entrepreneurs providing services to consumers could benefit from invoicing without VAT based on minor business operations after the abolition of the threshold relief. The increase of the threshold for minor business operations to 20,000 euros has not yet been confirmed in the VAT law, but it is expected to come into effect on 1.1.2025.

However, an entrepreneur who invoices at 0% VAT cannot deduct VAT from their purchases, so the benefit may be marginal if there are many products or services to be resold in relation to sales. Even if the right to deduct would be lost when switching to VAT-free invoicing, it is still worth deducting expenses, as they reduce taxable income.

With the OP Light Entrepreneur (with business ID) service, it is possible to invoice without VAT within the limits of low business activity. The service automatically applies for a business ID in the VAT register when the threshold is exceeded, after which it is possible to benefit from VAT deductions on purchases.

Invoicing should not be artificially limited, as the service takes care of the entrepreneur’s VAT registration when the threshold is exceeded. However, the entrepreneur should take into account the VAT change in their own pricing.

Requirements for invoicing at 0% VAT in the future

You can invoice minor operations at 0% VAT if the turnover, i.e. sales without VAT, does not exceed 20,000 euros during the current and previous year. For example, if in 2024 and 2025 the turnover remains below 20,000 euros, you can invoice at 0% VAT from 2025 onwards in the service.

If in 2025 the turnover exceeds the €20,000 limit, for example in September, we will automatically register the entrepreneur in the VAT register from September onwards. The VAT register is not applied for retroactively, so VAT does not need to be paid on sales made at 0% VAT.

The service takes care of fulfilling the VAT obligation and automatically registers the entrepreneur in the VAT register.

We follow the progress of the legislative change and the instructions of the Tax Administration

We will take into account the legislative reform and any changes it may bring to our service. Our goal is for entrepreneurs to continue to benefit as much as possible.

We will update this article when the Tax Administration’s instructions are clear regarding the details of VAT.

More information about the bill and its handling can be found on the Ministry of Finance’s website (in Finnish) and in the Tax Administration’s news about the tax change.

Foreign trade of small businesses from the perspective of the VAT system

The VAT law change also affects VAT liability when invoicing outside domestic borders. Starting January 1, 2025, it is possible for an entrepreneur to apply for a VAT special scheme, which allows the utilization of VAT thresholds of other EU countries for minor business operations.

The purpose of the change is to facilitate internationalization for small businesses. In practice, this means that a small business can invoice abroad without VAT within the country’s limits so that the company does not become tax liable in that country.

Foreign trade is not currently possible in the OP Light Entrepreneur service.