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VAT deduction in Finland: what VAT is deductible in 2026

Karma Accounts · Published 20 October 2026

A VAT-registered business in Finland can deduct the VAT on the goods and services it buys for its taxable business, provided it has a proper invoice from a seller who is liable for VAT. This right of deduction (vähennysoikeus) is in section 102 of the Finnish VAT Act, the arvonlisäverolaki (1501/1993). The deduction is lost or reduced when the Act excludes the purchase (entertainment, housing, commuting and most passenger cars), when it is partly private or for VAT-exempt sales, or when the paperwork is wrong.

Who can deduct VAT in Finland

1. You are liable for VAT. If your turnover is at most 20 000 euros in both the current and the previous calendar year, you are not liable for VAT on your sales unless you register voluntarily, and without that there is nothing to deduct (see our article on the VAT registration limit). The limit does not cover the buyer's reverse charge: a business under it that buys services from abroad must register for those purchases and pay the VAT, with no matching deduction. When you register for your sales, goods and services you already hold for the taxable business can be deducted on your first return (AVL 112 §): the VAT on the original purchase, less any part matching a fall in value, with the original invoice and a voucher made when the item is taken into use. Real property is excluded, and a company cannot deduct what a shareholder bought in their own name.
2. The purchase is for your taxable business. Private purchases give no deduction, and neither do purchases for sales that are exempt without a right of deduction, such as health care, financial services or renting out a home. Tax-free sales that keep the right, such as exports and goods sold to businesses in other EU countries, do not cost you the deduction (AVL 131 §).
3. The seller is liable for VAT on the sale. Check a Finnish seller at ytj.fi. A buyer in good faith keeps the deduction if a VAT-liable seller merely failed to register (KHO 1999:71), but not when a small business outside the register, or a landlord not registered for VAT on the rent, adds VAT to the invoice.

What you need: a proper invoice

Under AVL 102 a § the deduction requires the seller's invoice. A simplified invoice is enough when the total is at most 400 euros, and whatever the amount for retail-type sales made almost entirely to private individuals and for restaurant, meal and passenger transport services not bought for resale. It shows the date, the seller's name and VAT number, what was sold and the VAT by rate (AVL 209 f §). Some cross-border sales, such as EU distance sales, need a full invoice. Other invoices need the full set of entries in our article on invoice requirements; how long to keep them is in our article on receipts and record keeping.

A typo in the seller's name, an incomplete address or a wrong unit price with the right total does not remove the deduction, and the Tax Administration can accept a deduction without a proper invoice if you otherwise show your right to it. Three things do cost the deduction:

• The VAT on the invoice is wrong. You cannot deduct on an invoice with incorrect VAT. Ask for a corrected one; the seller must give it.
• You bought as a consumer. A sole trader's own name is the business's name, but if you order from a foreign web shop as a consumer without your VAT number, or give Customs your personal identity code instead of the business ID, the VAT is not deductible until the seller or Customs corrects the document.
• The margin scheme. An invoice for used goods that says the margin scheme (marginaaliverotus) applies carries no deductible VAT (AVL 115 §).

Non-deductible VAT: what the VAT Act excludes

AVL 114 § lists purchases whose VAT cannot be deducted even when they serve the business.

Entertainment: no VAT back

Hospitality towards clients, business contacts and others outside the company, to win or keep business, is entertainment: restaurant bills, gifts chosen for a contact, travel and venues used for hosting. Whether an event is entertainment or marketing depends on its purpose and nature. None of the VAT on entertainment is deductible, so the whole bill including VAT is the cost; for income tax, half of business entertainment expenses is deductible (EVL 8 §).

Similar costs may be deductible in another setting, depending on purpose and arrangements: ordinary refreshments such as coffee or a buffet-type lunch within a marketing event's programme, or an event for the whole staff. Where the lines run is in our articles on entertainment expenses and staff parties and marketing expenses.

Cars: all or nothing for a passenger car

The restriction covers a passenger car's price, lease, fuel, charging, servicing and parts. It also covers a dual-purpose vehicle (kaksikäyttöauto), meaning a van-class (N1) vehicle fitted with seats, or mountings for seats, beyond the front row, and anything registered as a passenger car, which includes most campervans.

A passenger car is deductible only when it is used exclusively for deductible business, shown with a driver's log. Even slight private use removes the whole deduction: ordinary trips between home and work, staff taking it to lunch, or entertainment. If the car's VAT had already been deducted, own-use VAT becomes payable, normally on its purchase price or a lower likely sale price (AVL 74 §). Cars bought for resale, rental, professional passenger transport or driving instruction are the exception: their VAT is deductible for that use, less any private share.

A van or lorry is deductible for the share of driving in the taxable business. VAT has no 50 % rule: the 50 % kilometre test is income tax, deciding whether a sole trader's car is a business asset (see our article on cars in the business).

Housing and commuting

The housing rule covers the property and what goes with it: furniture, cleaning, repairs, and its share of heating, electricity and water. A home also used for the business does not, as a starting point, give a deduction (KHO 28.4.2003 t. 1049), while temporary accommodation on a work trip is not housing. Commuting costs, such as e-bikes bought for staff to ride to work, are excluded too.

Mixed use: how to split the VAT

When a purchase serves both the taxable business and private use or VAT-exempt sales, you deduct only the taxable share (AVL 117 §) and must be able to show the split. The law sets no formula; the Tax Administration asks for the method that gives the most accurate result, judged at the time of purchase:

• kilometres from a driver's log for a van;
• floor area for premises;
• working time, for overheads in a business whose staff work on both taxable and exempt sales;
• taxable turnover as a share of total turnover for shared overheads such as accounting, phone and rent, as a percentage to two decimals.

Example: home internet. A sole trader's home connection costs 40 euros a month including 25.5 % VAT, so the VAT is 8.13 euros. With 60 % business use, 4.88 euros is deductible.

Example: a van. A van costs 30 000 euros plus 7 650 euros VAT, and the log shows 80 % of the driving for the taxable business, so 6 120 euros is deductible. Keep the log in later years too: if it shows more non-deductible driving, the deduction is corrected.

If the estimate was wrong from the start, correct the deduction on the return where you made it. A later change of use is not an error in that return: moving goods or services you deducted into private or exempt use is taxed as own use (AVL 21–22 §). A passenger car cannot be split like this, apart from the exceptions above.

When to deduct

By default you deduct the VAT for the month in which the goods arrived or the service was performed, or the month you paid if you paid before that (AVL 141 §). There are two alternatives:

• Invoice basis: the month of the invoice (AVL 142 §). Purchases not yet invoiced at the end of the financial year go to its last month.
• Cash basis: a business with turnover of at most 500 000 euros can use the month of payment (AVL 137 §), and then applies it to all its purchases and sales that qualify.

Cross-border purchases keep their own timing whichever basis you use. Import VAT goes to the month of the customs decision, VAT on goods bought from another EU country is deducted in the same month it is reported as payable (AVL 141 a §), and services bought from another EU country cannot use the invoice or cash basis. Return dates are in our article on VAT return deadlines.

Reverse charge purchases and imports

When you buy services such as ads or software from a foreign business, the invoice usually carries no VAT. The same applies in Finland to construction services when your business itself sells construction services other than occasionally (AVL 8 c §), and to metal scrap and waste when you are VAT-registered (AVL 8 d §). You report the VAT as payable and, if the purchase is for your taxable business, deduct the same amount on the same return, so the net is zero; reporting it is a condition of the deduction (AVL 102 a §). If the purchase is entertainment, private or for exempt sales, the VAT is payable but not deductible. More in our article on reverse charge. For goods imported from outside the EU, the deduction requires a customs decision naming your business as the holder of the goods.

Claiming and correcting the deduction

Enter the period's total deductible VAT on the VAT return under "Tax deductible for the tax period" (Verokauden vähennettävä vero). If it is larger than the VAT on your sales, the period's VAT is negative. The Tax Administration can pay it back once the return is processed, at the earliest after the general due date of the month after the period; it may first use it for other taxes due, and amounts under 10 euros are held back. Without a filed return, nothing is paid back.

A wrong deduction is corrected for its own period with a replacement return in MyTax; how, and when a small error can go on a later return, is in our article on correcting a VAT return. A credit note from the seller reduces the VAT you deducted (AVL 118 §). The rates on your purchase invoices, 25.5 %, 13.5 % and 10 %, are in VAT rates in Finland 2026, and the whole system in our guide to VAT in Finland.

What we do

We keep the books every month from your receipts, sales invoices and bank lines, file the VAT return by its due date and tell you the amount before it is due. The VAT return is included in the monthly fee. Sole trader accounting costs 69 euros a month up to 240 000 euros of turnover. Limited company accounting costs 199 euros a month up to 240 000 euros and 249 euros up to 500 000 euros, with a written quote above that. Payroll is 15 euros per payslip. Prices are plus VAT 25.5 %, with the software and the year-end included and no limit on receipts. See the price list or request a quote.

Frequently asked questions

What VAT is deductible in Finland?

The VAT on goods and services a VAT-registered business buys for its taxable business, with a proper invoice from a VAT-liable seller, plus reported import, EU and reverse-charge VAT. Mixed-use purchases are deductible only for the taxable share.

What VAT is not deductible in Finland?

Entertainment, commuting, housing and holiday homes for the owner or staff, and passenger cars, motorcycles, caravans, leisure boats and aircraft up to 1 550 kg with their running costs (AVL 114 §), as well as private purchases and purchases for exempt sales without a right of deduction.

Can I deduct VAT on a car in Finland?

On a passenger car, only if it is used exclusively for deductible business; any private use removes the whole deduction. Cars for resale, rental, taxi or driving school use are exceptions. On a van, you deduct the business share shown by your driver's log.

Is VAT on entertainment expenses deductible in Finland?

No. VAT on entertaining clients and business contacts is not deductible, and for income tax half the cost is. An event for the whole staff or ordinary refreshments at a marketing event may be deductible, depending on purpose and arrangements.

Sources

• Finlex: Value Added Tax Act 1501/1993, sections 3, 8 c, 8 d, 21, 22, 74, 102, 102 a, 112, 114, 115, 117, 118, 131, 137, 141, 141 a, 142 and 209 f (in Finnish)
• Finlex: Business Income Tax Act 360/1968, section 8 (in Finnish)
• Tax Administration: deducting VAT on purchases
• Tax Administration: Arvonlisäverovelvollisen opas, chapters 8, 10 and 11, detailed guidance (in Finnish)
• Tax Administration: Arvonlisäveron vähennysoikeudesta, mixed use and overheads, detailed guidance (in Finnish)
• Tax Administration: VAT on vehicles and their running costs (in Finnish)
• Tax Administration: marketing and entertainment events in VAT, detailed guidance (in Finnish)
• Tax Administration: VAT invoice requirements, detailed guidance (in Finnish)
• Tax Administration: refunds of VAT and other self-assessed taxes

Please note: this is general information about Finnish rules, not advice for your own situation, and the rules change. Ask us before you act on it.

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