Regulatory updates - Finland

On 16 June 2023, the new government of Finland announced the outcome of the negotiations on the government programme named “A Strong and Committed Finland”.

The negotiations' outcome covers government policies on the economy, finance, tax, ownership, pensions, and investment programs. From the tax policy perspective, the government aims to:

• Improve household purchasing power by easing the taxation of work and different modes of transport,
• Improve incentives for work,
• Support economic growth and strengthen domestic ownership,
• Remove obstacles to posting foreign workers in Finland,
• Keep the corporation tax rate at a competitive level,
• Carry out a reform of property taxation to correct the differences between the properties' tax values and standard values.

The government intends to digitalize tax collection to ensure smooth flow and more predictable taxation.

On 19 January 2023, the Finnish Government (Valtioneuvosto Statsrådet) published a press release emphasizing that the government supports the modernization of value-added taxation in the digital age - ViDA initiative.

As per the announced statements in the release, the Finnish government accommodates the objectives of the ViDA proposals and the deployment of digital technology in the fight against tax fraud. They also consider the goal of simplifying the VAT system and reducing administrative costs for businesses. However, the authorities are awaiting further details of the proposals to better analyze the associated costs with the reform of the Tax Administration, companies, and especially SMEs.

Furthermore, the government submitted the letter U 103/2022 vp in the form of a Petition* to the parliament on the proposals of the ViDA initiative published on 8 December 2022.

The case status is still “in progress” and the letter is now being passed to the relevant key stakeholders for review. Although it’s currently unclear how and when Finland will implement ViDA, we are witnessing the first positive public reaction by an EU Member State.

* A petition is a formal written request sent to the Parliament by government members calling for some form of action.

Timeline of the e-invoicing Act

The Finnish Government announced the e-invoicing Act (241/2019) on 22 February 2019 to implement the European Standard 2014/55/EU on electronic invoicing. According to the Act, all invoices to the public entities are mandatory to comply with the EU norm, and companies with an annual turnover of more than EUR 10.000 have the right to request their suppliers to send e-invoices.

This Act was introduced to enter into force on 1 April 2020 but has been postponed to 1 April 2021 due to COVID-19.

Businesses and traders are encouraged to prepare for the transition to the EU-compatible e-invoicing in time so that invoices sent to the state, from 1 April 2021 at the latest, meet the requirements of the EU standard. Invoice formats such as Finvoice 3.0 and TEAPPSXML 3.0 correspond to the EU norm.

Outline of the new e-invoicing validation

As of 6 April 2021, e-invoicing operators and service providers will start validating invoices. A Schematron validation checks the data content of the invoice in accordance with the EN16931, i.e. the European Standard. After the validation is performed, invoices containing incorrect data will not be delivered, and invoice senders will be informed about the errors.

The long-term effect will be that invoice recipients will not receive the invoice unless it is validated. If an invoice does not pass the validation, the sender will need to correct the errors and resend it.

The temporary zero VAT rate has been implemented in Finland for intra-community acquisitions and local sales of goods utilised for COVID-19 testing and prevention by amendment 486/2020 to the VAT Act (1501/1993) since 30 January 2020.

Owing to the exceptional circumstances surrounding the COVID-19 outbreak, the Finnish Government has decided to make an amendment to the upcoming e-Invoicing Act (241/2019), which enters into force on 1 April 2020.

The new Finnish e-Invoicing Act will give both government entities and businesses in Finland the right to ask their counterparts for e-invoices in line with the EU standard. The new legislation is in line with the e-Invoicing Directive (2014/55/EU), which has now reached legislation at national level across Europe.

The Finnish State Treasury announced in a press release on 18 March 2020 that although the Act stipulates EU-compatible e-invoice formats as of 1 April 2020, the deadline will be pushed back and older formats that do not meet the standard will be accepted until further notice, owing to the COVID-19 outbreak. However, businesses are encouraged to switch to e-invoicing in line with EU standards as soon as possible.

Invoice formats that already comply with the EU norm are the nationally used Finvoice 3.0 and TEAPPSXML 3.0, and international standards such as Universal Business Language (UBL) and Cross Industry Invoice (CII). Other formats are acceptable as long as they are aligned with the legal requirements.

Should the need to align your e-invoices with the legal requirements emerge, make sure you inform the ERP provider responsible for updating your financial system of the required changes, and notify your operator of the format updates to ensure you adhere to the desired timeline.