Value added tax takes many forms in international business: at its simplest, it’s about buying goods or services from or, conversely, selling them to other countries. The most difficult situations are those in which a company operates both in and outside its home country.
Because the EU is subject to the VAT Directive, many VAT provisions are common to all EU countries. However, because the Directive’s provisions are not mandatory in all respects, national VAT legislation can also differ within the EU.
In the case of sales from Finland to another EU country or vice-versa, VAT issues can usually be resolved in the company’s home country. There are, of course, situations which require local expertise. This is particularly true for purchases and sales in the construction sector, if construction takes place in Finland or Estonia. In addition, the sale of some other services to buyers in these states may create an obligation to register in the buyer’s state.
Because non-EU countries lack uniform regulations equivalent to the EU VAT Directive, many issues concerning trade between EU and non-EU countries must be clarified on a country-by-country basis. So local expertise is often needed.
As with trade between EU states, in the case of trade between non-EU and EU countries certain provisions of the EU VAT Directive and national VAT legislation may require non-EU companies to register for VAT in Finland, Estonia or another EU country.
The obligation to register is particularly relevant if the company has a permanent establishment in Finland. This is the case, for example, if a company has a location, employees or, say, a long-term or several consecutive construction and installation contracts in Finland. Concepts of permanent establishment for VAT purposes and income taxation are not entirely unified, and international tax treaties do not take a stand on VAT in any regard. This requires careful analysis of each case, in order to act correctly and avoid unpleasant surprises.
Our experts at Oy Tuokko Ltd and Tuokko OÜ have solid expertise and long-term experience in international VAT matters. On the other hand, if you need special, local expertise in another country, we can obtain it quickly from our comprehensive cooperation network via Praxity.