VAT – Explained Simply for Freelancers and Entrepreneurs

VAT (Value Added Tax) can sound complicated when you’re just starting out — but it doesn’t have to be.
This guide explains when VAT applies, how it’s calculated, and how Palkkaguru takes care of it automatically for you.When YEL Insurance Is Mandatory

What Is VAT?

VAT is a consumption tax added to most goods and services sold in Finland. As a light entrepreneur, you simply add VAT to your invoice — Palkkaguru will handle the rest.

The main VAT rates in Finland (2025) are:

• 25.5% – general rate (most services and goods)

• 14% – applies to, for example, food, restaurant services, books, medicines, sports services, tickets to cultural and sports events, passenger transport, accommodation services etc.

• 10% – applies to newspapers, magazines, and public broadcasting

• 0% - applies to to international trade, sale and rental of vessels, and sale of membership magazines to non-profit organizations

NOTE: The reduced 14% VAT rate is planned to decrease to 13.5% starting from 2026. In addition, sweets and chocolate will be transferred to the general VAT rate (from 14% → 25.5%) later in 2025, but the exact effective date has not yet been confirmed.

When Do You Have to Pay VAT?

You must register for VAT if your annual turnover exceeds €15,000 per year. If your income is lower, VAT registration is optional — but often beneficial, especially if your clients are businesses who expect VAT invoices.

VAT for Light Entrepreneurs – How It Works with Palkkaguru

When you invoice through Palkkaguru, you don’t need to handle VAT reporting yourself.

We take care of:

• Calculating and adding VAT to your invoice

• Separating and reporting the VAT amount

• Filing the VAT declaration to the Finnish Tax Authority

You always see your net salary excluding VAT, and we handle the taxes in the background.

Example – VAT in Practice

Example:
You invoice your client €1,000 + 24% VAT = €1,240. Palkkaguru pays your salary based on €1,000, and the €240 VAT is reported and transferred to the Tax Administration.

You don’t need to do anything — it’s fully automated.

Common Questions About VAT

Do I need to register for VAT?
Yes, if you earn more than €15,000 annually. Below that, it’s optional.

Does VAT affect my salary?
No — VAT isn’t your income. It’s collected and paid to the tax office.

What if I work for foreign clients?
Palkkaguru automatically applies the correct international VAT rules and tax treaties.

Ask for Tax Advice

Not sure if you need to charge VAT?
Book a free consultation with our tax experts and get a clear answer.

Let Us Handle VAT for You

No more stress about VAT reporting.
Palkkaguru calculates and pays VAT for you automatically.