Starting January 2025, Finland will abolish the VAT threshold relief, historically aiding small businesses with an annual turnover of less than €30,000. Concurrently, Finnish businesses will gain the ability to capitalize on VAT exemptions in any EU country they operate in, according to new legislation proposed today by the government.

The VAT threshold relief has been a significant tax relief for small businesses, benefiting about 80,000 companies in 2023 alone.

While businesses can still apply for this relief for the year 2024, the abolition marks a substantial policy shift dictated by the EU's small business directive, which mandates the removal of such reliefs across member states. Finland is the last EU country to implement this change.

This legislation will not alter the minor operation threshold, which remains at an annual turnover of less than €15,000, allowing businesses under this limit to avoid VAT registration and obligations.

However, a new framework comes into play with this legislative change, enabling Finnish small businesses that sell goods or services to other EU countries to utilize the VAT advantages available in those nations. For instance, if a Finnish business operates below the minor operation threshold of the country it sells to, it can benefit from VAT exemptions without needing to charge VAT to its customers.

This opportunity requires businesses to join a new EU-wide system designed for small businesses engaging in cross-border sales within the EU. This system is particularly advantageous as it allows these businesses to enjoy VAT exemptions in other member states without having to surpass the common EU threshold of €100,000 in sales.

This legislative update signifies a strategic pivot towards enhancing the competitiveness of Finnish businesses in the European market, aligning with broader efforts to support small enterprises across the continent.