Self-employed in Finland - not registered for VAT - getting jobs from other EU countries
Thread poster: Patrycja Dittmann

Patrycja Dittmann
Finland
Local time: 01:03
English to Polish
+ ...
Nov 14, 2016

Dear Colleagues,

I am seeking your advice regarding registering for VAT or not. I would like to become a sole trader but apart from translation I am going to provide other services aimed mostly at private people - so a significant part of my customers would not be able to deduct VAT.

I do not expect my income to exceed the limit until which you actually have a choice whether to register for VAT or not but I am wondering whether not having a VAT number would affect my ability to get jobs from other EU-countries. I work full time at a Finnish translation agency and we do not cooperate with translators who do not have a VAT number (even if they are registered as self-employed in their home countries).

Does anyone know what the current legislation is? I read somewhere on this forum that it is actually illegal to provide your services to companies from other EU-countries if you do not have a VAT number but the topic was 10+ years old so the situation might have changed.

If you have your own company but are not VAT-registered, does this put you at a disadvantage when offering your services to customers outside your home country?


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Teresa Borges
Portugal
Local time: 23:03
Member (2007)
English to Portuguese
+ ...
@Patrycja Nov 15, 2016

Welcome!

I am based in Portugal, and I do have a VAT number, in Portugal it is mandatory no matter how much you earn.
In accordance with the legislation in force, I must charge VAT to all Portuguese clients (23%). I must also charge VAT to all EU clients unless they provide me with a legal VAT number, and I am obliged to report the VAT numbers of all EU clients with which I have worked and for which I have charged VAT.

In Belgium where I lived for 30 years I did exactly the same, with the only difference that the rate applied was 21%.


[Edited at 2016-11-15 11:29 GMT]


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Tom in London
United Kingdom
Local time: 23:03
Member (2008)
Italian to English
VAT Nov 15, 2016

You should only comply with the tax regulations in the country in which you are resident for tax purposes. If in that country there is no requirement to register for VAT below a certain income threshold, then you need not register unless you want to.

Under UK regulations (for example) I am not obliged to register for VAT, and I never have been VAT-registered.

I have never found this an impediment to finding work in other EU Member States.

In fact it simplifies matters for both parties, since I don't claim the VAT and they don't pay it.

Simply state on your invoices that in compliance with the tax regulations in the country, VAT is not applicable.

[Edited at 2016-11-15 11:46 GMT]


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Kay-Viktor Stegemann
Germany
Local time: 00:03
Member (2016)
English to German
A VAT number does not necessarily mean you actually charge VAT Nov 15, 2016

I can only speak for Germany, but here applying for a VAT number and opting for VAT are two separate things. If you sell your services outside your country, you need a VAT number even if you do not opt for VAT. I assume it will be similar in Finland. You should check with your local tax office.

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Tom in London
United Kingdom
Local time: 23:03
Member (2008)
Italian to English
The rules Nov 15, 2016

"From 1 January 2016 the VAT registration threshold for Resident businesses (in Finland)will be increased from €8,500 to €10,000.This threshold does not apply to foreign, non-resident traders from the EU or any other country. They are required to register with the Finnish authorities as soon as they start performing taxable supplies in Finland."

https://www.meridianglobalservices.com/blog/2015/05/27/Finland-VAT-registration-threshold-for-Resident-businesses-will-be-increased-in-January-2016

I.e. if your gross income (or the income you expect) is greater than €10,000 then you should register for VAT and apply it (at the Finnish rate).

[Edited at 2016-11-15 11:59 GMT]


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Michael Wetzel  Identity Verified
Germany
Local time: 00:03
German to English
Contact your tax office Nov 15, 2016

Like Kay-Victor said, it should be no problem to get a VAT number while remaining VAT-exempt. I'm pretty sure that's how it works in every EU country that has a VAT-exemption threshold - except for the UK (and maybe one Eastern European country).

Contact your local tax office or find the relevant information online (search something like "VAT number combined with VAT exemption" in Finnish).

I'm not sure about the legal situation, but I would disagree with Tom and say that, as a business, you should invest at least a minimal amount of effort in helping your clients to comply with the tax regulations in their countries.

And that is not meant as a jibe at Tom: Doing things the "standard" way involves far more than a "minimal amount of effort" for UK-based translators, so his position is perfectly reasonable for translators there. However, I do not think his position makes sense outside of that context.


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Shamien  Identity Verified
Finland
Local time: 01:03
Member (2014)
English to Finnish
+ ...
Finnish comments Nov 15, 2016

Please note that if you end up receiving payments over the threshold, you're liable to pay for ALL invoicing done that year, and it might become a big hassle.

I decided to become VAT liable already when my operation was small scale in anticipation to the time I was not, and I think that was the best decision ever. I can deduct the vat of all my purchases, and as most of my sales are EU or outside EU, I basically pay very little VAT, generally the amount is negative.
Note, I'm a Finnish entrepreneur, so I'm quite well versed of all the gimmicks in Finland, and this was decidedly the best option for me.

Edit: Forgot to mention that if you're a registered company, you already do have a VAT number, you're just not VAT liable. You form the VAT number from "Y-tunnus" by adding FI in front of the number and removing the dash. As an example, my Y-tunnus is 2624715-9, so my VAT number is FI26247159.

[Edited at 2016-11-15 12:42 GMT]


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Samuel Murray  Identity Verified
Netherlands
Local time: 00:03
Member (2006)
English to Afrikaans
+ ...
The NL situation (may be similar to yours, maybe not) Nov 15, 2016

Patrycja Dittmann wrote:
A significant part of my customers would not be able to deduct VAT.


I'm a resident of the Netherlands, so my situation may be different from yours (our VAT registration threshold is zero, i.e. all businesses must register for VAT).

If a client of mine qualifies for intra-community VAT deduction (i.e. if he has an EU VAT number), then I simply don't add VAT to my invoice. If he doesn't (e.g. if he is a local client or if he is an EU resident but he doesn't have an EU VAT number), then I usually give him a discount valued at the VAT amount, and then add VAT (so he ends up paying what we originally agreed).

I am wondering whether not having a VAT number would affect my ability to get jobs from other EU-countries.


I have heard that some agencies' accountants can be unsympathetic to EU resident freelancers who don't have VAT numbers, and it may require additional red tape for both you and them to pay you legally. So I suppose some EU agencies who have lazy or stupid accountants may therefore decide on a policy not to use vendors that don't have a VAT number.

I work full time at a Finnish translation agency and we do not cooperate with translators who do not have a VAT number (even if they are registered as self-employed in their home countries).


See? I'm sure it must be legally possible for an agency in Finland to give work to EU resident freelancers who don't have VAT numbers, but your agency's accountant is simply not in the mood to figure it out.

I read somewhere on this forum that it is actually illegal to provide your services to companies from other EU-countries if you do not have a VAT number...


In the Netherlands (where I live), it would be illegal for me to provide translation services to *anyone* if I don't have a VAT number, regardless of whether I actually charge VAT. It is, however, perfectly legal for me to provide my services to EU agencies even if they themselves don't have a VAT number.


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Michael Wetzel  Identity Verified
Germany
Local time: 00:03
German to English
Do you have an accountant? Nov 15, 2016

Samuel, did an accountant tell you to do things that way?

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Heinrich Pesch  Identity Verified
Finland
Local time: 01:03
Member (2003)
Finnish to German
+ ...
Yes, better register Nov 15, 2016

If you mostly get jobs from abroad, as I do, you rarely charge alvi (VAT), but you can deduct your own tax. So if you pay let's say 50 euro a month for telephone and Internet, you can get back 9.68 from the tax authority (24 %). The same is true for devices like computer, mobile phone etc. So there is no reason not to register.
In Finland you do not need an accountant, making the tax declaration takes me two hours each March, and an additional hour each month for filling in the online form.
But keep your bookkeeping in order, I do it in Excel. And file the invoices, digital form is enough.


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Samuel Murray  Identity Verified
Netherlands
Local time: 00:03
Member (2006)
English to Afrikaans
+ ...
@Michael Nov 15, 2016

Michael Wetzel wrote:
Samuel, did an accountant tell you to do things that way?


No. It's just easier for me. (or: what do you mean?)


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Patrycja Dittmann
Finland
Local time: 01:03
English to Polish
+ ...
TOPIC STARTER
You have answered my question + anyone knows helpful websites for Finnish freelancers? Nov 15, 2016

Thanks a lot everybody, especially Shamien.

I have been trying to find all day whether I actually do have a VAT number even if I register as a sole trader and decide not to register for paying/charging VAT - I also stumbled upon the info how to form the VAT number basing on your Y-tunnus but could not figure out whether it applies to every company. So, really, thanks a lot for helping with that.

So, it just looks like I shall simply try to make some estimates, make the decision and get started!

I have already started attending book-keeping classes but since the course lasts only two weekends I don't expect us to cover everything I should know. Hence, those of you who have their company in Finland, could you recommend resources for beginner entrepreneurs? I speak Finnish (so, the resources do not need to be in English).

Some of the practical questions that immediately came to my mind are like: do I need to make some changes to my Internet and phone subscriptions, hence I didn't have the company at the moment of making the agreements?

Will I also have to pay some social security contributions, even if at the same time I have a regular, full-time job and my employer pays those for me as well?

You do not have to answer all my questions but it would be really great if you could recommend some resources. Probably there are many things worth knowing that I wouldn't even think of.


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Shamien  Identity Verified
Finland
Local time: 01:03
Member (2014)
English to Finnish
+ ...
Answers Nov 15, 2016

You're welcome =)

I still have the same subscriptions for my internet and phone. What I do is to charge the entirety of my phone through my company, as it also includes mobile internet, and have my physical internet as private expense. This way I can prove that the phone+internet is mainly in company use.
You need to check the necessity for YEL insurance from the insurance company, but as you have a full time job on the side, I seem to remember that is not obligatory in your case. That leaves only taxes, possible VAT payments, and company purchases on your expense list. If you wish, you can also send me a direct e-mail shamien@thescribe.fi, as I've gone through all this recently and can give decent advice.


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