This page includes information about various kinds of specialties with value added tax. More information about general value added tax processing in Procountor can be found here.
VAT relief information is reported on the tax return for self-assessed taxes of the last month in the financial period or the last target period in the calendar year.
- A reason for requesting the VAT relief can be specified in section 336 of the tax return by selecting the correct option. The default selection is Not requesting a relief.
- VAT relief information is added to the tax return for self-assessed taxes by filling fields 315, 316 and 317. If an option other than Not requesting a relief is chosen in field 336, filling the fields 315, 316 and 317 is mandatory.
- The value entered to field 317 Amount of VAT relief directly decreases the amount to be disbursed to the Finnish Tax Administration.
- Adjustments to account 2930 (VAT liability) and to revenue are done with a journal receipt that is dated to the last month of the financial period or the last target period of the calendar year.
- The adjustments made must also be taken into account on the accounting page of the tax return for self-assessed taxes. Value added tax to be paid/received is adjusted with the amount of VAT relief on the accounting page.
More information about VAT relief and its conditions can be found from the website of the Finnish Tax Administration.
Marginal tax processing
Procountor does not include a ready-made function for marginal tax processing. However, there is a report formula that can be used to track profit margin on a monthly basis. A simple guide for processing marginal tax on tax period basis is presented below.
Note! The example below is only a very simple model about marginal tax processing in Procountor. Marginal tax processing, like other special situations with VAT, includes a variety of exceptions with different situations and circumstances. Therefore, the accounting entries of all real-life situations have to be carefully examined with the guidance provided by the Tax Administration (only in Finnish).
In order to observe the profit margin, the following two accounts must be created in these groups:
- 340, Sales, used goods, art, collector pieces and antiques: for example, the account to be created can be 3410 Sales (Marginal taxation)
- 415, Purchases, used goods, art, collection items and antique: for example, the account to be created can be 4160 Purchases (Marginal taxation)
Creating the accounts above is necessary in order to be able to make accounting entries for the profit margin’s value added tax. When the margin changes to a positive value, the required postings are made with a journal receipt.
An example about the emergence and processing of marginal tax is presented below:
Sales of used goods
Purchases of used goods
- A company buys used goods for 5 000,00 euros. The following posting is made: 4150 Debit / 1910 Credit. “0” is chosen in VAT % field and “No VAT handling” is chosen in VAT status field.
- The used goods are sold for 9 000,00 euros. The following posting is made: 1910 Debit / 3400 Credit. “0” is chosen in VAT % field and “No VAT handling” is chosen in VAT status field.
By these postings, a positive profit margin is formed. In order to clear the accounts used in sales / purchase transactions and to make a bookkeeping entry for VAT of the profit margin, the following postings are made with a journal receipt:
- Debit 3400: 9 000,00 euros (VAT % = “0”, VAT status = ”No VAT handling”)
- Credit 3410: 5 000,00 euros (VAT % = “0”, VAT status = ”No VAT handling”)
- Credit 3410: 4 000,00 euros (VAT % = ”24”, VAT status = ”Domestic”, VAT type = “Sales”; VAT processing as per the tax to be paid)
- Credit 4150: 5 000,00 euros (VAT % = “0”, VAT status = ”No VAT handling”)
- Debit 4160: 5 000,00 euros (VAT % = “0”, VAT status = ”No VAT handling”)
Tracking the profit margin
In order to track the profit margin on a monthly basis, a report formula is created by following the steps below:
- Go to Report formulas view from Report formulas button in Accounting reports view.
- Click New report formula button and choose Version 2 in the Report formula example window that opens. Note! This window may not appear in newer environments.
- The default selection in the Select default formula to be used template window is A – Income statement by account groups (before 2016 changes). However, the chosen formula doesn’t have any relevance, since all information is going to be removed in step 5. Click Continue button.
- Enter a name for the report formula in the Name field of Report formulas view. After this, click Edit as text button in the top bar of the view.
- The window that opens presents the report formula chosen in step 3 in a text format. Remove all information in the window. Copy the following text to the window and click Continue button:
3400 Sales of used goods;1;row;false;false;3400
4150 Purchases of used goods;1;row;false;false;4150
Profit margin of month;2;sum;false;false;3400+4150
In the end, save the formula with Save button in the upper section of the Report formulas view.
After the formula has been saved, it will become available for choosing to Accounting reports view’s Accounting report type drop-down menu with the name that is has been saved with.
Partially deductible purchases
If the user company or other entity has expenses that are partially deductible, VAT deduction percentages can be determined in Procountor to fit specific needs.
Default VAT deduction percentage is set in Management > Accounting info > VAT defaults. When new VAT deduction percentages are determined in this view, they become visible in the VAT deduction % drop-down menu of receipts.
By default, the VAT deduction percentage is 100. If the user company or other entity is not liable to pay VAT at all, the percentage can be set to zero. When the VAT deduction percentage is set to zero, electronic purchase invoices, for example, are automatically posted in a way that the value added tax is not deducted. The posting is done this way even if the invoice itself contains a VAT percentage other than zero.
Paying VAT proportion only
In some situations, only the VAT in purchase invoices must be paid. This is common in situations where an insurance company pays for the amount excluding VAT and the value-added tax itself must be paid by the company or other organization. The following is an example of such a situation and instructs how to pay an invoice consisting only of VAT:
- The company only needs to pay the 24 euros of VAT (that is wholly deductible) from the purchase invoice total sum of 124 euros (including VAT 24 %).
- To do this, create a new purchase invoice with two rows:
- Invoice row including VAT with the original sum and the actual VAT percentage. The total sum should be 124,00 euros.
- A correcting row to offset the amount covered by the insurance company, i.e. 100,00 euros (this row should have VAT 0 %).
- The result should be the following kind of invoice:
- Sum excluding VAT 0 euros
- VAT amount 24 euros
- Amount to be paid 24 euros
- Because the paid sum will directly be eligible for VAT deduction, this transaction has a zero-euro effect on the income statement.
VAT rules in EU countries
The following is a direct quote from the Finnish Tax Administration’s website:
When telecommunications services, broadcasting services, and electronically provided services are sold to consumers, the general rule is that the selling is VAT taxable in the country where the consumers are resident. However, from 1 January 2019, small-scale selling to consumers can sometimes be taxed in the seller’s country of residence. If the country of VAT taxation is the consumer's country, the seller can use the VAT special scheme for filing and paying the value-added tax.
If a Finnish business sells telecommunications, broadcasting services, and electronically provided services to consumers who reside in other EU country, and the sales volume for this activity is maximally €10,000 – and the €10,000-threshold had not been exceeded the previous calendar year – the Finnish business is able to simply file and pay Finnish VAT on these sales. However, it is additionally required for this that the Finnish business does not have a fixed establishment in another EU country.
If the Finnish business were to sell these services for more than €10,000 per year, it would either have to be registered for VAT in the consumer's country, or have to start using the VAT Special Scheme. Even in cases where the €10,000-threshold is not exceeded, the Finnish business would be entitled to select the consumer’s country as the country of VAT taxation. If preferred, it could make use of the VAT special scheme in order to deal with its VAT obligations there.
Entry into the Special Scheme is voluntary. Sellers can alternatively become registered for VAT in all the countries where they have sales activities of telecommunications, broadcasting and electronically provided services to consumers.
Businesses that have entered into the VAT Special Scheme in Finland must use the VAT Special Scheme e-service for their VAT obligations.
More information can be found on the Finnish Tax Administration’s website:
Choosing the VAT processing rules
The VAT treatment in Procountor is suitable for businesses that are VAT liable in Finland. The customer service can turn on an additional, free feature that enables VAT processing rules of multiple countries in Procountor. Enabling the feature makes it possible to generate VAT reporting for various different countries. The feature allows the handling of sales and purchase invoices of a business partner located in another VAT liable EU country. The invoices will have that country’s VAT processing and the taxes must be reported and filed to the local tax authorities. The feature also allows the reporting of the sales of telecommunications services, broadcasting services, and electronically provided services to consumers according to the regulations of the country where the seller is located.
When VAT processing of EU countries feature is enabled, a new section is added in Management > Accounting info > VAT processing rules. This section lists all the EU countries and the ones where the company is VAT liable can be selected from this list. Choose a country by ticking the box in VAT liable column. After this, all the VAT rates of this country will be available. Finland is selected by default.
Each country can have a specified VAT account. The default account for each country is 2930 (VAT liability). We recommend creating accounts for the processing of foreign VAT and assigning an account for each country.
If other countries have been selected, the invoices and receipt journals in Procountor will have a new field in the Additional information section called VAT processing. The field has a drop-down menu for selecting the EU country for VAT handling.
A default VAT processing can be defined for each business partner that is used automatically on invoices created for that business partner.
Please note, that if the VAT processing field's value is changed after rows have already been added on the invoice, the VAT percentage on each row will be changed to zero.
Invoice accounting page
The Accounting view of each invoice will always use the VAT processing selected on the invoice. The VAT processing field is also visible on the Accounting view but cannot be modified. This is to ensure the VAT percentage on the invoice matches the percentage on the accounting page. Same percentages as on the invoice can be selected from the VAT drop-down menu on the accounting page. Select Domestic from VAT status field when using the EU VAT processing rules.
Every other aspect on the accounting page stays the same, and the VAT debt is only processed on the VAT summary.
Generating a VAT summary
The monthly VAT summary will take into account the VAT processing on each invoice. Notifications sent to the Finnish Tax Administration must still only contain invoices that have Finland’s VAT processing. This concerns both the monthly and quarterly tax returns.
In addition to transactions with Finnish VAT processing, transactions with foreign VAT processing will be automatically generated in the accounting page for each EU country selected in VAT processing rules. The account is selected according to the settings made in the VAT processing rules view.
Foreign VAT sums are fetched based on the month of the invoice date on the accounting page, in the exact same way as domestic VAT.
The Printable list button in Receipt search has an option Search result and VAT specification. Clicking this button gives a VAT summary that lists different EU countries and a breakdown of all the VAT information. The general ledger in the accounting reports can be used to get a VAT amount specification of all the VAT information of different EU countries.
Reporting made in accordance to the VAT processing rules of different EU countries is done manually by registering to the VAT Special Scheme or by registering for VAT in these specific EU countries. Value-added taxes conforming to the EU VAT processing rules are paid using purchase invoices with the specific country’s VAT account selected as the expense account. Verifying the information is correct is always the user’s responsibility.