VAT-exempt importation

Payment of import VAT is usually required for goods imported from outside the EU and released for free circulation. 

Customs duties collected on imported goods or exemption from customs duty do not necessarily have an impact on the collection of import VAT: 

  • The relief from customs duty for imported goods does not necessarily eliminate the obligation to pay import VAT for those goods. 
  • The import of goods can be exempt from VAT, even if a general third country duty is levied for them. 

The grounds for VAT exemption on imports have been specified separately in the Value Added Tax Act. 

How is the VAT exemption for imports reflected in the Value Added Tax Act?

The Value Added Tax Act specifies the situations in which imports are exempt from VAT. The Act specifies for example the following:

  • Articles of the Duty Relief Regulation based on which the import is exempt from VAT.
  • Articles of the Union Customs Code based on which the import is exempt from VAT.
    • There could be specifications in the Value Added Tax Act concerning the conditions for VAT exemption. For example, relief from customs duty for returned goods is applied based on Article 203 of the Customs Code, but the conditions for VAT exemption for the import of returned goods are specified in section 94(1)(18) of the Value Added Tax Act. You can read more about the import of returning goods.
  • Articles of the Customs Code based on which the import is exempt from VAT. 
    • However, the prerequisites for VAT exemption and the specifications must be examined in the Value Added Tax Act. When the relief from customs duty for the goods is based on legislation, a regulation or, for example, an international agreement, you can read more on the webpage Relief from customs duty. 
  • Other situations, based on which the import can be exempt from VAT. 
    • The VAT exemption for imported goods can be based, for example, on the VAT exemption for domestic sales of the goods. Read more under “Exemption from VAT on import based on domestic sales with tax exemption” and under “The import of the following goods may also be exempt from VAT based on domestic sales.”

The instructions on this webpage deal with VAT exemption for the import of goods, which is based solely on the Value Added Tax Act.

Enter the VAT exemption on import in the customs declaration

If you are applying for import VAT exemption in the customs declaration, indicate this in the declaration using, for example, the requested procedure code, additional procedure code, or a combination of procedures.

However, Customs will not confirm the VAT exemption for the goods with a customs clearance decision, if the trader is registered for VAT and files VAT on their own initiative to the Finnish Tax Administration.

By selecting the customs procedure, you can postpone the date of collection of VAT 

In certain cases, the import goods remain under the supervision of Customs or another authority, even though they may have been released for free circulation. When the goods remain under supervision, it is usually because all import duties and taxes, such as VAT or other charges are not paid upon import.

By selecting the customs procedure, you can affect when the VAT is collected. For example, in the following procedures you can postpone the collection of the VAT to a later date:

  • You can transfer the collection of the VAT to the Member State of destination, if the prerequisites for tax exemption for the import are met. For goods placed under procedure 42 or 63, no VAT on import is collected, rather the collection of the VAT is transferred to the Member State of destination where the transport of the import ends. You can read more on how to use the procedure on the page VAT-exempt importation under Article 94 b of the VAT Act.
  • You can postpone the time of collection of VAT and excise duty, if the import goods are places under the tax warehousing procedure. Goods that are exempt from excise duty and VAT, can be stored under the tax warehousing procedure. When you declare the goods for procedure 07, they are place under the tax warehousing procedure at the same time and released for free circulation. You can read more on the webpage concerning tax warehousing.
  • You can postpone the collection of VAT or excise duty if the imported goods are moved to a tax warehouse. For example goods that are exempt from VAT can be stored in a tax warehouse. When you declare the goods for procedure 45, they are released for free circulation and partial home use, but at the same time they are placed in a warehouse that is not a customs warehouse. You can read more on the webpage concerning tax warehousing.

If you wish to postpone the collection of excise duty using the procedure you have indicated, read the instructions on the page on how to declare excise goods. 

Even though the end-use procedure reduces customs duty it does not, however, transfers VAT on imports. However, in the cases specified in the Value Added Tax Act, the import may be exempt from VAT, for example, if the spare parts and equipment of vessels in international traffic are placed under the end-use procedure. You can read more about the end-use procedure. 

The use of the special procedure may have an impact on the time of the collection of import VAT. You can place the goods under a special procedure, if the prerequisites of the procedure are met. You can read more about special procedures.

You can declare exemption from VAT with an additional procedure code 

You can apply for exemption from VAT on import with a customs declaration, if there are grounds for exemption from VAT in the Value Added Tax Act. Applying for exemption from VAT is provided in the customs declaration, for example, with an additional procedure code. The additional procedure codes have been compiled in the code list “CL102 ‒ Additional procedure.”

In addition, importers registered for VAT should always declare the import details on their own initiative by filing a VAT return in the Finnish Tax Administration’s MyTax service. The Tax Administration is responsible for the VAT on import.

Exemption from VAT on import based on domestic sales with tax exemption

The exemption from VAT for imported goods can be based, for example, on the exemption from VAT for domestic sales of the goods. The Value Added Tax Act also gives the grounds for VAT exemption for the importation of these goods. 

For example, the domestic sales of the following goods are exempt from VAT. The Value Added Tax Act also provides that the import of goods is exempt from VAT.
 

The import of investment gold as defined in the Value Added Tax Act is exempt from VAT (section 94(1)(5) of the VAT Act). Investment gold means gold in the form of a bar or wafer as well as gold coins. Importers that are not registered for VAT must invoke the tax exemption for import in the customs declaration and provide proof that the conditions for the tax exemption are met.

In the customs declaration, provide additional procedure code “637 – Investment gold referred to in section 43(b) of the VAT Act (section 94(1)(5) VAT Act).” The import of gold material (such as gold powder and granules) and semi-manufactured gold (such as gold rods and scrap gold) is taxable.

The manufacturer’s declaration, for example, can be accepted as proof that the conditions for the tax exemption are met. Read more in the Tax Administration’s detailed guidance about the value added taxation of investment gold, gold material and semi-manufactured gold (available in Finnish and Swedish, link to Finnish).

When calculating the relationship between the normal selling price and the open market price of the gold contained in a coin, the following concepts are used: 

  • Normal selling price: the price at which the seller sold the coin to the buyer. Transport costs or other similar costs charged by the seller are not included in the price.
  • Currency conversion rate: the conversion rates established by Customs and published monthly on the Customs website are used when converting other currencies to euros.
  • Open market value of gold: The price of gold quoted at the London Metal Exchange on the day the coin was received is used when calculating the open market value of gold (USD/ounce). If the price of gold is not quoted on the said date, the value on the following quotation date shall apply. As a rule, the declarant is responsible for providing the open market value of gold.
  • Gold content of a coin in grams: The importer must provide proof of the gold content of the coin (e.g. the manufacturer’s declaration).
  • Ounce (oz): 1 oz = 31,1035 g (troy ounces)
  • Tael: 1 tael = 1,193 oz (troy ounces)
  • Tola: 10 tolas = 3,75 oz (troy ounces)

In certain cases, the import of dental prostheses as defined in the Value Added Tax Act is exempt from VAT (section 94(1)(11) of the VAT Act). An importer of dental prostheses must check whether the dental prostheses they are importing are those referred to in section 36(3) of the VAT Act. 

If the dental prostheses meet the requirements of the VAT Act, and the seller of the dental prostheses is a dentist, dental technician or specialised dental technician, the dental prostheses are declared in the customs declaration with additional procedure code “623 – Dentures referred to in section 36(3) VAT Act”. Check the conditions in the Finnish Tax Administration’s guidance on value added taxation of health care and medical care, section 4.4 (available in Finnish and Swedish, link to Finnish).

If the conditions for VAT exemption are not met, this additional procedure code can’t be used. In that case, proceed as follows:

  • Businesses registered for VAT declare the import VAT details on their own initiative by filing a VAT return.
  • Customers not registered for VAT pay the VAT upon import in accordance with the customs clearance decision.

The import of special automatic data processing software as defined in the Value Added Tax Act is exempt from VAT (section 94a of the VAT Act). Imports of special automatic data processing software are exempt from tax, when the importer is an entrepreneur or a VAT-registered legal person.

Examples of declaring data media
  • If the software is downloaded via a web service on the internet, it is not classified as a good in this context. Therefore, no customs declaration is submitted to Customs for the software nor are any import duties paid. 
  • Software freely available for anyone to buy is delivered to the customer on a flash drive. An import declaration for the software must be submitted to Customs and the customs value is based on the price paid for the software. Customs duties are paid for the import. 
  • Importers registered for VAT declare the import details on their own initiative by filing a VAT return in the Finnish Tax Administration’s MyTax service. Read more about how to declare the VAT on import. Customers not registered for VAT pay the import VAT levied by a customs clearance decision in conjunction with the customs clearance.
  • Bespoke software developed for a company is delivered to the customer on a flash drive, i.e. it is so-called special automatic data processing software. An import declaration must be submitted to Customs for the flash drive. The customs value is based on the total value of the flash drive and the software stored on it, and import duties are levied on this value (licences or activation codes are not software). Services carried out after the import (e.g. installation, maintenance, training etc.) and items paid for them are not included in the customs value. 

The customs declaration is submitted as follows:

  • If the special automatic data processing software was imported by an entrepreneur or a VAT-registered legal person, additional procedure code “636 – Special automatic data processing software, imported by an entrepreneur” is provided in the customs declaration. 
  • Importers registered for VAT declare the import VAT on their own initiative by filing a VAT return in the Finnish Tax Administration’s MyTax service.
  • If the entrepreneur isn’t registered for VAT, the exceptional taxable amount for VAT must be provided in the customs declaration with the code 80. The taxable amount for VAT includes the value of the storage medium, the import taxes and customs duties as well as other items to be included (e.g. freight and insurance costs) to the place of destination in Finland. However, the VAT to be paid in Finland is not included in the value. If it is known at the time of customs clearance that the goods will be transported to another destination located within the EU, these costs shall also be included in the taxable amount for VAT.
  • If the importer of the special automatic data processing software is not an entrepreneur, an additional procedure code or exceptional taxable amount for VAT must not be provided. 
  • If the importer is not registered for VAT, the import duties and VAT are levied by a customs clearance decision.

Import of the following goods may also be exempt from VAT based on domestic sales

  • Import of electricity, or gas supplied via the natural gas network or a connected distribution system is exempt from VAT. You can read more in the guidance on how to declare electricity and natural gas.
  • The import of a seagoing vessel is VAT-exempt in certain cases. You can read more about declaring a seagoing vessel on the webpage about declaring the mode of transport.
  • Mother’s milk, human blood as well as human organs and tissues
  • Gold, when the importer is a central bank
  • Bank notes and coins, which are current tender, with the exception of banknotes and coins the selling price of which is determined by their value as collector’s items or their metal value.
  • Editions of newspapers and periodicals 
    • The import is tax-exempt if the following conditions are met concerning newspapers and periodicals: Printed editions of imported newspapers and periodicals that arrive at least four times a year to a public interest community that mainly publishes the periodical for its members or shareholders or for member of societies or shareholders in them. The tax exemption further requires that the society does not publish or sell newspapers or periodicals in the course of their business. 

Other exemption from VAT, which is only provided for in the Value Added Tax Act

The import of goods may be exempt from VAT, for example, because Finland has signed an international agreement and the Value Added Tax Act provides that goods under the agreement are exempt from VAT. If the import of goods is also exempt from customs duty and the relief from customs duty is based on legislation, a regulation or, for example, an international agreement, you can read more on the webpage Relief from customs duty. 

For example, the Value Added Tax Act provides that imported goods are exempt from VAT on the following grounds: 

  • Goods brought in by a foreign airline company
    • Ground equipment, safety devices and instruction materials used by a foreign airline company in international air traffic, spare parts and accessories for these goods, as well as related documents and forms are exempt from VAT.
  • Goods acquired for the official use by EU institutions referred to in Article 129 of the VAT Act
    • The import of goods imported for the official use of a body of the European Union or the European Atomic Energy Community is exempt from tax under the conditions and restrictions agreed in a protocol or agreement referred to in section 129 of the Value Added Tax Act, provided that the taxable amount of the import plus the VAT portion is at least 80 euros. The restrictions and conditions were agreed on in the Protocol on the Privileges and Immunities of the European Union of 8 April 1965, and in the agreement of its implementation or in the host country agreement. 
  • Goods imported by an international organisation and its personnel referred to in section 129(b) of the Value Added Tax Act 
    • Goods imported by another international organisation and its personnel recognised by Finland and located in Finland, are exempt from tax under the conditions and restrictions agreed in the organisation's founding agreement or the host country agreement. The prerequisite is that the taxable amount of the import tax plus the VAT portion is at least 170 euros. The importer must present a written confirmation issued by the Ministry for Foreign Affairs as to whether the importer is entitled to tax-exempt imports based on the founding agreement or the host country agreement, the status and the intended use of the goods. 
  • International agreements
    • The import of goods is exempt from VAT if an agreement on tax exemption binding Finland was made with a foreign state when the Value Added Tax Act came into force. The Value Added Tax Act (1501/1993) came into force on 1 June 1994. After this, the application of a tax exemption that deviates from the concluded international agreement requires that the agreement has been brought into force by legislation.

Other things to note

Finnish Value Added Tax Act (1501/1993), sections 94‒96 and 72 h

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