Retrospective occupational health VAT bill shock

In recent years, the Tax Administration has stepped up supervision of VAT practices at companies in the social welfare and healthcare sector. The sale of health and medical care services is exempt from VAT, but the challenge has been determining when a service is a health or medical care service per the Value Added Tax Act, and when it is not.

One large industry company, Pihlajalinna, surprised customers last week by announcing it would retrospectively invoice its occupational health customers for the VAT share of some services sold in 2024 and 2025.

The Tax Administration’s current guidance states that although arranging occupational healthcare is a statutory obligation for employers, this does not mean that all services included in occupational healthcare are VAT-exempt health and medical care services.

Pihlajalinna says the retrospective invoicing is based on a tax audit carried out at the company and the Tax Administration’s interpretation, under which “some occupational healthcare services are considered VAT-liable expert services”. Pihlajalinna’s customer announcement says that these services include writing and updating an occupational health action plan, work ability support for the client organization, reporting to the company, contacts, advice and other coordination for the company, occupational safety and health activities, multi-professional cooperation meetings and writing Kela’s annual report.

“Only the VAT share required by the Tax Administration will be invoiced retrospectively. Any late-payment interest and other additional tax-related costs will be paid by Pihlajalinna,” the company says on its website.

“Under the terms of the Pihlajalinna price list, the company is entitled to charge the buyer VAT at the applicable rate, including retrospectively,” the company says on its website, explaining the retrospective invoicing.

The 2025 price list states: “If the sale is later considered taxable, the seller is entitled to charge the buyer VAT at the applicable rate.”

Pihlajalinna also said it will reflect the new VAT interpretation in its pricing from 1 May.

Pihlajalinna stresses that most of its customers can deduct the VAT payable in full. However, if a company carries out VAT-exempt activities, VAT will be a cost as part of the company’s occupational healthcare.

If a company receives a corrected invoice, it may deduct VAT under the normal rules.

“VAT may not be deducted if the buyer is a small-scale operator not entered in the VAT register or operates in a VAT-exempt sector, such as banking or insurance. In the non-profit sector, too, the activities of public-benefit entities are often not subject to VAT,” says Laura Kurki, Senior Tax Specialist at Suomen Yrittäjät, the Finnish SME association.

The Tax Administration’s current guidance on VAT in health and medical care dates from 2019. Updated guidance is due to be published in the coming weeks.

“I won’t benefit from the deductions”

Solo business owner Tuomas Laitinen is one of Pihlajalinna’s occupational health customers. He has already sent Pihlajalinna an enquiry about what kind of invoice his company will receive and who will compensate the administrative costs. He has not yet received an answer.

“In my case, my estimate is that the invoice would be around €150–200, and it would relate to a maximum of six or seven different invoices from 2024–2025.”

“Because during those years my business activities were almost 100% VAT-exempt, I won’t benefit from the deductions. In addition, the administrative cost, meaning the accountant’s work, will probably cost more than what Pihlajalinna is trying to recover, if it tries to recover anything.”

“I don’t think this is really about the euro amounts, but about trying to make customers pay for the company’s own mistake.”

Adjustment Board assessment

Mehiläinen already said late last year that changed VAT interpretations had affected the pricing of certain services from 1 November 2025.

“The Tax Administration has also ordered VAT on these services to be paid retrospectively from 2023 onwards. Mehiläinen will still refer the decisions to the Adjustment Board for assessment,” the company said on its website at the time.

Pihlajalinna also intends to refer the decision to the Tax Adjustment Board for assessment.

Mehiläinen has not announced that it will charge customers for the share of VAT that was not invoiced.

The sector’s third large operator, Terveystalo, said late last year that it was “aware that some companies in the sector had recently received guidance to change their VAT practices concerning occupational health services”.

“The Tax Administration’s general interpretive guidance for the sector on the VAT treatment of healthcare services has not changed, however, and at Terveystalo we have not received official instructions to change our current practice,” the company says on its website.

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