VAT relief for small businesses to become history

Small business owners, in particular, are deeply concerned with the change being prepared.

The finance ministry is preparing a Bill to amend the Value Added Tax Act. The Bill stems from the EU’s VAT Directive. Kauppalehti first reported the story.

The VAT relief scheme has been a subsidy for small businesses who are on the VAT register and whose turnover over 12 months is below €30,000. The relief scheme will be abolished from 2025 due to an EU directive. The Government will not raise the small-scale business threshold of €15,000 either.

The small-scale business relief means that if a business’s turnover was under €15,000, the business can claim back all the VAT it paid. If the turnover has been between €15,000 and €30,000, a business has been able to reclaim some of the VAT it had paid as a form of relief. It is this relief which is being abolished because of the EU directive.

Juhana Brotherus, a Vice President and Chief Economist at Suomen Yrittäjät, the Finnish SME association, evaluated the effect of the change in June when speaking to Yrittäjämediat.

“The change will affect around 40,000 entrepreneurs and increase the tax burden on small-scale businesses,” Brotherus said.

“The change makes smaller businesses’ operations more difficult, removes incentives to growth and raises the threshold to start operating a business or running one part-time,” Brotherus continued.

Suomen Yrittäjät proposes raising the lower boundary for small-scale businesses from €15,000 to €30,000. According to Suomen Yrittäjät, such a change would ease the administrative burden not just for businesses, but also for the Tax Administration.

“We’ve calculated that that’s an appropriate limit which would encourage people to set up and grow businesses. The limit cannot be raised too high, as that could distort competition,” Laura Kurki, a tax expert at Suomen Yrittäjät, said to Kauppalehti on Wednesday.

“A particularly high number of service businesses benefit from the relief, and it has an impact on their income, which might be low to begin with. After Covid, in particular, this causes concern,” Kurki said to the newspaper.

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