Selecting the VAT code for an invoice
The VAT code is a mandatory data item on an electronic invoice.
The currently effective legislation on electronic invoicing requires that invoicing companies must indicate the VAT code on electronic invoices in cases where the basis for the tax exemption had to be marked on the invoice in the past, as well. When the VAT rate is normal, the program adds the code on the invoice automatically.
The VAT code is a mandatory data item on electronic invoices that meet the e-invoicing standard.
When you create an invoice where the VAT rate is zero on one or all invoice rows or an invoice that is exempt from VAT, you must specify the VAT code in the invoice information. If you select 0% as the VAT rate, the program automatically asks you to select the VAT code and enter a VAT 0% phrase.
When you are creating an invoice and click the field shown in the image above (VAT code and VAT 0% phrase), the program opens a separate VAT 0% selections window where you can select the correct code from a drop-down menu and enter the VAT 0% phrase.
First select VAT 0 in the VAT code drop-down menu.
After this, enter the VAT 0% phrase.
You can specify a default VAT code and default VAT 0% phrase in your invoice settings (Settings > Invoicing settings > Default values). The program adds your defaults to the invoice automatically when the tax rate of the invoice is 0 or when the invoice is exempt from tax.
An example of using default settings
VAT reverse charge in the construction industry
If your company operates in the construction sector and you often send invoices with the VAT reverse charge mechanism, you can do the following:
- In the invoicing settings, set the default tax code as "AE - VAT reverse charge" and write in the VAT 0% phrase field: "Buyer is liable to pay VAT, Section 8 c"
- In the invoice row section, select not to show VAT on the invoice.
- In the future, when you make new invoices, they will automatically have no VAT and contain the VAT code and the VAT phrase.
The VAT codes
AE – VAT reverse charge
The Finnish VAT reverse charge mechanism covers the construction sector, sales of scrap and waste, gold investments and emissions rights trading.
E – Exempt from tax
The exempt from tax code is intended for sales by companies that do not entitle the buyer to tax deductions on the purchase.
Note! Using this code requires registering in the value added tax register. If your operations are fully exempt from value added tax, you must use code O.
G – Free export item, tax not charged
This code is used when selling services or goods to third countries. Third countries mean countries outside of the European Union.
Please remember to apply this code when selling goods to the Åland islands.
K – Exempt from EEA intra-community supply of goods and services
This code applies to the sales of goods or services within the EU. In addition to the tax code, the invoice must contain the text "intra-community supply" or similar.
Please note that the invoice must also include the buyer's VAT number, the code of the supply country and the delivery date or invoice period.
O – Services outside scope of tax
The O code is intended for companies that are not registered in the VAT register.
Z – Zero rated goods
This code is used when the sales are zero rated, in other words, when the tax rate is 0%. In this case, the purchase is tax-deductible.
S – Normal domestic sales
The program automatically adds the S code to invoices that are not zero rated.
If you do not know which VAT code or VAT 0% phrase to select, you can contact your accounting office.
If necessary, you can also ask advice from the Finnish Tax Administration.
The detailed guidance by the Finnish Tax Administration also contain further instructions on, for example, various invoicing cases and phrases. Read the Finnish Tax Administration's instructions here: VAT invoice requirements.