Value-Added Tax Changes

As a result of Finland's expected joining of the EU on January 1, 1995, major changes are proposed for the Finnish VAT system. If enacted, these changes will become effective on January 1, 1995.

Finland will introduce the EU rules regarding intracommunity trade. Under these rules, VAT is no longer imposed at the border on imports from other EU countries. Intracommunity acquisitions will be subject to VAT in accordance with the destination principle. If a purchaser of goods is a taxable person for VAT purposes, it will be entitled to input tax credit if it uses such item in a taxable business activity. The new rules create a cash flow benefit for taxable persons because they no longer have to pay VAT when they import goods from another EU country.