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Reduced VAT rates rising in new year: guide for deciding which VAT rate to use
The Tax Administration has published instructions and examples of how increases to reduced VAT rates will be applied from the turn of the year.
Reduced VAT rates are changing on 1 Jan. 2025. On that day, products and services to which the 10% VAT rate currently applies move to the reduced 14% VAT rate.
However, the change does not affect newspapers, periodicals or public-service broadcasting. These goods and services will continue to be taxed at 10% VAT.
Sanitary towels, incontinence protection and babies’ nappies will move from the current general VAT rate of 25.5% to the reduced VAT rate of 14%.
In addition, preparations are under way to raise the VAT on sweets and chocolate from 14% to 25.5%. This change is intended to enter into force on 1 Jun. 2025.
14% VAT rate from 1 Jan. 2025
- books (printed and e-books)
- medicines
- sport and exercise services, such as game and gym bookings, tennis, golf, hockey stadium and sports slots, as well as ski lift ticket sales
- admission to cultural, entertainment and sporting events, such as theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and streaming of such events
- transport of people (buses, trains, taxis, domestic flights)
- accommodation services (hotels, motels, inns, farm accommodation, tent, caravan and trailer sites at campsites, as well as cabin rental)
- honoraria for performing artists, sportspeople or other public performers, if the recipient of the honorarium has applied for VAT status for such activities.
Read the Tax Administration’s instructions below on whether the old or new VAT rate applies to the sales of goods and services.
Delivery date decisive in sales of goods
When selling goods, the date of delivery decides which VAT rate applies. Goods are delivered when they have been handed over to the buyer. If it is agreed that delivery of the goods is the seller’s responsibility, the goods are considered delivered when the buyer has received them. If delivery of the goods is the buyer’s responsibility, the goods are considered delivered as soon as they are dispatched.
If a product which is taxed at 10% VAT is delivered to the buyer on or before 31 Dec. 2024, the VAT rate is 10%, even if the buyer pays for the goods later, in 2025. If the product is handed over to the buyer on or after 1 Jan. 2025, the VAT rate is 14%.
If the buyer pays an advance for the product, the VAT rate in effect at the time of payment applies to the advance.
Provision date decisive in sale of services
When selling services, the day the service is provided decides which VAT rate applies. If the provision of the service is still under way when the VAT rate changes, the VAT rate in force at the date the service is completely provided applies. The service has been provided when the buyer can use it.
If a service which is taxed at 10% VAT is provided to the buyer on or before 31 Dec. 2024, the VAT rate is 10%, even if the buyer pays for the service later, in 2025. If the service is provided to the buyer on or after 1 Jan. 2025, the VAT rate is 14%.
If the buyer pays an advance for the service, the VAT rate in effect at the time of payment applies to the advance.
Sale of continuous goods or services
When selling goods or services that are provided continuously, the value for money is determined in terms of the passage of time. A continuously provided good or service is considered delivered or provided when the accounting period for each payment ends.
One-off sales, which are paid in instalments, such as hire-purchase, are not continuous.
Example: A customer buys a season ticket for public transport as a continuous annual subscription, and is charged for the ticket every 30 days. The customer orders the season ticket in December 2024 and makes the first payment in December. After this, the customer is charged monthly. The first instalment is taxed at 10% VAT. The following instalments are taxed at 14% VAT.
When is it an advance?
A payment is an advance when the seller receives the payment before the goods have been delivered or the service provided to the customer. What is decisive is when the seller has access to the money. If the seller receives the advance before the new VAT rate comes into effect, the VAT rate is the present 10%. If the seller receives the advance after the new VAT rate comes into effect, the VAT rate is 14%.
Example: In November 2024, a customer buys a ticket for a train journey in January 2025. Because the customer has paid for the ticket before she uses it, that is, before the train journey, this is an advance. The advance is taxed at the current VAT rate of 10%. If a customer pays for a ticket before using it, but in 2025, the VAT rate is 14%.
Example: On 30 Dec. 2024, a customer buys a local public transport ticket valid for 4 months. The ticket is taxed at 10% VAT.
Example: In December 2024, a customer buys a bundle of 6 cinema tickets. They can be used for any showing of any film. The customer uses the tickets in the bundle to see films in 2025. The bundle of tickets is sold at 10% VAT.
Example: A customer holds a continuous gym membership, which he can pay either every month or every few months. From January 2025 on, the gym membership is sold at 14% VAT. If the customer pays for his January–March 2025 membership in advance in December 2024, this is an advance, to which 10% VAT applies.
Example: A customer buys a ticket to an event in December 2024 directly from the event organizer. The event is held in June 2025. The customer pays for the ticket in December 2024, which makes the payment an advance. Because the seller has received the advance before the turn of the year, the applicable tax rate is 10%.
Example: A customer buys a ticket for an event in December 2024 through a ticket agent. The event is held in June 2025. The customer pays the ticket agent for the ticket in December 2024, which makes the payment an advance. The ticket agent sells the ticket to the customer in its own right on behalf of the event organizer (a “commission sale”). Because the ticket agent has received the advance before the turn of the year, the tax rate which applies to the ticket agent’s sale is 10%.
A second customer orders a ticket in December 2024. The ticket and invoice for the ticket are posted to the customer in January 2025. The customer pays for the ticket at the end of January. This too is an advance, because the event to which the ticket grants admission does not take place until June. Because the ticket agent has received the advance after the turn of the year, the tax rate which applies to the ticket agent’s sale is 14%.
Example: A customer buys a concert ticket through a ticket agent in December 2024. The concert is scheduled for June 2025. The ticket agent sells the ticket to the customer using the name of and on behalf of the event organizer. The ticket agent is thus a middleman and sells the event organizer a brokerage service which is charged at the general VAT rate. The event organizer is responsible for organizing the concert.
The ticket agent transfers the ticket sale proceeds to the event organizer and deducts a commission. Because the tickets are sold in the name of and on behalf of the event organizer, the event organizer is considered to be selling the tickets directly to the customers.
When the customer pays for a ticket in advance in December 2024, and no special arrangements (such as an escrow account) are used, it may generally be considered that the agent receives payment on behalf of the event organizer. In that case, the VAT rate which applies to the event organizer’s sales is determined based on the date the advance payment is made to the ticket agent. In these situations, the event organizer files and pays the taxes on the sales for the month it received the advance payment. If the seller receives the advance before the turn of the year, the applicable tax rate is 10%.
Another customer orders a concert ticket in December 2024 from the same ticket agent. The ticket and invoice are posted to the customer in January 2025. The customer pays for the ticket at the end of January. This too is an advance, because the event to which the tickets grant admission does not take place until June. The tickets are sold at 14% VAT.