Freelance + VAT question

luckykitty · Post by **luckykitty** » Sat Jun 20, 2009 9:30 am

Hi,
If I do a job as a freelance photographer, how does VAT and tax work? So when I charge the client, I add the VAT value, but then later do I pay normal income tax in Finland also? The client is based elsewhere in EU.

Secondly, if I buy photographic equipment for my job, can I only get VAT back if its new equipment with a receipt of purchase? I bought some second hand equipment before but so none of that has receipts...

Cheers,
LK

**Sponsor:**

rinso · Post by **rinso** » Sat Jun 20, 2009 10:33 am

1- you pay tax over your profit.
you pay vat over your sales (22% or so)
Your selling price to clients includes this vat. (so 22% of your sales goes to waste)

2- you can get vat back on the things you buy for your profession (not only camera's) but you need receipts for them. Shops that sell you second hand equipment should give you a receipt. A private person doesn't pay vat, so you cannot get any back.

3- You can try to deduct the cost for your equipment from your income and so reduce your taxable profit. (doesn't always work)

Buying second hand professional equipment is tricky. Several parts in a digital camera have a limited usability before they wear out. Amateurs hardly ever come to those number of pictures, but professionals do.

luckykitty · Post by **luckykitty** » Sat Jun 20, 2009 12:45 pm

1- you pay tax over your profit.
you pay vat over your sales (22% or so)
Your selling price to clients includes this vat. (so 22% of your sales goes to waste)

2- you can get vat back on the things you buy for your profession (not only camera's) but you need receipts for them. Shops that sell you second hand equipment should give you a receipt. A private person doesn't pay vat, so you cannot get any back.

3- You can try to deduct the cost for your equipment from your income and so reduce your taxable profit. (doesn't always work)

Buying second hand professional equipment is tricky. Several parts in a digital camera have a limited usability before they wear out. Amateurs hardly ever come to those number of pictures, but professionals do.
1- you pay tax over your profit.
you pay vat over your sales (22% or so)
Your selling price to clients includes this vat. (so 22% of your sales goes to waste)
I looked on some guide and photographers have 9.5% VAT? or 8.5% this year, so I can just add it on if i register for VAT? But then I still pay tax on everything after income - vat - equipment costs, is that right :O?

2- you can get vat back on the things you buy for your profession (not only camera's) but you need receipts for them. Shops that sell you second hand equipment should give you a receipt. A private person doesn't pay vat, so you cannot get any back.

3- You can try to deduct the cost for your equipment from your income and so reduce your taxable profit. (doesn't always work)
If I bought it second hand, can I deduct it from my income? (have no receipt tho

)

Buying second hand professional equipment is tricky. Several parts in a digital camera have a limited usability before they wear out. Amateurs hardly ever come to those number of pictures, but professionals do.

Bubba Elvis XIV · Post by **Bubba Elvis XIV** » Sun Jun 21, 2009 10:06 pm

luckykitty wrote: If I bought it second hand, can I deduct it from my income? (have no receipt tho )

You can claim it.

You have to be able to show the receipt...So you have to keep it for 6 years, in case they decide to investigate your claim.

But you don't have to show the receipt when you make the claim. So it's your risk if you wish to claim with out the receit.

I claim a lot of stuff off tax cos of my job (god knows if I get it)...I pop any receipts straight into an envelope and have them all organised. If your gonna work freelance with the possiblity to claim tax money back, it's a habit you need to get into and follow.

Make sure you know what you can claim for and claim for as much as possible. Get some help from someone around you. You'll be suprised. I think you can claim for a small amount of clothes even (not sure 100%). Read the tax info carefully. You can claim for what you want, all that happens is they deny it if they think it's not a reasonable claim.

And keep the silly pieces of paper.

I didn't do this properly for about 3 years and no one ever told me...Have no idea how much money I have 'lost' .

luckykitty · Post by **luckykitty** » Mon Jun 22, 2009 12:14 am

Bubba Elvis XIV wrote:
luckykitty wrote: If I bought it second hand, can I deduct it from my income? (have no receipt tho )
Make sure you know what you can claim for and claim for as much as possible. Get some help from someone around you. You'll be suprised. I think you can claim for a small amount of clothes even (not sure 100%). Read the tax info carefully. You can claim for what you want, all that happens is they deny it if they think it's not a reasonable claim.

Hey thanks for all the info. yeah i definitely want to claim back for the camera equipment, its expensive :s. But i bought the stuff second hand so no receipt at all, so i should start buying from the store now..
Anyway is there some kinda tax guide online on what can be claimed for job expenses as a freelance? And I have to fill my tax returns in Finnish right?
Thanks!
LK

rinso · Post by **rinso** » Mon Jun 22, 2009 9:15 am

Try to find an other free lancer and get an idea what they accept from him.
The tax office uses internal guidelines for different professions about how much is reasonable. If you are way out of the scale, they will careful look into it. (and ask for the receipts)

Rosamunda · Post by **Rosamunda** » Mon Jun 22, 2009 10:00 am

luckykitty wrote:
Bubba Elvis XIV wrote:
luckykitty wrote: If I bought it second hand, can I deduct it from my income? (have no receipt tho )
Make sure you know what you can claim for and claim for as much as possible. Get some help from someone around you. You'll be suprised. I think you can claim for a small amount of clothes even (not sure 100%). Read the tax info carefully. You can claim for what you want, all that happens is they deny it if they think it's not a reasonable claim.
Hey thanks for all the info. yeah i definitely want to claim back for the camera equipment, its expensive :s. But i bought the stuff second hand so no receipt at all, so i should start buying from the store now..
Anyway is there some kinda tax guide online on what can be claimed for job expenses as a freelance? And I have to fill my tax returns in Finnish right?
Thanks!
LK

By the way. In order to claim back the VAT on your business-related expenses, you have to register for a VAT first and also pay VAT. You can't claim back more than you have paid in

And you can't claim back VAT for purchases made BEFORE you registered for VAT. So hold your new purchases until you have registered.

Small businesses can claim back VAT at the end of their fiscal year if their business revenues are below a certain threshold (IIRC around 22 K€). There is a form to fill in which is available on the Vero website.

VAT or no-VAT, you can still claim business-related expenses against your revenues when calculating your taxable income. For example, I claim books, magazine subscriptions, A4 printer paper and printer cartridges, travel and other IT related purchases such as a mini-laptop and a digital recorder/microphone, speakers etc..

If you go into the immigrant's advice office in Helsinki www.intofinland.fi you can ask for more advice on what can be claimed and what can't. Golden rule: always keep receipts and a travel log book (very important).

Charles Monk · Post by **Charles Monk** » Mon Jun 22, 2009 10:27 am

Penelope says of VAT: "You can't claim back more than you have paid in". Maybe this is true for a freelance photographer, but it's not true for us.

We're a small OY. All our invoices are for computer services to EU customers outside Finland. We collect no VAT because one doesn't have to charge it on that kind of sale of services. In ten years of trading, I have never added VAT to an invoice. We can still claim back the VAT we have paid on goods and services, though. Every month we fill in our return and send no money to the verotoimisto. About twice a year we make a claim for a VAT repayment, and we get the money about 5 months later. This is of course an odd situation. Most (profitable) firms collect more VAT than they pay, so the refund is handled as a deduction, but our story shows that it doesn't have to be like that.

From what you write in your original post, I think you should talk to an accountant. They are not expensive in Finland. It's one thing to be confused about the details of how VAT works, but if you're mixing up the basic concepts of VAT and income tax then you need help.

@Rinso. "22% of your sales goes to waste". VAT is not waste. VAT is tax. You could argue that it's a complicated, irritating, counter-intuitive, regressive and unfair tax, but it is a tax. Those guys in the verotoimisto aren't shovelling the cash into furnaces, or composting it.

Rosamunda · Post by **Rosamunda** » Mon Jun 22, 2009 10:42 am

Charles Monk wrote:
We're a small OY. All our invoices are for computer services to EU customers outside Finland. We collect no VAT because one doesn't have to charge it on that kind of sale of services. In ten years of trading, I have never added VAT to an invoice. We can still claim back the VAT we have paid on goods and services, though. Every month we fill in our return and send no money to the verotoimisto. About twice a year we make a claim for a VAT repayment, and we get the money about 5 months later. This is of course an odd situation. Most (profitable) firms collect more VAT than they pay, so the refund is handled as a deduction, but our story shows that it doesn't have to be like that.

Yes, you are in an odd situation and I must admit that I do not understand all the ins and outs of VAT on cross-border services within the EU. There are special rules for this and, what's more, they seem to change all the time. IIRC it also depends on the size of your business (eg Amazon does charge Finnish VAT on books sent from the UK to Finland but the Bookdepository does not....) . It makes sense though that you are reimbursed VAT on your business expenses. By the way... (bean-counter question coming up -> ) how do you (or your bookkeeper) account for the VAT refund? Do you book it as revenue or as a negative expense???

In my company (also an Oy) I charge VAT and also deduct VAT on purchases I make. But at the end of the year I claim it all back because my revenue is below the threshold (at least it has been in the past), I don't think they ever paid me back more than I paid in though (even in the first year).

Bubba Elvis XIV · Post by **Bubba Elvis XIV** » Mon Jun 22, 2009 10:58 am

Hijacking a bit...

Penelope - how do you actually know what you get back?

I make the claim but I never get all the cash back. So, is there a way of finding out what they actually paid for and what the said 'no' to?

Maybe I should just read the info a bit more carefully.

Charles Monk · Post by **Charles Monk** » Mon Jun 22, 2009 11:18 am

Penelope:

VAT just fills me with misery, to be honest, so I try to ignore it.

I don't know how the accountants actually book it. I think of it as a loan which will be repaid, but in the actual tax returns it might get special treatment because it's a tax payment. My guess is that would be 'invisible' as far as trading profit and loss accounting is concerned, because ALV sits on top of all that stuff.

In practice, it works as a nice little (compulsory) government-run savings scheme. They pay a fair rate of interest. In Autumn 2008, they owed us about EUR 12K. If they had paid it to me there and then, I'd have been worrying myself silly about which bank was safe enough to keep it in.

"Collect no VAT on sales, reclaim all VAT paid on purchases? " As you can imagine, the verotoimiso have always been very interested in our strange ALV situation. They even came and made an inspection of the books once. We got a big thumbs up, so what we're doing must be right.

The Amazon case is a beauty. I think that they add 8% VAT for sales to Finland (this is right for books). Strangely, they add 8% to the shipping fee as well. Perhaps that's right. I have got them to refund the VAT charged. put the money back on the credit card account. Apparently, they agree that since they are selling books to VAT-registered firm in another EU country, they should not be charging VAT. To be honest, I'm not really sure now whether this is correct for books, but they have been happy to make the refund in the past. Actually making the request is so complicated that I eventually stopped doing it, but it worked when I last tried (in about 2005).

Upphew · Post by **Upphew** » Mon Jun 22, 2009 12:11 pm

Charles Monk wrote:The Amazon case is a beauty. I think that they add 8% VAT for sales to Finland (this is right for books). Strangely, they add 8% to the shipping fee as well. Perhaps that's right. I have got them to refund the VAT charged. put the money back on the credit card account. Apparently, they agree that since they are selling books to VAT-registered firm in another EU country, they should not be charging VAT. To be honest, I'm not really sure now whether this is correct for books, but they have been happy to make the refund in the past. Actually making the request is so complicated that I eventually stopped doing it, but it worked when I last tried (in about 2005).

True, shipping should be at 22%. But not charging VAT part is not true: if company has sales of X (X=35 000, IIRC) then they are liable to pay Finnish VAT to Finnish taxman, else they go by local rules, see: http://www.bjl-legal.com/e/article/internationalvat and http://www.e-fs.net/kbase.asp?fileName=vat_e_com

Charles Monk · Post by **Charles Monk** » Mon Jun 22, 2009 12:47 pm

Yep. I just gave up worrying about the Amazon ALV several years ago. I also remember that they were doing something else wrong (charging the wrong rate or something).

Maybe we should pay ALV on books and other physical goods delivered from abroad, but software sales definitely attract zero ALV for intra-eu sales between countries. For example, if a VAT-registered Finnish company buys software from a German supplier, then no VAT is charged.

In principle, trading should be VAT-neutral. In other words, if you have no way of reclaiming VAT which you have paid on your imported purchases, then you should not be paying it in the first place. Otherwise, there would be unfair competition between suppliers from different countries. The same argument does not apply to hotels and taxis, though, which are used where they're paid for.

So what happens to the MOMs you pay when staying in a hotel in Sweden, or the IVA on a taxi ride in Portugal? I have no idea: I just hand over the receipts to my accountants and hope that - somehow - they manage to include extra-Finnish expenditure in the VAT refund claim. I confess to leaving all that agony to them.

ajdias · Post by **ajdias** » Mon Jun 22, 2009 2:49 pm

Someone asked for the tax guide. It's here with links for the different sections.

Information on VAT can be found from here (click the link to download the pdf). From the document:

8.1.1. Intra-Community supply of goods from Finland to other EU Member States

As a rule, trade between taxable businesses in the internal market is based on the country of destination
principle. This means that the taxable seller in Finland does not pay tax on the sale of goods
transported to a buyer in another Member State. The carrier may be the seller, buyer or someone else
acting on their behalf. The zero-rating in intra-Community supply also imposes VAT on the buyer in
intra-Community acquisitions. The seller of the goods must also make certain that the buyer is VATregistered
in the other Member State and that the VAT number is valid. The VAT number issued to
the buyer in the other Member State must be entered in the sales transaction invoice in addition to
the seller’s VAT number. When all these conditions are met, intra-Community supply from Finland to
other EU Member States is zero-rated. Otherwise, the seller of the goods must charge and pay VAT
on the sale of goods in Finland.

Rosamunda · Post by **Rosamunda** » Mon Jun 22, 2009 4:28 pm

In other words if you gave Amazon your VAT number they would apply the zero-rate to your invoice. Fair enough. But sometimes I order work books and non-work books in the same order... Anyway, I find it easier (and cheaper) to order from www.bookdepository.co.uk who don't charge VAT or delivery charges.

I think intra-community services and SW product sales are VAT free for the simple reason that no one has thought up a way of tracking them. If VAT were introduced on SW sales (eg downloadable SW etc) all the suppliers would just ex-patriate themselves to the Cayman Islands or Jersey etc. I guess ibooks will follow the same pattern. If I was teaching on-line to students in China, I wouldn't invoice VAT but I could still claim the VAT back on my IT and telecom bills. But I am not.

@bubba. Re: VAT refund
We just take whatever they send us back. Haven't sat dwn to work it all out. With the ice-cream business it's fairly easy (cones, cups, ice-cream and plastic spoons, rent, electricity) but for the teaching it is a bit more tricky as I claim travel costs which Vero are generally very cautious with. You're probably right though, I doubt they give it all back. Maybe if it rains ALL summer, I'll sit down and reconcile the whole thing.

Finland Forum

Find information about moving to, living in and life in Finland