Reverse charge VAT in construction in Finland: who pays and how to report it (2026)

What does the reverse charge mean?

Normally the seller pays the VAT. In construction, section 8 c of the Finnish VAT Act shifts the liability: when the conditions are met, the seller invoices without VAT, and the buyer calculates, reports and pays the tax itself. Construction services are taxed at the general rate of 25.5%. If the buyer acquires the service for business that entitles it to deduct VAT, it deducts the same amount on the same return.

When does the buyer pay the VAT?

The reverse charge must be applied when both conditions are met (exceptions are covered below):

• The service is a construction service, or the hiring-out of workers for construction services.
• The buyer is a business that, more than occasionally, sells construction services or hires out workers for construction services. A company that, more than occasionally, builds or commissions buildings for sale on land it holds, or sells property before it is taken into use after construction work, also meets the condition.

The buyer can also be an intermediary — a business that sells the same service on to such a buyer. The seller’s line of business does not matter: what counts is the type of service and the buyer’s status.

What does "more than occasionally" mean?

The condition is broad. Construction does not have to be the buyer’s main business — selling construction services regularly, even as a side activity, is enough. In the Tax Administration’s example, a farmer who now and then digs for others with his excavator sells construction services more than occasionally, so the reverse charge also applies to the repair of his cowshed. Occasional means mainly one-off, temporary or minor construction that is not intended to continue. The share of construction in turnover does not decide the matter on its own, and the buyer’s entire business is taken into account, including abroad.

• A construction company sells construction services more than occasionally from the day it starts operating.
• For a company in another industry, the current and the previous year are looked at.
• Once the condition is met, the buyer pays the VAT on all construction services it buys for its business — including, for example, the renovation of its own office, which it does not sell on.

Who checks the buyer’s status?

The seller is responsible. The seller must exercise due care to find out whether the buyer meets the conditions and, in unclear cases, ask the buyer for clarification. The information does not appear in public registers such as the Finnish Business Information System (YTJ), so it is worth getting the buyer’s confirmation in writing already at the quotation or contract stage.

What counts as a construction service?

Under the VAT Act, a construction service is building and repair work on real property, together with goods installed in the course of that work. The reverse charge covers, for example:

• groundwork and foundations, building construction, and civil engineering such as roads and utility networks
• building installations such as plumbing, heating and ventilation (LVI), electrical and roofing work, and finishing work such as plastering, painting and glazing
• demolition of buildings and construction cleaning
• hiring out construction machinery with an operator when the machine is used for work on real property
• doors, windows, air-source heat pumps and solar panels sold installed.

Not construction services are, for example, design and supervision (including the work of the responsible site manager, vastaava mestari), architectural and engineering services, hiring out machinery without an operator, transport to the site, ongoing property maintenance, chimney sweeping, installing blinds, putting up and taking down scaffolding, and installing and servicing production machinery or equipment serving a special activity on the property, such as a professional kitchen. When such work is part of a contract whose main service is a construction service, the reverse charge covers the whole contract; sold separately, the work is not subject to the reverse charge.

Selling goods alone is outside the reverse charge, but material installed as part of the work is inside it. Parquet sold as such is a sale of goods; parquet sold installed is a construction service. If the seller only delivers and connects a fridge or a dishwasher, it is a sale of goods, but kitchen cabinets and a built-in oven sold installed are construction services.

How the seller invoices

The seller must issue an invoice even though the buyer reports and pays the VAT. The invoice shows the price without VAT. Make sure it contains:

• the normal invoice details, but without the VAT rate and the VAT amount
• the buyer’s VAT identification number — for a Finnish buyer, its Business ID (Y-tunnus)
• the text "Käännetty verovelvollisuus" (reverse charge)
• the grounds for the buyer’s liability, e.g. a reference to section 8 c of the VAT Act
• the text "Itselaskutus" (self-billing) if the buyer prepares the invoice on the seller’s behalf.

If the invoice wrongly shows a VAT amount and rate, the seller issues a new invoice that refers to the original one. An "alv 0 %" line printed automatically by the invoicing system does not require a new invoice if the other required details and a reference to the reverse charge are there. When the reverse charge applies to the main service, it also applies to travel and accommodation costs charged to the buyer.

How to report the reverse charge in MyTax (OmaVero)

The buyer reports reverse-charge purchases on the VAT return in three fields:

1. 1The total of the purchases without VAT under “Purchases of construction services and scrap metal” (Rakentamispalvelun ja metalliromun ostot).
2. 2The VAT at 25.5% under “Tax on purchases of construction services and scrap metal” (Vero rakentamispalvelun ja metalliromun ostoista).
3. 3The same VAT under “Tax deductible for the tax period” (Verokauden vähennettävä vero), to the extent the purchase is deductible.

Example: a subcontractor invoices a construction company €10,000 without VAT. The company reports €10,000 as purchases, €2,550 (25.5%) as tax on the purchases and, as the work relates to its taxable business, the same €2,550 as deductible tax.

The seller reports the total of its reverse-charge sales under “Sales of construction services and scrap metal” (Rakentamispalvelun ja metalliromun myynnit), not as tax on domestic sales. The seller deducts the VAT on its own purchases as usual. If the deductible VAT exceeds the VAT payable — common for subcontractors — the negative VAT is refunded; if the company has overdue taxes, the refund first goes towards paying them.

In the Tax Administration’s file format (VSRALVKV) used by software and the Ilmoitin.fi service, the fields have data codes: 320 purchases, 318 tax on purchases, 319 sales and 307 deductible tax. The same fields are also used for construction services on property in Finland bought from a foreign company that has no fixed establishment in Finland and has not registered for VAT here — even if your own company does not sell construction services.

Which rate applies when a contract runs for a long time?

The VAT rate is determined by when the construction service is completed — when the client has approved it at the acceptance inspection or otherwise taken it over. Instalments invoiced as the work progresses (maksupostit) are advance payments, and their rate depends on when the payment accrued to the seller. The rule is the same when the buyer pays the VAT under the reverse charge. The general rate rose from 24% to 25.5% on 1 September 2024, which matters for example when correcting returns for earlier periods.

The most common mistakes

• A private person as the buyer. The reverse charge never applies to sales to private persons — not even when the buyer is a construction entrepreneur buying for private use. The invoice then includes VAT. If part of the house is used in the entrepreneur’s business with a right to deduct, the reverse charge applies.
• Housing companies and other buyers that do not sell construction services. A housing company (asunto-osakeyhtiö) or, say, a flower shop usually does not sell construction services, so its renovations are invoiced with VAT. The exception: if the contractor is a foreign company not in the Finnish VAT register, the housing company pays the VAT as the buyer and registers for this purpose.
• The State and municipalities. The State is considered to sell construction services only occasionally, so the reverse charge does not apply to its purchases. Municipalities are assessed one by one: if a municipality sells construction services more than occasionally, the reverse charge applies to all its purchases of construction services.
• Mixed contracts. When a contract covers construction and something else, the main service decides. The way of invoicing does not: the content of the contract determines whether it is a construction service. If no main service can be identified, the invoice is split. In the Tax Administration’s example, a week of leased workers putting up scaffolding is invoiced with VAT and a week of actual construction work under the reverse charge.
• Subcontracting chains. Every sale is assessed separately. The reverse charge applies to a subcontract bought by the main contractor, but transport and design that the subcontractor buys separately are invoiced to it with VAT, even though the subcontractor’s own overall contract is a construction service.
• A small business outside the VAT register. If the seller is not liable for VAT because of small-scale business (turnover no more than €20,000 in both the current and the previous calendar year) and has not registered voluntarily, the reverse charge does not apply. The same goes for the buyer: an unregistered small business does not have to register just because it buys a construction service.

Construction reports and the Contractor’s Obligations Act are separate duties

The reverse charge does not replace the other duties in construction. They follow their own rules, also when the reverse charge does not apply:

• Contract details for the Tax Administration: the buyer of construction work reports contracts worth more than €15,000 excluding VAT by the 5th day of the second month after the reporting month. Housing companies report their contracts too, and in a subcontracting chain each buyer reports its own subcontracts. On a shared site, worker details are also passed to the principal contractor (päätoteuttaja).
• Contractor’s Obligations Act (tilaajavastuulaki): the client must obtain reports on its contracting partner when a subcontract is worth at least €9,000 (excluding VAT) or leased workers work for more than ten working days — usually before the contract is signed. In construction, the duty applies to every client, including those for whom construction is not part of their normal business, and the reports also include a certificate of accident insurance if the work is done by the partner’s employee.

Help with construction VAT

We handle bookkeeping and VAT returns for construction businesses. We check when the reverse charge applies, that your invoices are marked correctly and that sales and purchases end up in the right fields of the return. Our accountants serve you in Finnish or Russian.

Official sources

• Vero: VAT reverse charge in the construction industry
• Vero: detailed guidance on the construction reverse charge (in Finnish)
• Vero: instructions for filing the VAT return
• Vero: changes to VAT rates — which rate applies
• Vero: the information-reporting requirement in the construction industry
• Vero: report contract details
• Finlex: Value Added Tax Act 1501/1993 (in Finnish)
• Työsuojelu: application of the Contractor’s Obligations Act