What is it about?
As from 1 July 2014 onwards businesses purchasing certain type of construction services in Finland need to submit monthly reports of these services to the Finnish Tax Administration (“Report of construction work”). In addition, certain main contractors (i.e. the party being the main supplier of construction service) are liable to submit monthly reports of workers to the Finnish Tax Administration (“Report on workers”).
The reporting liabilities concern supplies of construction services. The concept of construction services comprises
- construction work referred to in the Finnish VAT Act,
- certain types of maintenance and repair work directed to real estate located in Finland,
- erection and dismantling of scaffoldings, and
- renting of labour force for construction purposes.
Who is liable to submit the reports?
The liability to submit monthly report of construction work lies at any business (as well as at individuals under certain conditions)
- which is purchasing construction services which are deemed to be supplied in Finland, AND
- the value of the commissioned contract exceeds EUR 15.000 (excl. VAT). Note that this applies not only to the party “at the end of chain” but also to any party within the chain purchasing construction service (even if recharged immediately onwards to another entity).
The liability to submit report of workers lies at the main contractor if
- the worksite where the construction services take place is a shared worksite (i.e. there are more than one employer/contractor or independent worker active on the worksite simultaneously or in succession), AND
- the overall value of the supplied construction services exceeds EUR 15.000 (excl. VAT).
Note that the main contractor’s reporting liabilities are not limited to its own workers but cover also any other workers (either employed by other company or working independently) working on the shared worksite.
The assessment on the threshold value (EUR 15.000) is made basically on a contract-by-contract basis.
What information needs to be reported?
The list of information that needs to be submitted on the report of construction work is very extensive including (but not limited to) details on the supplier of the construction work as well as the of worksite number, duration of work, monthly invoicing etc.
The list of information that needs to be submitted on the report of workers is also very extensive including (but not limited to) information related to the worksite and workers’ personal information (e.g. personal IDs, address information, information on the social security, type of work contract).
How and when are the reports submitted?
The reports are to be submitted for each month for which there are any reportable items. In addition, Finnish Tax Administration suggests to file a nil return for the sake of clarity for months without reportable items.
The due date for the return is the 5th day of the second month following the month in question. As the new reporting liabilities come into effect on 1 July 2014, the first returns must be submitted on 5 September 2014 at the latest.
The reports must be submitted in electronic format through a special web portal for which a electronic ID (so called Katso ID) is needed. The reports cannot be submitted on paper.
A penalty payment of up to EUR 15.000 per return can be imposed due to missing or incorrect returns. In addition, the company failing to meet the reporting obligations may be removed from the prepayment register.
The new reporting liabilities will significantly add compliance costs for those businesses in Finland which fall within the scope of the new provisions.
It is important to note that the new mandatory reporting requirements apply to any party purchasing construction services regardless of their legal status in Finland, i.e. the liabilities are the same for Finnish and foreign businesses (regardless of whether they operate with or without a branch/fixed establishment in Finland). Therefore, the new provisions concern foreign businesses regardless of whether they are VAT registered in Finland or not, and whether they carry out any business subject to VAT in Finland.
The new provisions will come into force soon and so businesses operating in Finland are advised to asses without a delay whether they are engaged in transactions for which the new reports (either report of construction work or report of workers) need to be submitted.
If applicable, the businesses should review their processes in gathering the needed monthly information as well as that they are in a position to submit the needed reports (i.e. that they have the needed electronic Katso authorization in place).