European standard e-invoicing requires the invoicer to add a VAT category code to the e-invoice row when a zero VAT rate is used or when the invoice is completely VAT exempt. When using other VAT rates, the VAT category code S should be selected. The VAT category code is mandatory information in e-invoices compliant with the e-invoicing standard.
VAT category codes indicate the main category of VAT treatment for sales. The most common code is S (standard), which should be used for domestic invoicing by companies registered for VAT. If there is no VAT on the invoice, the invoicer should select the appropriate code that indicates the reason for the VAT exemption. For example, the VAT category code K is used for intra-Community sales within the EU, and the code G is used for sales outside the EU.
VAT exemption reason code - A code based on the EU VAT Directive that provides a specific reason why there is no VAT on the invoice. It is a code under the VAT category code that specifies the reason for VAT exemption in more detail. Sometimes it can be challenging to determine the exact code because they are not based directly on Finnish VAT law but on international standards. If the reason code for VAT exemption is known and there is no VAT on the invoice, it is recommended to use the VAT exemption reason code instead of the VAT exemption reason. A list of VAT exemption reason codes can be found here.
VAT exemption reason should be used when the exact VAT exemption reason code is not available. This may be the case, for example, in connection with national laws. A free-form text can be used as a description, typically explaining the reason for the VAT exemption on the invoice. For example, in reverse charge transactions in the construction industry, a text description such as "VAT Act § 8c" can be used.
Below is an interpretation guide for the use of VAT category codes.
| VAT category Code | VAT Percentage | VAT Exemption Reason Code or VAT Exemption Reason | Interpretation Guide |
| S | 10%, 14%, 24% | No code or exemption reason | Only the sale of goods or services at the general or reduced VAT rate |
| Z | 0% | No code or exemption reason | Invoices with a 0% VAT rate for VAT-registered invoicers in Finland. For example, invoices from insurance companies or tax-exempt membership fee invoices for partially taxable non-profit organizations. Not used for exports outside the EU or for intra-EU transactions; these have their own tax treatment codes. |
| E | 0% | Code or exemption reason |
Invoices with a VAT exemption, where the VAT rate for goods or services is 0 or exempt from tax. For example, social and health care services. NOTE! The use of Tax Treatment Code E requires that you are registered for VAT. If your activities are entirely VAT exempt, you should use code O instead. |
| AE | 0% | VAT Exemption reason. The AE code must be accompanied by the tax treatment description "Domestic reverse VAT" or "VAT Act 8c §". |
The code is used in Finland only for domestic reverse VAT, i.e., sales where both the buyer and the seller have a FI-starting VAT identifier. Used in the construction industry, scrap and waste trade, investment gold, and emission rights trading. NOTE! CONSTRUCTION INDUSTRY is a mandatory description "VAT Act § 8c" |
| K | 0% |
Code or VAT exemption reason. Invoices must have either code or reason "intra-community supply" |
Invoices for intra-Community supply of services and goods (intra-EU trade). On export invoices, the buyer's VAT identifier, the designation "Intracommunity supply," the country code of delivery, the delivery date, or the billing period are mandatory. |
| G | 0% |
Code or VAT exemption reason. The G code must be accompanied by a VAT exemption reason code or the VAT exemption reason "Export outside the EU." |
Export sales outside the EU. In Finland, the G code is used for both goods and services (national exception). NOTE! Remember to use the tax treatment code G when selling goods to Åland. |
| O | 0% |
Code or VAT exemption reason. In a tax-exempt invoice, there should be no other tax codes or the seller's VAT number. |
The O code is used, for example, for those who do not have a VAT identifier (the seller is not registered for VAT). If the invoice contains both tax-exempt and taxable sales, use the Z tax code instead of O. |
Sources used:
Guidance from the Tax Administration: https://www.vero.fi/syventavat-vero-ohjeet/ohje-hakusivu/48090/laskutusvaatimukset-arvonlis%C3%A4verotuksessa/#6.1-pakolliset-laskumerkinn%C3%A4t
Article from Tilisanomat: https://tilisanomat.fi/verotus/verokohtelukoodien-kayttaminen-verkkolaskutuksessa
Guidelines from the State Treasury: https://www.valtiokonttori.fi/palvelut/muut-palvelut/laheta-lasku-valtiolle/#julkishallinnon-soveltamisohje-ja-en16931-ohjeet_julkishallinnon-soveltamisohje