In various sections of this Guidebook, you encounter the terms prepayment register and value-added tax, VAT. How are they connected to light entrepreneurship?
Prepayment register
The tax for salary, trade income and compensation for use is paid in the form of prepayments. When you earn salary, employers deduct the tax prepayment from it. However, for trade income or compensation for use, the payment method of the prepayment depends on whether you are registered in the prepayment register.
In principle, all entrepreneurs are registered in the prepayment register, and freelancers can enter it voluntarily. Light entrepreneurs are not on the register, as invoicing service companies pay their prepayments to the tax authority. For “registered light entrepreneurs”, the situation is different.
Those belonging to the prepayment register pay their prepayments periodically themselves. To principals, i.e. customers, the fact that an entrepreneur is on the prepayment register is a signal of reliability. It also reduces their administrative work.
Private households can claim a tax credit for household expenses for services they have bought from companies and freelancers that are on the prepayment register. The tax credit is also applicable to light entrepreneurs’ work, because the invoicing service companies that they use are on the prepayment register.
Value-added tax (VAT)
You can find more information on value-added tax in The Gig Work Guidebook section “Entrepreneurship”, subsection “Business taxation”, subsection Value-added tax (VAT) and in the section Light entrepreneurship vs. entrepreneurship.
Even though light entrepreneurs cannot be VAT taxpayers, value-added tax is nevertheless included in the invoices that light entrepreneurs send to their principals. This is because the invoicing service companies are liable to pay VAT. But, since light entrepreneurs are not liable to pay VAT, they cannot deduct VAT from their investments or request a VAT relief for small businesses. So, light entrepreneurs only need to worry about VAT when issuing an invoice, at which point they need to indicate the applicable VAT rate. Invoicing services will help you with this if you do not know your VAT rate.
For “registered light entrepreneurs”, starting a company with the help of an invoicing service can entail VAT liability. “Registered light entrepreneurs” should contact the invoicing service they are using and ask what they need to do about value-added tax.
https://www.vero.fi/en/businesses-and-corporations/taxes-and-charges/vat/
Light entrepreneurs’ travel expenses
The two different operating models of invoicing service companies – a formal employment contract or a billing agreement – affect the tax treatment of travel expenses: Only employers can pay allowances for travel expenses. The financial impact of this policy varies from situation to situation.