Starting point: rent is tax-free
Under section 27 of the Value Added Tax Act, the transfer of the right to use real property, such as renting premises, is as a rule exempt from VAT. Section 30 of the Act, however, allows the owner of the property, a shareholder or a tenant to apply to become voluntarily liable for tax on the transfer of the right of use, when the conditions are met.
Once the landlord has registered as liable for VAT, general VAT is added to the rent. It has been 25.5 % since 1.9.2024. Correspondingly, the landlord can deduct the VAT on the construction, repair and maintenance of the property.
Condition: the tenant's activity
According to the Finnish Tax Administration's guidance, voluntary VAT liability requires that the end user of the space continuously uses it at least in part for activity that entitles to deduction. Continuous use does not require full-time or primary use; for example, seasonal use may be enough. The space must be in the tenant's exclusive use, and the object can also be a single room or a smaller functional unit.
A landlord must apply for VAT liability separately, even if they are already liable for VAT from other business activity.
Partly VAT-liable tenant
If a tenant has both taxable and tax-exempt activity, the landlord can still charge VAT on the entire rent. The tenant may deduct only the share attributable to taxable activity. The remainder stays as a cost to the tenant.
If the end user's activity in a given space is entirely exempt from VAT, the tax liability does not apply to that space. According to the examples in the guidance, the tax liability also ends to the extent that a tenant sublets part of the space to someone carrying out VAT-exempt activity.
Who suffers from VAT
A VAT-liable business that uses the premises entirely for taxable activity deducts the VAT on the rent in its own taxation, so for it the tax is in practice a cash-flow matter. For a business carrying out VAT-exempt activity, such as many health services, the financial sector or associations, VAT is a real additional cost.
An exception applies to public bodies: if the end user is the State, a university, a university of applied sciences or a certain private provider of vocational education, there is no separate requirement for a right of deduction. Municipalities and wellbeing services counties are treated here as equivalent to those entitled to deduct.
- Before making an offer, ask whether the property is voluntarily liable for VAT
- Compare offers in the same way: VAT 0 or VAT 25,5 %
- Tell your landlord about your activity, as it affects the landlord's taxation
- Find out in advance what subletting means for VAT
Example: how much VAT costs
Suppose the rent for business premises is €2,000 per month excluding value added tax and the landlord has registered as liable for VAT. The invoice is then €2,510, of which the VAT portion is €510.
If the tenant uses the space entirely for taxable activity, they deduct the full €510, and the net cost of the rent is €2,000. If the share of taxable activity is 40%, the deductible amount is €204 and the cost to the business is €306 per month, or €3,672 per year. Voluntary tax liability does not apply to a tenant carrying out entirely VAT-exempt activity, so no VAT should be charged on its space at all.
It is worth making the calculation before comparing rental offers, because the real cost of two premises with the same price can differ clearly.
Duty to check: why the landlord asks about your business
When new construction or a major renovation has been carried out on a property, the landlord has deducted the VAT on the investment. This is subject to a ten-year adjustment period. If the use of the premises changes to something less entitled to deduction, for example when a VAT-exempt tenant moves in, the landlord has to return part of the deductions each year at one tenth.
For this reason, leases often contain a clause under which the tenant undertakes to notify of changes in its activities or to compensate the landlord for any VAT costs incurred. Read such a clause carefully if your activity is partly VAT-exempt.
Change coming in 2028
On 10.6.2026 the Ministry of Finance circulated for comments a draft of changes to the value added taxation of real estate. According to the proposal, the remaining adjustment period would be settled in one go when a property is sold, and in certain situations the sale of a property could be chosen to be taxable. The proposed entry into force is 1.1.2028, and the change is not yet in force.
For VAT questions, it is worth asking advice from an accounting firm or the Finnish Tax Administration before signing the agreement. You can find rent levels and available premises in Premises Radar.
Frequently asked questions
Is there value added tax on business premises rent?
Only if the landlord has voluntarily registered as liable for tax. In that case 25,5 % VAT is added to the rent.
Can a VAT-exempt business rent out a VAT-liable space?
If the use of the space is entirely VAT-exempt, voluntary tax liability does not apply to that space. A partially taxable tenant may rent the space but deducts only the taxable share.
What is the adjustment period for a real estate investment?
Ten years. If the use of the premises that entitles to a deduction decreases, the landlord refunds part of the VAT deducted.
What is the general VAT rate in 2026?
The general VAT rate is 25.5%. It has been in force since 1 Sept 2024.
Calculate it yourself
Ready-made tools
- Premises comparison and cost calculator · Rent, maintenance charge, costs and €/htm2, plus a comparison of three premises
Sources
- Finnish Tax Administration: Applying for VAT liability for the transfer of the right to use real property (VH/5624/00.01.00/2024)
- Finnish Tax Administration: VAT rates
- Finnish Tax Administration: Property investment
- Finnish Government: Changes proposed to the value added taxation of real estate (10.6.2026)
The article is general information and does not replace the guidance of an authority, a lawyer or an adviser. Check up-to-date information from the sources.