When can a company sell social services without adding value added tax to the price?

A customer is entitled to tax-free social services if it has been proven that they cannot get through their everyday life without help. The reasons for this may include, for example, ageing, illness, recovery from illness or disability. Services that are free from value added tax include, for example, household work, meal services (meal deliveries or meals at a care home) and support services for home care, such as help with shopping and visiting institutions such as a health care centre or bank.

“Many elderly people’s circumstances meet this criterion, i.e. their ability to function in daily life has deteriorated in a proven way. However, they don't yet know enough about the possibility of buying services without having to pay value added tax and so they haven’t looked into it,” says Sari Saarikoski, Business Advisor for the welfare sector, and continues:

“It’s the responsibility of municipalities to organise social services, but such services can also be produced by private companies. Customers always have to pay for home support services and assistance with visiting shops and various institutions, and it would help them a great deal to know what kind of financial support is available to them.”

The criteria must be met

Customers themselves get directly in touch with the company they want to buy services from. When making a written contract of service with the company, it’s important also to draw up a service plan that clearly states what services are needed, or in other words, why help is required to run a person’s day-to-day life. The contract of service must reveal what services are required and how often.

When these prerequisites are met, the company can invoice the customer for the services performed without value added tax. Value added tax is approximately a fifth of the service price and not having to pay it is a significant saving for customers. Customers can also take advantage of tax deductions for domestic work, which amount to 45% of the service price.

“Due to scarce resources, municipal home care services do not include periodic tasks such as window cleaning or snow clearing, but customers can buy these services themselves to supplement the municipal services they get and to ease their everyday lives,” Saarikoski says.

No decision by authorities required

When drawing up the contract of service, the company’s representative shall confirm, for example from a medical certificate, that the customer’s ability to look after themselves has deteriorated. No decision by authorities is required. A social welfare officer’s estimation of the need for services is only required when the services are provided by a municipality. Income level and wealth are not relevant; the only criterion is the need for help when estimating whether a company is entitled to sell a customer services without charging value added tax.

It’s also important that any company offering home care services as a social service notifies the municipality or municipalities where they operate about their activities, because this guarantees that their operations are overseen by the authorities, providing extra assurance for customers of the quality of their services. The company must also have a self-monitoring plan. When a company offers nursing services, it must also register in the Regional State Administrative Agencies’ (AVI) register of private social service providers.

For further information go to www.vero.fi

Any questions? Please don’t hesitate to get in touch. We’re happy to serve you!

Sari Saarikoski, 040 558 6058