At the beginning of November, the Supreme Administrative Court (KHO) issued a taxation decision concerning the optician field (KHO:2022:124), in which the free eye examinations offered by opticians was deemed to be related to the sales of eyeglasses or sunglasses subject to VAT. In terms of taxation, the decision is important for the entire field. In the future, the opportunity for opticians to deduct the VAT included in their purchases will expand significantly.
In 2019, the Tax Administration placed opticians under great scrutiny and carried out extensive tax audits of companies in the sector, and issued VAT guidelines that were binding on the entire field. The Tax Administration, among other things, considered that an optician cannot deduct VAT from purchases that are directly or indirectly related to free eye examinations. The Tax Administration justified its view by stating that free eye examinations are not related to the taxable activities of opticians, such as the sale of eyeglasses and sunglasses, in any way.
The Supreme Administrative Court overruled the Tax Administration’s point of view and stated, in its decision, that the purchases made for eye examinations marketed free of charge related to the sale of eyeglasses or sunglasses must be considered to have a direct and immediate connection to the company’s VAT deduction-entitled business. According to the Supreme Administrative Court, it is not relevant whether the free eye examinations performed for marketing purposes ultimately lead to the sale of eyeglasses or sunglasses.
“There is a years-long process behind this, during which opticians have had to pay millions of euros due to an incorrect interpretation of the law. The Tax Administration’s dictation has been one-sided and it has not taken into account the very different business models of opticians. The decision of the Supreme Administrative Court restores faith in predictable legislation and strengthens the equality of companies”, commented Panu Tast, CEO of The Finnish Association of Vision and Eyecare NÄE ry.
“In the future, an optician will have the right to deduct the value added tax included in its purchases also when the purchases are used for free eye examinations performed by opticians related to the sale of eyeglasses and sunglasses. It may concern purchases directly or indirectly related to the above-mentioned eye examinations, such as equipment or tools,” sums up Toni Jääskeläinen, a leading taxation expert of the Finnish Commerce Federation.
How should an optician deal with erroneously taxed expenses?
It is likely that due to the Tax Administration’s tax audit campaign and incorrect instructions, a vast majority of opticians have been charged too much value added tax, or the shops themselves have paid too much tax. It is possible for opticians to get back the overpaid VAT to the extent that it is a question of the tax included in purchases that have been connected to free eye examinations combined with the sale of eyeglasses and sunglasses.
“Some opticians have demanded a tax adjustment from the Assessment Adjustment Board or the Administrative Court. If the case is still pending, the optician should wait for a positive solution”, advises Jääskeläinen.
“If the taxation has not been corrected in the Assessment Adjustment Board or the Administrative Court, or the optician has not demanded an adjustment at all, they can claim back the overpaid value added tax through a correction notice. The error can be corrected by submitting a replacement tax return for the tax period in which the information contains the error. It is only possible to correct the mistake within three years, so, in practice, some of the taxes may no longer be able to be claimed back,” continues Jääskeläinen.
Additional information:
Toni Jääskeläinen, leading tax expert, Finnish Commerce Federation, toni.jaaskelainen@kauppa.fi
Panu Tast, managing director, The Finnish Association of Vision and Eyecare NÄE ry, +358 40 5433 337, panu.tast@naery.fi
