Short answer
VAT (value added tax, ALV in Finnish) is a tax you add on top of your invoices and pass on to the Tax Administration. It is not your money. You collect it from your customer on behalf of the state.
Basic example
You do work for 1,000 euros. You add 25.5% VAT. The customer pays 1,255 euros. You keep 1,000 euros, 255 euros goes to the Tax Administration.
As a self-employed individual, you are responsible for VAT
Unlike light entrepreneurship (where PalkkaOnline is itself VAT-liable), as a self-employed individual you are personally liable for VAT. This means:
You must be in the VAT register (if your turnover exceeds 20,000 euros/year)
You must choose the correct VAT rate on your invoices
You must approve the VAT report each period
PalkkaOnline handles the practical work for you — calculates VAT, compiles the report, and submits the return — but the responsibility is yours.
Read more
A detailed guide is available in the article VAT for self-employed individuals in plain language, which covers:
What the VAT register is and when you must join
When you can invoice at 0% VAT (and when you cannot)
VAT rates (25.5%, 14%, 10%, 0%)
How the VAT report works
Input VAT deductions on purchases
The difference between VAT and tax prepayment