VAT - The special status of the Åland Islands
When Finland became a member of the European Union, it also committed to applying tax systems according to EU directives in its indirect taxation. According to the Åland protocol in the Treaty of Accession, however, the Åland Islands is excluded from the application of EU VAT and excise tax directives. Thus the province of Åland, like the rest of Finland, is part of the customs territory of the European Community, but it is not included in the fiscal territory. The purpose of the special status of the Åland Islands was to maintain the right to tax free sales in the ship traffic. The ship traffic is of vital importance for the province’s communication, and the intention was to support the economy of the province this way.
The special status of the Åland Islands has made it possible to continue selling tax free goods to passengers in the vessel traffic between the Åland Islands and other EU Member States, although the tax exemption in the traffic between EU Member States ended as of July 1st, 1999. This exception also makes tax free sales possible for passengers travelling between The Åland Islands and mainland Finland.