Taxation in Finland
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- The Finnish Tax Administration
- Finnish Income Taxation in Brief
- Tax for U.S. Citizens
- VAT Rates
- Tax Card - Applications & Revisions
- Tax Administration - Regional Offices
- Tax Administration - Telephone Service
- Related Links
Countries with high levels of social security usually have high levels of taxation as well; Finland is no exception. All income is taxed, as are goods and services. Value-added tax (VAT) is known in Finland as arvonlisävero (ALV).
The State, the Municipalities, the Evangelic Lutheran Church and the Orthodox Church all have the power to levy taxes. Direct taxes include state income tax, wealth tax, inheritance and gift tax, and asset transfer tax, all payable to the State, municipal tax payable to the appropriate Municipality, and church tax payable to the Church. Indirect taxes include VAT added to the price of products, and excise and customs duties.
The Tax Administration's web site has gone from strength to strength over the years. Individual and company tax information are now comprehensively covered in English, as well as Finnish and Swedish. Limited versions of the site are available in Sami, Estonian, Russian and Polish.
Briefly, the Verohallinto site includes:
- The Finnish tax system
- Tax Guides
- Forms and publications
- Electronic filing
- Tax Administration
Online services: The amount of services available at the site is constantly increasing. Recent additions include:
- Tax card applications and revisions online
- Tax percentage calculator
- Tax Account: Check transactions, submit returns, browse past returns, and more...
Summary only - see www.tax.fi for details.
Taxable income comprises earned income and capital income. Capital income is "income generated through the possession of wealth"; all other income is earned income. Examples of earned income are wages or salary, and pensions. Similarly, fixed income such as social benefits, compensation, and unemployment relief are regarded as earned income.
The tax assessment procedure is first to separate the part regarded as capital income, then to assess the rest of the income as earned income. The tax assessment for earned income involves first subtracting tax deductions from the gross income, then assessing the remaining amount according to the progressive scale of state taxation.
In addition, there are two flat rates of tax applicable to earned income, namely municipal tax (usually 18% to 19%) and church tax (1% to 2%).
Profits, returns, earnings etc. derived from investments that the taxpayer has made are regarded as capital income. Also regarded as capital income are: Gains from selling an asset, any other income that can be attributed to the fact that the taxpayer has owned assets, dividend income, rental income, capital gains, interest income, proceeds from a life insurance contract, the share of profits of an investment fund.
In 2015 the capital income tax rate is 30% for income up to €30,000 and 33% for capital income exceeding that amount.
Tax Deductions & Tax Credits
Please see www.tax.fi > Precise Information for details of
- Description of the system of deductions
- Deductions applicable to earned income only
- Deductions applicable to capital income only
- Tax credits - not the same as deductions!
- Nondeductible expenses
Don't panic, there are no special Finnish taxes levied on U.S. citizens! Americans should however be aware of their tax obligations, unique among the world's major countries. U.S. citizens residing abroad are generally subject to the same rules for filing U.S. tax returns as if they were resident in the United States. U.S. citizens living in Finland, even those with dual Finnish-U.S. citizenship, are subject to U.S. taxation on their income regardless of its source.
Until 2010 the U.S. Internal Revenue Service (IRS) could not easily detect non-filing by U.S. citizens living overseas. That changed with the passing of the Foreign Account Tax Compliance Act (FATCA) which, essentially, required disclosure of foreign accounts.
More information: Federation of Finnish Financial Services (FFI): FAQ about FATCA PDF
As of July 2014, Finnish financial institutions have been obligated to institute due diligence procedures to establish when a new account is opened by a U.S. citizen. From 2015, subject to thresholds which are being lowered during the course of the year, these ‘U.S. accounts’ will be reported to the IRS. In other words, the IRS will know which U.S. citizens have accounts overseas, and whether or not they have filed U.S. tax returns and Foreign Bank Account Reports (FBARS).
In June 2014 the IRS announced the adoption of Streamline Foreign Offshore Procedures (SFOP) for U.S. citizens residing outside the U.S. who can establish that their non-filing of U.S. tax returns and FBARs was not wilful. Any U.S. citizen living overseas who was honestly unaware of their U.S. tax and bank report filing obligations is eligible to use the SFOP.
Thanks to Marcus von Schantz of Finnish accounting firm AST Oy for apprising Expat Finland of the recent changes.
More information: AST Oy: U.S. Tax in Finland; Introduction and Case Study
AST works with a U.S. partner to provide tax advice and services to U.S citizens living in Finland
See also: U.S. Internal Revenue Service (IRS): International Taxpayers
The VAT rates are:
- 24%: The general rate
- 14%: The reduced rate for the supply of foodstuffs, animal feed and restaurant and catering services
- 10%: The reduced rate for the supply of books, pharmaceutical products, services creating opportunities for physical exercise, passenger transportation, accommodation, the remuneration received by Yleisradio Oy from the TV and radio fund and by Ålands Radio and TV based on the TV licence fees, the entrance fees to cultural and recreational events, the supply and import of works of art in certain situations, the subscriptions of newspapers and periodicals and the remuneration relating to a copyright where received by an organization representing the copyright owners
When you obtain work, you should already have your personal identity number (henkilötunnus). Now you need a Tax Card, or if you already had a tax card it should be revised with the new details. When applying for a tax card or revision you need to provide realistic estimates, facts and information regarding your annual gross income and tax deductions. These are reflected in your tax assessment. To assist you in doing so there is a Tax Percentage Calculator available online.
Most online Tax Administration services require you to sign in using either your network banking security codes or your HST card (electronic identity card).
Request a Tax Card or Revision in One of the Following Ways:
- Print out or send a request online: www.tax.fi/taxcard (you need personal web bank identifiers)
- Telephone the Tax Card service: 020 697 050
- Visit a Tax Office
- More information: www.tax.fi/en-US/Individuals/Tax_Cards
When You Start Work
As of 2014 it is no longer necessary to present a 'hard copy' of your tax card to your employer when starting a job. Employers can now obtain all necessary tax rate information in electronic form directly from the national Tax Administration.
- Your tax card will indicate your tax percentage. If you obtain further work simultaneously with your primary employment, you must obtain a tax card revision. Your tax percentage can be revised whenever your income changes.
- Keep an eye on your income and tax percentage; if you pay too little tax you will have to pay more the following year.
- Remember to complete your annual tax return form, which you will receive by mail every year, on time. The form will indicate the date it must be returned - do it on time or be fined.
Automated Tax Returns
One very nice thing about the Finnish tax system: a large proportion of salaried employees do not actually have to complete tax returns! Simple, pre-completed tax returns, called "tax proposals", are received by mail. They are based on the information supplied to the Tax Office. If you agree with the figures, you don't have to do anything. If you disagree, correct the form and return it to the Tax Office for revision. This is a pretty stark contrast to the tax returns (more like phone books) I've had to fill in on other parts of the planet!
Depending on your tax-payer group (ex. individual, self-employed, corporate) you should contact the right type of tax office. The Tax Administration web site has a search engine to locate the right type of office in your region. The search engine is in Finnish-only, but instructions for its use are available at:
tax.fi > English > Tax Administration > Contact information > Local Tax Offices
It is also possible to use the Taxation Telephone Service. The Tax Administration offers service in English at the following enquiry numbers on weekdays between 9:00 - 16:15
Calls from Finland: 020 697 050
Calls from outside Finland: +358 20 697 050
International Tax Situations
- Individuals, students, workers, professional employees
- Questions regarding income from sources outside Finland
- Relocations from Finland to another country.
Calls from Finland: 020 697 024
Calls from outside Finland: +358 20 697 024
- Small businesses, private traders and self-employed professionals
- Limited liability companies (Oy)
- New business entrepreneurs (with new Business IDs)
- Persons or companies liable for Value-added tax (VAT / ALV)
- Persons or companies who have employed someone.
Calls from Finland: 020 697 051
Calls from outside Finland: +358 20 697 051
In the past, a large amount of PDF's were downloadable at the Tax Administration web site. These have mostly gone, in favour of a Search system which works well. It seems all data has been archived and is retrievable with searches. For example, the PDFs Consequences of Late Payment, Taxpayer in Financial Difficulties and Tax Relief are gone, but entering those titles yields comprehensive search results.
- Suomi.fi > In English > E-Services: Multilingual e-services and downloadable forms from Finnish government agencies and local authorities
- Accounting & Auditing Firms: Firms offering multilingual accounting & auditing services in Finland
- Entrepreneurship: Starting a business in Finland, business taxation
- Social Security: Residence and employment-based social security, Kela