Taxation in Finland
Introduction
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 Finnish Tax Administration (Verohallinto)
The Tax Administration's website www.tax.fi is comprehensive, with full versions covering taxation for Individuals as well as Companies / Organisations available in English, Finnish and Swedish. Limited versions are available in Estonian, French, German, Polish, Russian, and Sami.
The Verohallinto site includes:
- The Finnish tax system and tax guides
- e-file: Electronic filing services for individual and corporate taxpayers
- Forms and publications
e-File online services: E-services are constantly increasing. Main services include:
- MyTax: File tax returns for self-assessed taxes, submit bank details and arrange online payments, view your tax information and tax decisions, and more. Authenticated login is required to use the service. For information and instructions see
MyTax: www.vero.fi/en/e-file/mytax/ - Other popular e-services include Tax Card Online, Bank Account Notice, Tax Return Online, Corporation Tax Online, and Tax Percentage Calculator. For information and e-services see
e-File: www.vero.fi/en/About-us/contact-us/efil/
Income Tax in Finland - In Brief
Summary only - see www.tax.fi for details.
Earned Income
Taxable income comprises earned income and capital income. Capital income (often called "investment 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%).
Capital Income
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 2023, the capital income tax rate is 30% for income up to €30,000 and 34% for capital income exceeding that amount.
Tax Deductions & Tax Credits
Please see www.tax.fi 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
Tax for U.S. Citizens in Finland
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.
From 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 these ‘U.S. accounts’ have been reported to the IRS. In other words, the IRS knows which U.S. citizens have accounts overseas, and whether or not they have filed U.S. tax returns and Foreign Bank Account Reports (FBARS).
More information:
- Finance Finland: Agreement with USA means new questions for financial customers
- See also: U.S. Internal Revenue Service (IRS): International Taxpayers
VAT Rates from 1st September 2024
The VAT rates are:
- 25.5%: 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
- See Finnish Tax Administration: Rates of VAT
Tax Card - Applications & Revisions
When you obtain work, you should already have your personal identity number (henkilötunnus). You also 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 Tax Administration e-services require authenticated login 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
- Telephone the Tax Card service: 029 497 050
- More information: www.vero.fi/en/individuals/tax-cards-and-tax-returns/
When You Start Work
It is not necessary to present a hard copy of your tax card to your employer when starting a job. Employers obtain all necessary tax rate information directly from the national Tax Administration.
Tax Tips
- 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
A great thing in Finland is that the majority of employees don't have to complete tax returns! Simple, pre-completed tax returns called tax proposals are sent 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. A stark contrast to the enormous tax returns I've had to fill in on other parts of the planet!
Tax Administration - Telephone Service
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
Individual taxpayers
Calls from Finland: 029 497 050
Calls from outside Finland: +358 29 497 050
International Tax Situations
- Individuals, students, workers, professional employees
- Questions regarding income from sources outside Finland
- Relocations from Finland to another country.
Calls from Finland: 029 497 024
Calls from outside Finland: +358 29 497 024
Businesses
- 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: 029 497 051
Calls from outside Finland: +358 29 497 051
Car Tax
Calls from Finland: 029 497 152
Calls from outside Finland: +358 29 497 152
Excise Taxation
Calls from Finland: 029 497 154
Calls from outside Finland: +358 29 497 154
Related Links
Links to other sites are direct to the relevant page, where possible
