Aland IslandsTax Obligations Detailed

Employers in Åland Islands face various tax obligations, including social security contributions, potential payroll tax, and adherence to specific payment and reporting procedures.

Social Security Contributions

As of 2025, the total social security contribution in Åland Islands is 24.85% of an employee's salary. This is broken down as follows:

• Employee Contribution: 7.15% (8.65% for employees aged 53-62).
• Employer Contribution: 17.38% (This includes the final repayment of the 0.45 percentage point reduction from 2020).

Unemployment Insurance Contributions

Separate from the general social security contribution, employers also contribute to unemployment insurance. The rates for 2025 are:

• Standard Employer Contribution: 0.20% of the wage sum (up to a maximum of €2,455,500 annually).
• Higher Employer Contribution: 0.80% of the wage sum for the portion exceeding €2,455,500.
• Employer Contribution for Part-Owners: 0.20% of wages.
• State-Owned Companies: 0.20% of wages up to €2,455,500, then 0.43% on the excess.
• Universities: 0.20% of wages up to €2,455,500, then 0.49% on the excess.

Payroll Tax

Åland Islands may also have a payroll tax based on the total salary paid. Contact the Åland Tax Administration for current rates and details.

UNESCO Contribution

For 2025, Åland Islands contributes to UNESCO's regular budget.

• Assessment Rate: 0.0006%
• Annual Contribution: €2,056 (paid in USD using the UN operational rate of exchange).

Other Taxes and Reporting Requirements

Employers are responsible for withholding employee taxes and remitting them, along with employer contributions, to the Åland Tax Administration by the specified deadlines. Regular payroll reports detailing salaries, withheld taxes, and contributions must also be submitted. Additionally, fringe benefits provided to employees may be subject to specific taxes. Consult the Åland Tax Administration for details.

General Tax Information for Åland Islands

• Tax Card: Effective from January 1st each year (including 2025). Available in MyTax by December 13th of the preceding year. Reflects deductions and income ceilings calculated for the full year. Income exceeding €7,000 can be included on the tax card.
• Åland Islands Media Fee: €127 if total income (capital and earned) exceeds €14,000.
• Capital Income Tax Rates: 30% up to €30,000, and 34% on any excess.
• VAT: Businesses with annual sales exceeding €20,000 must register for VAT.
• Intrastat Reporting Thresholds: As of January 1, 2025, the thresholds are €750,000 for both dispatches from and arrivals into Åland Islands (including Northern Ireland).

This information is valid as of February 5, 2025, and may be subject to change. Always consult with the Åland Tax Administration or a tax professional for the most up-to-date information.

Employee tax deductions in Aland Islands consist of income tax, social security contributions, municipal tax, and a voluntary church tax. As of 2025, the earned income allowance is replaced by an increased credit for work income. Additionally, the medical expense deduction is no longer available.

Income Tax

Aland Islands utilizes a progressive income tax system where higher earners pay a larger percentage of their income in taxes. The tax rates for 2025 are not yet publicly available. In addition to state tax, municipal and church taxes, along with health insurance contributions total approximately 18-27%.

Social Security Contributions

These contributions fund pensions, healthcare, unemployment benefits, and other social programs. The specific contribution percentages for employees are not yet publicly available.

Municipal Tax

Municipal tax rates vary by municipality within Aland Islands. The basic deduction for municipal taxation will be raised to €3,825 in 2025. Specific deductions previously available, such as for medical expenses, study costs, and student loan interest have been removed for the 2025 tax year.

Church Tax

Church tax is voluntary and applies only to registered members of eligible churches. The rate is typically around 1-2% of taxable income.

Tax Card and Tax Returns

Tax cards for 2025 are valid from January 1st and cover the full year. They're available in MyTax by December 13, 2024, with physical copies arriving by mail by the end of December. Tax return filing deadlines for wage earners and pension recipients are April 15th, 22nd, and 29th, 2025.

Other Deductions and Credits

While some specific deductions have been eliminated, some credits remain. The credit for work income increases in 2025, particularly for those with underage children. Single parents receive double the increase. Additionally, the household expenses credit is capped at €1,600 and calculated at 35% of expenses when hiring a company, and 13% when hiring an individual. The travel expense deduction remains capped at €7,000 with a credit threshold of €900.

The commuting deduction remains at €7,000, as in 2024, with a €900 threshold for the credit. Tax-exempt reimbursements for travel expenses are updated for 2025. Full daily allowance: €53. Partial daily allowance: €24. Meal allowance: €13.25. Tax-exempt kilometer allowance: €0.59 per kilometer.

It's crucial to consult official sources like the Aland Tax Administration or a tax professional for the most accurate and up-to-date information as details may change. This information is current as of February 5, 2025.

Value Added Tax (VAT) in the Åland Islands operates differently than in mainland Finland and the rest of the EU. Åland is part of the EU customs territory but not the EU VAT area. Consequently, trade with Åland involves customs formalities and specific VAT procedures.

VAT Rates and Application

• Standard Rate: 25.5% (increased from 24% on September 1, 2024).
• Reduced Rate: 14% (applies to most food products, catering and restaurant services, water, pet food, pharmaceuticals, books, passenger transport, hotel accommodation, cinema, and sports services). Goods and services previously subject to a reduced rate of 10% (excluding newspapers and magazines) now fall under this 14% rate as of January 1, 2025.
• Reduced Rate: 10% (applies exclusively to newspapers, magazines (print and electronic), and public broadcasting).
• Exemptions: Certain goods and services are exempt from VAT. Specific examples include goods transport services between Åland and mainland Finland, postal deliveries between the two, and certain international trade brokerage services. Additionally, consignments of a maximum value of 22 euros are effectively exempt due to their low value.

VAT Registration and Filing

• Registration: Businesses operating in Åland and engaging in taxable transactions must register for VAT with the Finnish Tax Administration. Non-established businesses must register before conducting any taxable activities. There are no specific turnover thresholds for mandatory registration in Åland, unlike mainland Finland. Voluntary registration is permitted for smaller businesses.
• Filing and Payment: VAT returns and payments are generally submitted monthly or quarterly, depending on the business's specific tax period. Annual filing is allowed for businesses with an annual turnover not exceeding €30,000. The deadline for VAT return submission and payment is the 12th of the second month following the reporting period. Annual filers submit by the end of February of the following year.
• Corrections: Corrections below €500 can be made via the next VAT return. Amounts above this require a corrective VAT return.
• VAT Refunds: Automatic refunds are issued following the submission of a VAT return with a credit balance. However, this may trigger a VAT audit. Resident businesses will have any VAT credit first offset against other taxes due.

Customs Procedures and Documentation

• Customs Declarations: Due to the tax border, goods transported between Åland and mainland Finland (and between Åland and other EU countries) must be declared to Finnish Customs, regardless of value. However, consignments with a maximum value of €22 are effectively exempt from VAT due to their low value. Documentation indicating the value of goods should be included.
• Import VAT: For goods imported to Åland from mainland Finland or the EU, import VAT is payable. The general rate is 25.5%, with reduced rates and exemptions applicable to specific goods.

Special Considerations

• Åland's Special Status: Åland's status outside the EU VAT area allows for tax-free sales on ferries traveling between Åland and other EU countries, including mainland Finland. This special status aims to support Åland's economy and maritime transport, which is vital for the islands' communication.
• Non-EU Businesses: Most non-EU businesses operating in Åland will typically require a Fiscal Representative.
• Åland Media Fee: Businesses in Åland are also subject to an Åland media fee instead of the public broadcasting tax levied in mainland Finland.

Please note: This information is current as of February 5, 2025, and might be subject to change due to potential future legislative amendments. For the most up-to-date information, consulting the Åland Tax Administration or a qualified tax advisor is highly recommended.

Åland Islands' tax system offers unique benefits alongside Finnish national taxes.

Individual Taxation

• Disability Credit: Åland residents with a permanent disability level of 30-100% may receive a credit up to €440. This credit is not available for mainland Finland residents.
• Study Grant Deduction: A deduction is available for the year a study grant is received, automatically calculated by the Tax Administration.
• Student Loan Compensation: Compensation received after graduating from higher education (started on or after August 1, 2014) is tax-exempt.
• Medical Expense Deduction: As of 2025, the deduction for medical expenses is no longer available.
• Earned Income Allowance: As of 2025, the earned income allowance has been removed and replaced with an increased credit for work income.
• Basic Deduction: The basic deduction for municipal taxation in Åland is €3,825 for 2025.
• Travel Expense Deduction: Up to €7,000 can be deducted for commuting expenses, with a credit threshold of €900 (unchanged from 2024).
• Household Expenses Credit: For 2025, the maximum claimable amount is €1,600. The credit is 35% of expenses when hiring a company and 13% when hiring an employee.
• Media Fee: A media fee of €127 applies to Åland residents with a combined capital and earned income exceeding €14,000.

Other Relevant Tax Information

• Tax Cards: Åland residents receive tax cards valid from January 1, covering the full year. Income subject to prepayments over €7,000 can be included on the tax card. Tax cards are available in MyTax by December 13 of the preceding year or by mail by the end of December.
• Tax Rates for Capital Income: Capital income is taxed at 30% up to €30,000, and 34% on any amount exceeding that threshold.
• Tax Return Deadlines: Pre-completed tax returns are available in March, with a filing deadline in April.

Corporate Taxation

• Reduced Corporate Tax Rate: While specific figures are unavailable, Åland may offer a lower corporate income tax rate than mainland Finland.
• Tonnage Tax Regime: Shipping companies with eligible vessels may opt for tonnage-based taxation instead of standard corporate profit taxation.

Indirect Taxation

Åland maintains a unique status within the EU as a separate fiscal territory for VAT and excise duties on alcohol and tobacco. This allows duty-free sales for travelers between Åland and other EU member states, including mainland Finland. Customs clearance procedures apply between Åland and other EU territories.

This information is current as of February 5, 2025, and may be subject to change. Consulting with a tax advisor or the Åland tax authorities is recommended for personalized guidance.