Employers in Finland have significant responsibilities towards various social security funds. These include pension contributions (TyEL), unemployment insurance, and accident insurance. The rates for these contributions vary depending on factors such as the employee's age, industry, and the risk level of the workplace.

Pension Contributions (TyEL)

The rates for pension contributions, also known as TyEL, vary depending on factors like the employee's age and industry.

Unemployment Insurance

Employers are required to contribute a portion of the employee's salary towards unemployment insurance. The exact rate is determined by the Finnish Tax Administration (Vero).

Accident Insurance

The contribution rate for accident insurance depends on the risk level and industry of the workplace.

Occupational Healthcare

In addition to the above, employers are also required to provide occupational healthcare services and may pay a portion of the costs.

Contribution Caps

It's important to note that social security contributions might have maximum ceilings or limits depending on the specific fund.

Reporting and Payment

Employers must register with relevant authorities, withhold employee contributions, add their own, and remit payments on a regular basis, usually monthly.

In Finland, the income tax system is progressive and consists of municipal, state, and church tax components. The municipal tax rate varies by municipality, while the state tax is based on a progressive scale dependent on income level. The church tax applies to members of the Evangelical Lutheran Church of Finland or the Finnish Orthodox Church.

Employee Social Security Contributions

Employees in Finland contribute to several social security schemes. These include:

• Pension Contributions (TyEL): The rates for these contributions vary depending on the employee's age and industry.
• Unemployment Insurance: This is a portion based on a specific percentage of the gross salary.
• Sickness Insurance: This insurance has both daily allowance and health insurance components.

Withholding

Employers are responsible for deducting income tax, social security, and relevant insurance contributions from their employees' salaries. However, this information is not relevant to employee tax deductions and is therefore not included in this text.

The standard VAT rate (arvonlisävero or ALV) in Finland is 24%. However, reduced rates of 14% and 10% apply to specific goods and services such as food, books, accommodation, and certain cultural services.

VAT Liability for Services

Whether your services are subject to Finnish VAT depends on the place of supply and the reverse charge mechanism. The place of supply rules establish where a service is deemed to be supplied for VAT purposes. Different rules apply depending on the type of service, whether the customer is a business (B2B) or an individual (B2C), and the location of both parties. The reverse charge mechanism might apply under certain B2B service transactions. In this case, the Finnish business receiving the service typically becomes responsible for reporting and paying the VAT.

Important Categories of Services

Providing digital services (software subscriptions, downloads, etc.) to customers in Finland might trigger Finnish VAT obligations, even if your business is established outside of Finland. Services with a significant connection to a property located in Finland (e.g., construction, real estate services) usually fall under Finnish VAT rules. Consulting, accounting, and legal services generally are subject to VAT in Finland when the place of supply is determined to be within the country.

VAT Registration and Reporting

Businesses exceeding a specific revenue threshold within Finland might be required to register for VAT. Registered businesses must file periodic VAT returns and make corresponding payments to the tax authorities in Finland.

Tax incentives are financial benefits offered by the government to encourage specific business activities. They can significantly reduce a company's tax liability and support its growth and development.

Research and Development (R&D) Incentives

Businesses can deduct a significant percentage of eligible R&D expenses from their taxable income. Additionally, government grants and funding programs might be available for businesses engaged in research and development activities.

Innovation Incentives

Business Finland offers various funding programs and grants to support innovation, business development, and internationalization.

Startup Incentives

Business Finland and other organizations might offer grants specifically for startups in their early stages of development.

Regional Incentives

Businesses establishing operations or investing in less-developed regions of Finland may be eligible for grants and subsidies.

Other Potential Incentives

Programs might exist to encourage the hiring of specific groups, such as young people, the long-term unemployed or those with disabilities. Certain industries, such as clean technology or bioeconomy, might have targeted tax incentives or funding programs.

Important Considerations

Specific eligibility requirements usually apply to various tax incentives. Ensure your business activities qualify. Tax incentives sometimes involve formal applications and approval processes.