FinlandTax Obligations Detailed

In Finland, employers have various tax obligations related to payroll, corporate income tax, and other contributions.

Payroll Taxes

• Employer's Social Security Contributions: These contributions vary based on several factors and include:
  • Pension Insurance: Around 17.38% of the employee's salary.
  • Unemployment Insurance: 0.20% on total compensation up to €2,455,500, and 0.80% on any amount exceeding this threshold.
  • Accident Insurance: Approximately 0.54% of the total wage sum.
  • Group Life Insurance: Around 0.06% of the total wage sum.
  • Sickness Insurance: 1.87% of the employee's salary.
• Employee's Social Security Contributions (Withheld by Employer): Employers are responsible for withholding these contributions from employee salaries and remitting them to the appropriate authorities. These include:
  • Pension Insurance: 7.15% for employees aged 17-52 and 63-67, and 8.65% for those aged 53-62.
  • Sickness Insurance: 1.52%, including a Medicare contribution of 1.06% and a Daily Allowance contribution of 0.84% (waived for annual salaries below €16,862).
  • Unemployment Insurance: 0.59% of the employee's salary.
• Withholding Tax: Employers must withhold income tax from employee salaries based on the employee's tax card. The tax rate depends on various factors including income, municipality, and deductions.
• Payroll Reporting and Payment: Employers must report payroll information and remit withheld taxes and social security contributions monthly, typically by the 12th of the following month.
• Tax Card: Employers must use the employee's tax card for 2025 to determine the correct withholding tax rate.

Corporate Income Tax (CIT)

• CIT Rate: The corporate income tax rate in Finland is 20%.
• Payment Schedule: CIT is paid in advance installments, either twice a year or in twelve installments.
• Final Payment and Assessment: The due date for the final CIT payment is the 3rd day of the second month following the completion of the tax assessment. Taxpayers can request amendments to their advance tax payments until the assessment is completed (within ten months of the fiscal year-end).

Other Taxes and Obligations

• Value Added Tax (VAT): The standard VAT rate is 24%. A reduced rate of 14% applies to certain goods and services.
• Transfer Tax: This tax applies to real estate and share transfers. The rates are 3% for real estate and 1.5% for shares and other securities.
• Customs Duties: Goods imported from outside the EU are subject to customs duties.
• Carbon Border Adjustment Mechanism (CBAM): This mechanism applies to imports of certain goods into Finland.

Important Dates and Deadlines

• Pre-completed Tax Return Deadlines (2025):
  • Wage earners and pensioners: April 15th, 22nd, and 29th.
  • Self-employed and agricultural operators: April 1st.
• Employer's Contribution Payment Deadline: Generally, the 12th of the month following the payday month. For instance, the contributions for April payrolls are typically due by May 12th.

It's important to note that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax professional is recommended for specific situations and up-to-date advice.

In Finland, employees are subject to various deductions from their gross pay, primarily for taxes and social security contributions. These deductions are determined by factors such as income level, municipality of residence, and individual circumstances.

Income Tax

• State Income Tax: Progressive tax rates apply. As of 2025, the tax brackets and rates are as follows:

  • €0-€19,900: 0%
  • €19,901-€29,700: 12.64% (on the excess over €19,900)
  • €29,701-€49,000: 19% (on the excess over €29,700)
  • €49,001-€85,800: 30.25% (on the excess over €49,000)
  • Over €85,800: 34% (on the excess over €85,800)

• Municipal Income Tax: Varies by municipality. Helsinki's rate, for example, is 18.5% for 2025.

• Church Tax: Levied on members of the Evangelical Lutheran Church or the Finnish Orthodox Church. The rate varies but averages around 1-2%.

Social Security Contributions

• Pension Contributions (Työeläkemaksu): A percentage of earnings, typically around 7-8%, depending on age.

• Unemployment Insurance (Työttömyysvakuutusmaksu): Contributed by both employees and employers, with the employee's share being around 1.5%.

• Health Insurance: A percentage of earnings, also dependant on age.

Other Deductions

• Trade Union Fees: Deductible if the employee is a member of a trade union.

• Workplace Commute Expense deduction: Travel expenses between home and work are deductible with a maximum allowance of €7,000 and after exceeding a threshold of €900. Public transportation costs are generally the basis of this deduction unless another means of transport is cheaper or there is no public transport link.

Deductions and Allowances for Business Travel

• Mileage Allowance: €0.59 per kilometer for using a private car for business travel.

• Tax-Exempt Reimbursements: Employers can reimburse employees for other business travel expenses (e.g., accommodation, meals) tax-free, up to limits set by the Tax Administration.

Tax Year and Deadlines

The Finnish tax year aligns with the calendar year (January 1st to December 31st). Employers must withhold taxes and social security contributions from employee salaries and report them to the Tax Administration monthly. Individuals typically receive a pre-completed tax return in the spring and can file their final tax return online through MyTax, by mail, or with assistance from tax advisors. The deadline for filing the tax return is usually in May. It is advisable to confirm the exact date as this information is valid as of February 5, 2025.

Seafarers

For employees working aboard Finnish ships, a 35% tax-at-source rate is applied to their pay. A deduction of €510 per month (€17 per day) is permissible before withholding if the employee possesses a tax-at-source card with the applicable deduction. Assessment under the progressive tax scheme can be requested as an alternative.

Finland's Value Added Tax (VAT), known as arvonlisävero (ALV), is a consumption tax levied on most goods and services.

VAT Rates

• Standard Rate: 25.5% (effective from September 1, 2024)

• Reduced Rates:

  • 14%: Applies to foodstuffs (excluding certain sweets and chocolates as of June 1, 2025), restaurant and catering services, certain agricultural supplies, soft drinks, takeaway food. As of January 1, 2025, this rate also applies to items previously under the 10% rate, such as books, pharmaceuticals, domestic passenger transport, accommodation, and admission to cultural and sporting events. Certain sanitary products and children's diapers also fall under this rate.
  • 10%: Applies to newspapers and magazines (print and electronic).

• Zero Rate (0%): Applies to specific goods and services, including intra-community and international transport, certain publications by non-profit organizations and some transactions involving gold.

Registration Thresholds

• Domestic Businesses: €20,000 per annum (effective from January 1, 2025)
• Distance Selling from Other EU Countries to Finnish Consumers: €10,000 per annum.
• Non-resident Businesses with Taxable Supplies in Finland: No threshold, mandatory registration.

Filing and Payment

• Filing Frequency:

  • Monthly: Annual turnover exceeds €100,000.
  • Quarterly: Annual turnover between €30,000 and €100,000.
  • Annually: Annual turnover below €30,000. Note: Non-resident companies may need to file monthly.

• Deadlines:

  • Monthly/Quarterly returns: 12th day of the second month following the reporting period. For example, for March it will be May 12th.
  • Annual returns: End of February of the following year.

• Submission: Electronically via the MyTax service.

Exempt Goods and Services

Certain goods and services are exempt from VAT, meaning VAT is not charged, and input VAT cannot be recovered. These include:

• Healthcare and medical services.

• Social services.

• Education (general, vocational, university-level).

• Financial and insurance services.

• Sales and long-term rental of real estate and apartments. (short-term rental are not exempt)

• Copyrights.

Additional Information

• Businesses making exempt supplies cannot register for VAT, except in specific cases where voluntary registration is allowed.

• Non-EU businesses operating in Finland are generally required to appoint a fiscal representative.

• Corrections to VAT returns below €500 can be made via the next VAT return, while those exceeding this amount require a corrective VAT return.

• The information provided is based on the current legislation as of February 5, 2025 and might be subject to change. It's always recommended to consult with a tax advisor for specific situations.

Finland offers various tax incentives for businesses and individuals in 2025. These incentives aim to stimulate economic growth, promote research and development, and support investments in green technologies. Please note that as of today, February 5, 2025, some details of these incentives may still be subject to change.

Corporate Tax Incentives

• Green Investment Tax Credit: A tax credit for large-scale industrial investments that contribute to the transition to a net-zero economy. The credit is planned to be 20% of the investment amount, capped at €150 million per investment. It targets profitable businesses and is deductible from corporate income tax. Decisions for eligible investments are to be made by the end of 2025, and the credit will likely be applicable from 2028. Eligible investments include battery and hydrogen projects and fossil-fuel-free steel production.
• R&D Tax Incentives: Finland offers enhanced deductions for Research and Development activities. Companies can deduct 100% of their R&D costs. Furthermore, an additional deduction of 150% applies to subcontracting costs incurred between 2022 and 2027, up to €500,000 annually. There's also a 50% deduction on R&D wages and purchased services, ranging from €5,000 to €500,000.
• Tax-Free Shares for Employees: Non-listed companies can offer tax-free shares to employees. If the subscription price is at least equal to the share's mathematical value, the employee does not incur a taxable benefit.

Individual Tax Incentives

• Household Expenses Credit: This credit supports expenses related to renovations and household work. For 2025, the maximum credit is €1,600. If hiring a company, the credit is 35% of the labor cost. For hired employees, the credit is 13% of their pay, including employer contributions.
• Tax Relief for Foreign Workers: Relocation costs for foreign workers moving to Finland for employment are exempt from income tax. This aims to attract skilled labor to the country.
• Progressive Taxation for Non-Residents: Non-residents can apply for progressive taxation instead of the flat 35% source tax rate. This is subject to certain criteria and requires disclosure of worldwide income.

General Tax Information for 2025

• Corporate Income Tax (CIT): The standard CIT rate in Finland is 20%. Companies with permanent establishments in Finland are subject to CIT.
• Tax Cards: Starting in 2025, tax cards will be valid from January 1st, simplifying tax rate and income ceiling tracking.
• Tax Return Deadlines: The filing deadlines for individual tax returns in 2025 are earlier than previous years, falling in April.
• VAT Changes: Changes to VAT rates on goods and services and the VAT assessment of small businesses are expected in 2025. More details will be available closer to the implementation date.

This information is for general guidance only and does not constitute professional tax advice. It is crucial to consult with a tax advisor for specific guidance regarding your circumstances.