Finnish tax policy is focused on high interest rates. Taxes make up a significant part of the country’s budget and their timely payment is strictly monitored.
Finnish tax system
Finnish taxes are divided into direct and indirect. Direct ones are calculated on the income received, there are 25 of them in total. These include:
- Capital gains tax is taxed at a rate of 30%, and if annual income exceeds 30 thousand euros – 34%.
- Salary tax – 0 – 31.25%.
- Gift and inheritance tax – depends on the degree of relationship, immediate relatives pay 7 – 13%.
- Municipal tax – from 16.5 to 22.5%.
- Corporate income tax on enterprises – 20% of taxable income of the corporation, etc.
Indirect taxes (there are 16 in total) are consumption taxes that are additionally assessed on goods and services. Indirect taxes, fees and duties include:
- VAT – standard rate 24%, reduced rates 10% and 14%.
- Customs duties and excise taxes.
- Fee for television and radio broadcasting – 2.5%.
- Tax on alcohol and tobacco products, etc.
The tax regime in Finland considers residents to be citizens permanently residing in Finnish territory, as well as persons staying in Suomi for at least six months each reporting period. Residents pay taxes on their worldwide income.
Do non-residents have to pay tax in Finland? Non-residents pay tax on income received from Finnish sources (salaries, fees, rental of real estate). For all non-residents the rate is fixed – 35%.
Migrants working seasonal jobs in Suomi pay a seasonal work tax of 2–10%.
Finland has a progressive personal income tax rate. The personal income tax rate grows along with the tax base.
Finnish salary tax table:
- income up to 18,600 € – 0%;
- 18,600 – 27,900 € – 6%;
- 27900 – 45 900 € – 17.25%;
- 45900 – 80 500 € – 21.25%;
- over 80,500 € – 31.25%.
Income tax in Suomi is calculated individually for each entity. Many residents of the country often wonder: how to calculate my tax in Finland? A special tax calculator in Finland has been created on the website of the tax department, where anyone can calculate the estimated amount of the contribution to be paid for the reporting period.
Tax control in Finland is carried out by the tax department, which calculates and collects duties and taxes.
Social taxes in Finland are divided into those paid by employees and those paid by the employer. Workers pay the following contributions:
- to the health insurance fund – 2.04%;
- to the pension insurance fund – 7.15% or 8.65% (depending on the person’s age);
- to the unemployment fund – 1.4%.
Social contributions paid by the employer:
- to the health insurance fund – 1.34%;
- in the PF – 14.35%;
- unemployment insurance – 0.45 – 1.75%;
- accident insurance – 0.8%.
When applying for a job in Finland, you must have a tax card. It can be issued at the tax office at your place of residence, after which the document must be handed over to the employer. With a taxpayer card, you can track your tax percentage (via the Finnish Tax Administration website).
If income levels change, the tax rate is adjusted. Finnish taxpayers are advised to independently control the amount of taxes paid, since the underpayment will still have to be repaid, and the overpayment can be returned, but only next year. Serious tax violations result in hefty fines and sometimes imprisonment.
When moving to Finland, you must obtain a tax number. This can be done at the magistrate or tax office at your place of residence.
Features of the Finnish tax system
Paying taxes in Finland concerns not only citizens receiving wages, but also those receiving pensions, scholarships, and social benefits. The Suomi tax system has other features, including:
- Foreigners living in Finland but working for companies located abroad do not pay income tax.
- There are special fees in Suomi, for example, a fee for the rescue of sailors, a fee for an honorary title.
- For taxes paid in advance, the taxpayer receives certain benefits.
In Suomi there is no concept of a minimum tax, and there is no excess profit tax.
Comparison of taxes in Finland and the Russian Federation
Personal income tax in Russia is 13%, in Finland 0% – 31.25%. Income tax in both Russia and Finland is 20%. VAT in the Russian Federation is 20%, in Finland – 24%.
If we compare the average Finnish salary of 3,313 euros per month and the Russian one of 51.1 thousand rubles, which is about 623 euros per month, it turns out that Russian citizens earn on average five times less than Finns.
There is no tax on lotteries in Finland. It is believed that all necessary taxes are paid to the state by the lottery organizers. Winnings in a Finnish casino (online or traditional) are also not taxed. In Russia, the tax rate for winnings up to 5 million rubles is 13%.
In Finland there are taxes on gifts. Tax-free gifts can be given to a person for an amount less than €5,000 within 3 years, otherwise the recipient is required to pay gift tax. If a person has received a significant amount as a gift, he must draw up a gift agreement and fill out a tax return. When depositing a large amount into a bank account, you must also present a gift deed. Sometimes people give large gifts as loans to avoid paying gift taxes. In this case, you need to have documents proving the repayment of the loan, so that the loan is not subsequently defined as a gift.
Taxes on gifts from relatives in Finland are paid by the recipient of the gift. If a piece of real estate is donated, the entire amount is subject to tax. Property can be sold at a reduced value, but if the transaction amount is less than 75 percent of the property’s appraised value, the difference is considered a gift with appropriate taxation.
Inheritance tax in Finland is calculated on a progressive scale and ranges from 7 to 13% for close relatives and 7 to 32% for other relatives and other persons. The highest percentage is charged on amounts from 50 thousand euros for a gift and from 60 thousand euros for an inheritance.
Taxes in Finland for legal entities
Individual entrepreneur taxes in Finland are levied at a progressive rate of 6% – 31.25%. The tax is paid by tax residents of the country who stay in Finnish territory for more than 6 months. Non-residents pay tax at a flat rate of 35%.
The main tax base in Finland for legal entities consists of profits from the sale of goods, provision of services, capital gains, and passive sources of income. The income tax rate for legal entities is 20%. Previously, the rate was 24.5%, but the Finnish authorities decided to reduce it. This move had a positive impact on attracting investors from abroad and gave a boost to the development of local entrepreneurship.
Capital gains tax for legal entities is included in the general income tax base.
Capital gains tax for entrepreneurs in Finland (individual entrepreneurs, self-employed) – 30%. If the capital gains amount is more than 40,000 euros per year, the rate increases to 32%.
Rental tax in Finland is 30 – 32% of annual profit. The costs of building maintenance, upkeep and repairs are allowed to be deducted from the rental income before paying the fee.
In Finland, resident companies that receive income in Suomi or outside the country are required to pay income taxes. This rule does not apply to non-resident organizations.
The goods tax in Finland (VAT) is 24%, VAT on food and drinks is 14%, on medicines, books, and printed media is 10%.
More information about taxes in Finland
Finland imposes a tax on parcels arriving from third countries. For each parcel you are required to fill out a declaration and pay value added tax. If the online store is listed in the European IOSS database, then VAT can be paid simultaneously with placing the order. But you will still have to fill out a customs declaration.
When sending a parcel from Finland to the Russian Federation, the following rules apply. If the cost of the parcel exceeds 200 euros or its weight exceeds 31 kg, then a duty is charged – 15% of the cost.
Tax percentage in Finland when purchasing a new property: 2% – for an apartment; 4% – for a cottage. This tax is paid by the buyer. Permanent residents of Finland aged 18 – 39 years are exempt from paying tax on the purchase of real estate if they are purchasing housing for the first time.
The annual municipal property tax is up to 1% of the value of the property.
Foreigners who made purchases in Finland can return part of their cost (specifically, VAT) using the “tax free” system. You can return 10–16% of the cost if you follow the basic rules:
- the check amount must be from 40 euros;
- goods cannot be unpacked and tags removed from them until they pass customs control;
- the goods must be exported from Finnish territory no later than three months from the date of their purchase.
Alcohol, tobacco products, books and paid services are not included in the VAT refund program using the tax free system.
Finland has a tax on pensions, which is calculated on a progressive scale, but cannot exceed 22%. In Suomi you cannot receive a salary and a pension at the same time. But you can increase your pension savings. If a Finn does not retire at age 65, but works until age 68, then for each additional year his pension will be supplemented by 4.5%.
Despite the fact that all taxes in Finland have considerable rates, the country’s tax system works without failures. Citizens of Suomi receive their salaries with taxes already deducted. Tax contributions to the budget for the employee are made by the employer.