Finland is not just popular for its elegant landscape; there are also a lot of economic opportunities for foreign investors, excellent healthcare, and a thriving IT showground.
But of course, if you are coming to enjoy the vast economic opportunities available throughout the country, you should know the tax rates and the taxation system is used in the country.
In this article, we will guide you through everything you need to know about the Finnish tax system from filing your taxes to registering as a taxpayer.
How do taxes in Finland work?
As you very well know, Taxes in Finland and other Nordic countries can be as high as 40% of your income, including social security and insurance contributions. Taxation is administered and controlled by the Finnish Tax Administration, a subordinated agency under the Ministry of Finance. Taxes are collected submitted to the Government, municipalities, and the Social Insurance Institution.
Finland has a reliable system that allows employees to pay their taxes with ease. The taxation system is fair and structured in a way that everyone including expats can file their taxes without stress.
- You don’t have to do anything, since your taxes are automatically deducted from your salary every month.
- If you live and work in Finland, you’ll receive a pre-completed return anytime between March and April.
- If the information on your tax return is correct, you don’t need to take any other action for your tax return to be complete.
- If the information seems incorrect, you can go online and make the corrections before the end of March.
Individuals/natural persons who live are Finnish tax residents. If you have your permanent home in Finland or live in the country for over six months in a calendar year, the state would treat you as a permanent resident.
Residents are taxed every month on their worldwide income. Income and revenue generated by residents are taxed at progressive rates for national tax purposes.
Municipal, church, and social security contributions are taxed at a flat tax rate. Depending on the municipality you live in, you will be levied anything between 16.50% and 23.50%.
As in other countries of the world, the amount you are taxed in Finland depends on your monthly income. The table below contains the Finnish tax rates in 2021.
|Earned income [Euro]||Tax rate for amounts [%]|
|€18,600 – €27,900||17%|
|€27,900 – €45,900||6%|
|€45 900 – €80,500||21%|
A non-resident individual (a person that does not live in the country or occasionally travels to Finland for work) is only taxed on Finnish-source income – unless lower tax rates are provided in a tax treaty.
Tax rates for expats are 35% on employment income and 30% on dividends, interest, and royalties. Examples of such income include wages from an employer for work done in Finland, the dividends paid to an individual by a Finnish limited company.
However, some types of interest income received by a nonresident from a Finnish source are not taxable. The receipts of interest on a bank deposit, on bonds, or debentures are tax-exempt when the beneficiary is a nonresident. If you are an expat living in Finland, there are tax treaties signed by the state with other countries to eliminate double taxation.
However, the provisions of tax treaties are irrelevant when the state determines if you are a resident or nonresident. In this case, the state would rely on the provisions of the law on income taxes when addressing the issue of residency.
Corporate income taxes
Corporate entities are domestic when they are registered or established under the laws of Finland while a corporate entity registered in a foreign country but has a branch or franchise in the country is a nonresident entity.
If a corporate entity is treated as having a permanent establishment, it must pay Finnish tax on its income attributable to it, regardless of whether the source of the income is Finland or a foreign country. The corporate income tax rate in Finland is 20%.
Taxation of the dividends from non-listed companies is not as costly as you’d think. Most of these dividends are tax-exempt until they earn more than €150,000. Corporate taxations were paid as dividend taxes before 2004, but because of the neutrality requirements of the European Union, the tax credits allowed for dividends are a tad more complex.
Partnership and consortiums are not treated as a taxpayer because they are neither residents nor nonresidents. In this case, the receipts of income the partnership or consortium are allocated to its shareholders and taxed as the shareholders’ income.
Registering in Finland
In Finland, everyone is mandated to have a personal identification code. You must register at your local register office [henkilötunnus in Finnish or personbeteckning in Sweden].
You can also file your application for a personal identification code with your residence permit application. After that, you should head to your local tax office to apply and get a tax card.