Finland's Tax System: An Overview
Finland is known for its high tax rates, which ensure the stability of the social welfare system and a high standard of living. For individuals, businesses, and investors, understanding the tax system, key terms, and tax rates is crucial for effective financial planning.
In this article, we will examine the structure of Finland’s tax system, tax rates, business environment, and how to interact with the Finnish Tax Administration through the electronic platform Omavero.
Income Tax for Individuals
Finland applies a progressive tax system, meaning that tax rates increase as income rises. In addition to state tax, individuals pay municipal tax and social contributions.
Annual Income (EUR) | State Tax (%) | Average Municipal Tax (%) | Total (%) |
Up to 19,200 | 0 | 20.02 | 20.02 |
19,201–28,700 | 6 | 20.02 | 26.02 |
28,701–47,300 | 17.25 | 20.02 | 37.27 |
47,301–82,900 | 21.25 | 20.02 | 41.27 |
Over 82,900 | 31.25 | 20.02 | 51.27 |
Additional Contributions
- Employee Social Contribution: 7.15% of salary.
- Pension Contribution:
- 7.15% (for those under 53 and over 63).
- 8.65% (for those aged 53–62).
Example Tax Calculation
For an employee earning €50,000 per year:
- State Tax: 21.25% × 50,000 = €10,625
- Municipal Tax: 20.02% × 50,000 = €10,010
- Social Contribution: 7.15% × 50,000 = €3,575
💰 Total tax burden: €24,210 (48.42% of income)
Key Tax Deadlines
January–February: Receive and update your tax card (verokortti).
May: Submit changes to tax returns.
November–December: Pay tax balance or receive tax refunds.
Business and Investment Taxation
Finland’s tax system provides competitive corporate tax rates but requires significant social contributions from employers.
Tax Category | Rate (%) | Notes |
Corporate Tax | 20 | One of the lowest rates in Europe |
Dividend Tax | 30–34 | 30% for up to €30,000, 34% for amounts above |
Employer’s Social Contributions | 20–25 | Includes pension insurance |
Key Considerations
- Corporate Tax: The corporate tax rate is 20% of taxable profits.
- Example: A company with €100,000 profit will pay €20,000 in corporate tax.
- Dividend Tax:
- Example: If dividends amount to €50,000:
- (30% × 30,000) + (34% × 20,000) = €15,200.
- Employer’s Social Contributions: 20–25% of salary.
- Includes pension insurance, health insurance, and unemployment insurance.
Business Tax Deadlines
Monthly: Pay social contributions by the 12th.
April: Submit corporate tax return.
June: Receive final tax decisions.
Using the Omavero Online Tax System
Omavero is Finland’s online tax platform, making tax administration more efficient for both individuals and businesses.
Feature | Description |
Tax Return Submission | Report income and tax adjustments |
Checking Tax Decisions | View tax reports and documents |
Applying for Tax Deductions | Register expenses (work tools, education, etc.) |
Tax Payments | Directly pay tax balances |
How It Works
- Register: You need a Finnish ID number (HETU) and bank credentials.
- Submit Tax Return: Declare income, deductions, and expenses.
- Receive Tax Decision: Omavero automatically generates tax documents.
- Pay Taxes: Settle tax balances or receive refunds via Omavero.
Key Omavero Deadlines
- January: Update tax card.
- April–May: Submit tax return changes.
- November: Receive final tax decisions.
Taxation of Benefits and Income
- Social Benefits: Most housing benefits (asumistuki) and basic social support (toimeentulotuki) are tax-exempt.
- Employment Taxation:
- If you hold temporary protection in Finland, you have the same tax obligations as Finnish residents.
- Employers automatically deduct taxes, but employees must provide a valid tax card (verokortti).
- Tax Returns: Required for additional income, rental income, or foreign earnings.
Tax Deductions for Workers
Ukrainians working in Finland can claim several tax deductions:
✅ Work-related Travel Expenses:
- Deduction for public transport or private car costs.
- Maximum deduction: €8,400 per year.
✅ Professional Tool Deductions:
- If your job requires specific tools, they can be declared for a tax deduction.
✅ Education Expenses:
- Courses related to career development can be deducted.
Taxes for Self-Employed Individuals
If you register as a sole trader (toiminimi), consider the following:
💰 Income Tax: 20–30%, depending on earnings.
💰 Advance Tax Payments: Entrepreneurs must submit an income estimate to the tax office.
💰 Self-Employed Pension Contributions (YEL):
- Minimum rate: ~24.1% of income.
- YEL is mandatory if annual income exceeds €8,575 (as of 2024).
Taxation of Foreign Income
🌍 Worldwide Income Principle:
- All foreign income must be declared to the Finnish tax office.
🛡️ Avoiding Double Taxation:
- Finland and Ukraine have a double taxation treaty.
- You must provide proof of tax payments in Ukraine.
Key Tax Deadlines in Finland
Date | Event |
January–February | Receive and update tax card (verokortti) |
March | Submit preliminary tax forms |
May | Final deadline for tax return changes |
June–November | Review final tax decisions |
November–December | Pay tax balance or receive refund |
Balancing High Taxes with Social Benefits
Advantages of Finland’s Tax System | Challenges |
High-quality social services | High tax rates for high earners |
Transparent tax regulations | Complex tax calculations |
Efficient Omavero system | High costs for businesses |
✅ Keep your tax card updated: Ensure your tax card reflects your current income level.
✅ Utilize tax deductions: Take advantage of deductions for transport, work tools, and education.
✅ Learn to use Omavero: It simplifies tax payments, declarations, and monitoring.
Following these guidelines will help optimize your tax payments, avoid penalties, and ensure compliance with Finland’s tax regulations.