Finnish Income Tax

Tax residents in Finland: are liable to pay Finnish tax on their worldwide income,
Tax non-residents in Finland: are liable to pay tax on Finnish-source income in Finland.

Individuals will be regarded as tax residents:

  • if they have their main abode in Finland,
  • if they are continuously present in Finland for a period of more than 6 months.

A temporary absence up to two months does not break the period.

Finnish Nationals  are, in addition, subject to the 3-year rule. After a Finnish citizen’s residency has been established elsewhere, he or she is still considered to be resident in Finland until three years have passed from the end of the year when the individual left the country, unless the individual can establish that no essential connections with Finland have been maintained.

Spouses are taxed separately on their own income.

There is no positive definition of the term income although in principle this consists of all income received by the taxpayer in money or money's worth (such as salaries, wages, directors’ fees and benefits in kind).

Taxable income is divided into two categories: income from capital and earned income

Both categories are subject to national income tax. In the case of income from capital, it is levied at a flat rate; on earned income, it is imposed at progressive rates and also subject to municipal income and church tax, both imposed at proportional rates. Since the tax burden on earned income is remarkably heavier than on income from capital (flat rate of 28%), the distinction between the two types of income has become crucial; in borderline cases, the income is presumed earned income.

Certain deductions are permissible on earned income including:

  • standard deduction for business expenses (capped at EUR 620),
  • unemployment insurance premiums,
  • mandatory pension insurance contributions,
  • voluntary contributions to pension and other savings in long-term investments (under certain conditions),
  • commuting costs to and from work (capped at EUR 0.17 per kilometre),
  • interest charges from certain loans
  • household reparations
  • donations to certain universities in the EEA

Allowances for 2015:

  • basic allowance for low-income taxpayers is EUR 2'970 (maximum),
  • municipal earned income allowance is granted up to a maximum of EUR 3’570,
  • National earned income allowance is granted up to EUR 970.

Income tax rates for 2015:

 From Capital: 

  • 30.00% flat tax rate for income up to EUR 30’000,
  • 33% on the excess.

Earned income is subject to national and municipal tax.

National:

  •   0.00% from EUR    0.00 up to EUR 16’500,
  •   6.50% from EUR 16’500 up to EUR 24700,
  • 17.50% from EUR 24’700 up to EUR 41’300,
  • 21.50% from EUR 41’300 up to EUR 71’400,
  • 29.75% from EUR 71'400 up to EUR 90’000,
  • 31.75% above EUR 90'000.

Municipal:     varies depending on municipality between 18% and 19%.

Church:         varies depending on municipality between 1% and 2%.

Expatriate:   Under a special expatriate tax regime, qualifying expatriates may apply to be taxed on their salary income at a rate of 35%, instead of the normal income tax rates.

Filing date:   Generally in April or May of the following income tax year.


 

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