Finland tax system: audit, reporting and optimization of taxation of Finnish companies and individuals: VAT, income tax and capital gains

Basic taxes (briefly)

Personal tax 0-31.25%
Corporate tax (in detail) Corporate tax is levied at a fixed rate of 20%.
Capital gains tax. Details Capital gains are included into the corporate tax base.
VAT. Details The standard VAT rate is 24%. Reduced rates of 14% and 10% apply to some goods and services.
Other taxes Social Contributions, Municipal Property Tax, Property Transfer Tax, Inheritance and Gift Tax
Government fee
Stamp duty No

International tax agreement

Argentina, Armenia, Australia, Austria, Azerbaijan, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kosovo, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Montenegro, Morocco, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Switzerland, Tajikistan, Tanzania, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Viet nam, Zambia
   
Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, Botswana, Brunei Darussalam, Cayman Islands, Cook Islands, Costa Rica, Curaçao, Denmark, Dominica, Faroe Islands, Gibraltar, Greenland, Grenada, Guatemala, Guernsey, Iceland, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Macao (China), Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Norway, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Sint Maarten, Sweden, Turks and Caicos Islands, United Arab Emirates, Vanuatu, Virgin Islands (British)


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Personal Income Tax

Tax residents pay tax on their worldwide income, non-residents on income from sources in Finland.

National income tax rates are:

  • Income up to EUR 19,200 – 0%;
  • From EUR 19,200 to 28,700 – 6%;
  • From EUR 28,700 to 47,300 – 17.25%;
  • From EUR 47,300 to 82,900 – 21.25%;
  • Over EUR 82,900 – 31.25%.

Capital (investment) income is taxed at 30%, and if exceeds EUR 30,000 – at 34%. 85% of dividends from listed shares are taxed as capital income, the remaining 15% are tax exempt. Special rules apply to the taxation of dividends from unlisted companies.

In addition to the national income tax, a flat rate municipal tax is levied. The rates range from 16.5% to 23.5% depending on the municipality.

Members of official churches in Finland pay church tax at the rate of 1 – 2.2%.

There is a special tax regime for foreign experts sent to work in Finland, as well as for non-residents.

Corporate Income Tax

Corporate income tax is paid on the company’s worldwide income.

The tax rate is 20%.

Capital gains are included in the tax base. However, there is a substantial participation exemption. Profit from the sale of shares is tax exempt if the seller is not a company carrying out private equity activities, the seller has owned at least 10% of shares for at least one year, the shares are part of the seller’s capital assets, and if certain other conditions are met. In addition, there are restrictions on the target company: it must be a Finnish company, a company subject to the EU Parent and Subsidiary Directive or a company from a double tax treaty country. The company must not be a real estate company, there are other restrictions too.

Dividends are in many cases exempt from taxation. However, in some cases, they are taxed: dividends on quoted portfolio investments, from non-EU/EEA companies and in some other cases.

CFC Rules

Finnish CFC rules apply to foreign companies from low-tax jurisdictions controlled by Finnish tax residents. A jurisdiction is a low-tax one if the corporate income tax on a foreign company’s profit is less than 3/5 of the tax paid by a similar Finnish company. Control arises when a participation held in a foreign company directly or indirectly, solely or together with related parties, is at least 25%.

CFC rules do not apply to companies from the EEA if they conduct genuine business there. If the company is not from an EEA country, then the following conditions must additionally be met for the exemption to apply: the jurisdiction is not blacklisted by the EU, it has a tax information exchange agreement with Finland, and the company's activity is production or provision of permitted types of services.

Withholding Tax

Interest payments are generally exempt from withholding tax.

Dividends and royalties can be taxed at the rate of 20% when paid to companies. For payments to individuals, tax is withheld at the rate of 30%.

There are various exemptions, such as for payments to EEA companies. If it is impossible to identify the actual recipient of the income, a tax rate of 35% may apply.

The tax rates are reduced under double tax treaties and EU directives.

VAT

The standard VAT rate is 24%.

Some goods and services are subject to the reduced rates of 14% and 10%.

Social Security Contributions

The employer pays the following compulsory social security contributions:

  • health insurance contribution – 1.34%,
  • pension insurance contribution – 14.35%,
  • unemployment insurance contribution – 0.45% for the first EUR 2,125,500 of gross salaries and 1.7% for the excess,
  • accident insurance premium – 0.8%,
  • and some other contributions.

Employees pay the following contributions:

  • health insurance contribution – generally, 2.04%,
  • pension insurance contribution – 7.15% or 8.65% depending on the employee’s age,
  • unemployment insurance contribution – 1.4%.

Municipal Property Tax

The annual immovable property tax is set by municipalities.

The tax rates range from 0.41% to 2% (the rates may be higher for unused areas).

Property Transfer Tax

The tax is payable at the rate of 4% of the transaction value when transferring Finnish real estate.

When transferring company shares, the tax is paid at the rate of 1.6% (2% for real estate companies).

There are exceptions.

Inheritance and Gift Tax

The tax is levied on the market value of the inherited property or donated object.

The tax rates depend on the degree of relationship between the parties and on the value of the property. The tax scale is progressive.

Double Tax Agreements

Finland has double tax agreements and tax information exchange agreements with the following countries:

71 DTCs: Argentina, Armenia, Australia, Austria, Azerbaijan, Barbados, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Egypt, Estonia, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kosovo, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Montenegro, Morocco, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portugal, Romania, Russian Federation, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Switzerland, Tajikistan, Tanzania, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vietnam, Zambia.

49 TIEAs: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, Botswana, Brunei Darussalam, Cayman Islands, Cook Islands, Costa Rica, Curacao, Denmark, Dominica, Faroe Islands, Gibraltar, Greenland, Grenada, Guatemala, Guernsey, Iceland, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Macao (China), Marshall Islands, Mauritius, Monaco, Montserrat, Niue, Norway, Panama, Qatar, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, San Marino, Seychelles, Sint Maarten, Sweden, Turks and Caicos Islands, United Arab Emirates, Vanuatu, Virgin Islands (British).

Exchange Control

There is generally no foreign exchange control in Finland.

    Taxes of Finland

    Min. rate for corporate tax 20%
    Capital gains tax Regular rate
    VAT 24%
    Withholding tax 20%/0%/20%
    Exchange control No
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