Taxation in Finland is mainly carried out through the Finnish Tax Administration, an agency of the Ministry of Finance. Finnish Customs, the Finnish Transport and Communications Agency Traficom, and pension funds also collect taxes. Taxes collected are distributed to the Government, municipalities, church, and the Social Insurance Institution, Kela.[1]
Income (tulo) is categorized in Finnish tax law as either earned income (ansiotulo) or capital income (pääomatulo), essentially by stating that earned income is any salary paid in compensation for employment[2] and "any income other than capital income".[3] In general, as a tax is any compulsory financial charge levied on a taxpayer by a governmental organisation,[4] all the payments listed here are taken into account as taxes. Some taxes are levied on income and some are levied on the assets of those who pay that income. Therefore, there are two viewpoints on what is the effective tax rate:
Income taxation takes place in a series of phases where the proportional taxes are deducted from the gross income before the net income subject to the state income tax is determined. An employee's gross earned income is subject to the three following, proportional social security contributions:
The net earned income (gross earned income minus deductions) is subject to:
There is an automatic earned income tax credit (työtulovähennys) for some taxes and fees, making them slightly progressive despite their fixed rate.
Every person that is 17–68 years of age[10] and gets a salary as an employee[11] pays a certain amount of pension insurance fee on their gross income.[12] The exact percentage is set annually by a decree of the Ministry of Social Affairs and Health.[13]
The voluntary pension insurance fees or transfers to a personal pension account are credited in earned income taxation up to €5,000 per year.
Every person 18–65 years of age working as an employee in Finland[16] is required to pay unemployment insurance fee on their gross work income. The employee's fee is levied on their gross work income. The employer's fee is proportionate to what they pay to all of their employees and it is not withheld from the employees' gross salaries – in effect, it is paid out of the employer's assets. The exact percentages of the fees are set by law to a level that secures the Employment Fund's (Työllisyysrahasto) ability to pay out unemployment benefits, and in 2024 the fees are as follows:
Every person who is 16–68 years of age[18] and works as an employee in Finland[19] is required to pay the health insurance daily allowance contribution on their gross earned income. The rate of the fee is annually set by a decree of the Government of Finland and by law, it is set to a level that secures funding for healthcare costs.[20] In 2024, the rate is 1.01% and it is levied on the entire gross earned income if equals to or exceeds €16,499.[21]
The following contributions are deducted from the gross income before determining the net income subject to the state income tax:
The following progressive rates are levied on the net income (rates for FY 2024):[28]
| Net Income Over | Tax Rate | |
| €0 | 12.64% | |
| €20,500 | 19% | |
| €30,500 | 30.25% | |
| €50,400 | 34% | |
| €88,200 | 42% | |
| €150,000 | 44% |
The other credits are first deducted from the gross tax before deducting the earned income tax credit (työtulovähennys). If there is any earned income tax credit left after deducting it from the gross state income tax, the remainder is deducted from the gross municipal tax, gross health insurance medical expenses contribution, and gross church tax, proportionally.
The following contributions are deducted from the gross income before determining the net income subject to the municipal tax:
The municipal tax is levied on the net income. The rate is set by the municipality and in 2024, it ranges from 4.4% (Kauniainen) to 19.7% (Kökar) and averages at 9.17%.[29] If there is any earned income tax credit left (after deducting it from the state income tax), the remainder is deducted from the gross municipal tax, proportionally to its share in the sum of the gross municipal tax, gross health insurance medical expenses contribution, and gross church tax.
The following contributions are deducted from the gross income before determining the net income subject to the health insurance medical expenses contribution:
The insurance medical expenses contribution (0.51% in 2024) is levied on the net income. If there is any earned income tax credit left (after deducting it from the state income tax), the remainder is deducted from the gross insurance medical expenses contribution, proportionally to its share in the sum of the gross municipal tax, gross insurance medical expenses contribution, and gross church tax.
If the individual is a member of the Evangelical Lutheran or the Orthodox Church, or any of the country-wide Lutheran parishes (the German parish in Finland and Olaus Petri parish for citizens of Sweden living in Finland), their net earned income is subject to the church tax (kirkollisvero). The following contributions are deducted from the gross income before determining the net income subject to the church tax:
The church tax is levied on the net income. If there are multiple parishes in one municipality, the rate is set equally for the entire municipality by the parish union (seurakuntayhtymä) that represents all of the parishes, otherwise the rate is set by one individual parish for one municipality. In 2024, the rate in Evangelical Lutheran parishes ranges from 1.0% to 2.0%, averaging at 1.66%. In the same year, the rate in Orthodox parishes ranges from 1.75% to 2.25%, averaging at 1.96%.[29] If there is any earned income tax credit left (after deducting it from the state income tax), the remainder is deducted from the gross church tax, proportionally to its share in the sum of the gross municipal tax, gross health insurance medical expenses contribution, and gross church tax.
The following deductions are made on the gross income before determining the net income subject to the Yle tax:
The Yle tax (2.5%) is levied on the net income above €14,000.[30] However, the maximum tax is €163.[30]
The employer withholds the employee's pension insurance[12] and unemployment insurance fees from each paycheck. The employer is responsible for choosing the pension insurance institution[31] and pays the fee to the institution in conjunction with paying the salary to their employee.[12] The pension insurance fees collected by public-sector employers are paid to the dedicated agency Keva.[32]
The employer withholds a portion of each paycheck and pays that to the Finnish Tax Administration. The portions add up to the total of the following liabilities:
The portions withheld by the Tax Administration from earned income are determined by accuracy of 0.5 percentage points. After the fiscal year (calendar year) has ended, the administration pays the difference between tax liability and withheld taxes as a rebate or collects as tax arrears afterward. The decision is sent to the taxpayer between May and October the following year. Tax rebates, if any, are typically paid approximately two months following.
Anyone who has arrived in Finland and stayed longer than 6 months will become, from Tax Administrator's view, a resident. The residents' worldwide income is subject to Finnish tax, so that no distinction exists between the source country. Non-residents are subjected only to taxation of Finnish-sourced income.[33]
Persons working in Finland for a short period can get their Finnish personal ID at the tax office. The Finnish Tax Administration is entitled to enter information into the Population Register System and distribute identity codes jointly with Local Register Offices if the matter concerns foreigners who arrive for temporary periods, i.e. less than one year to work in Finland. ID requires following information entered to the system: Full name, Date of birth, Sex, Place of birth, Address, Citizenship, Native language and Occupation.[34]
In association of measures against grey economy in the construction industry, a new act governing the mandatory tax numbers and the public register of tax numbers was adopted in 2012. At the moment mandatory Tax Numbers are issued for construction-industry workers only. The Individual Tax Number does not reveal the individual's age, sex or date of birth. The number doesn't change when a worker moves on to work for another employer or to work at another construction site.[35]
Some foreign employees pay a flat-rate source tax of 32% on their net income instead of the regular progressive state income taxes, other taxes, and social security contributions.[36] The source tax is applied to a foreign employee under the following conditions:
A person is liable to pay the source tax for a maximum of 7 years from the beginning of the employment.[41]
Salaries or grants paid by the European Union bodies, such as European Chemicals Agency in Helsinki, are tax-free in Finland and do not need to be reported to the Finnish Tax Administration or Finnish social security, regardless of residency. Instead, the EU officials pay an EU-wide European tax on their salary.[42] Employees of European Union bodies may bring a car to Finland without paying the Finnish car tax.
Dividends, rents, and other kinds of capital gains are considered capital income (pääomatulo). In 2024, the net capital income is taxed at a fixed rate of 30% for net income up to €30,000 and 34% for net income above that.[43] However, dividends from unlisted companies paid to a private person may be considered earned income subject to the progressive rate if certain conditions below are met. Only natural persons pay capital income tax on their dividends.
15% of dividends from listed (publicly traded) companies to a private person are tax-exempt[44] and the rest is subject to the capital income tax.[43] The effective tax rate is thus 25.5–28.9%.
If the dividend from an unlisted company paid to a natural person adds up to 8% or less of the mathematical value (net assets) of the company, 75% of the dividend is tax-exempt and the rest is subject to the capital income tax (30% or 34%), rendering effectively a 7.5% capital income tax rate at minimum.[45] If the dividend to that person adds up to more than 8% of the net assets of the company:
If the person's all dividends from unlisted companies add up to more than €150,000, 85% the sum above the €150,000 is subject to the capital income tax and the rest is tax-exempt.[45]
The corporate income tax rate is 20%.[43] The corporate tax was fully paid as dividend tax before 2004, but because of neutrality requirements of the EU, the tax credits allowed for dividends are now more complex. Corporate tax was lowered from 24.5% to 20.0% in January 2014.[47]
Until 2016, a small percentage of corporate taxes was also distributed to parishes, regardless of the corporations' religious affiliations. From 2016 onwards, the direct tax distribution was abolished and it was replaced by a fixed, annual €144-million state subsidy that follows the Finnish Consumer Price Index.[48]
Municipalities collect property tax on properties located in their territory.[49] The tax is levied separately on the soil (maapohja) and on the buildings located on it. The tax on the soil is paid by the owner of the property and the tax on the buildings is paid by the owner of the building.[50] The tax on soil is generally 1.30–2.00%,[51] but the municipality can set it at 2.00–6.00%, if the property is undeveloped and certain legal requirements are met.[52] Additionally, if the property is located in Espoo, Helsinki, Hyvinkää, Järvenpää, Kauniainen, Kerava, Kirkkonummi, Mäntsälä, Nurmijärvi, Pornainen, Sipoo, Tuusula, Vantaa, or Vihti, the Property Tax Act requires that the soil tax for undeveloped property is 3.00 p.p. higher than for developed property, but 6.00% at maximum.[53] The tax on buildings is 0.41–1.00% for permanently residential buildings[54] and 0.93–2.00% for buildings with at least 50% of the space reserved for non-permanent residence.[55] Property taxes are levied annually on present market value.
There is a 3% property transfer tax for property, and 1.5% for stock and housing cooperative shares. First-time home buyers were exempt from transfer tax until 31 December 2023, but no longer enjoy exemption.[56]
VAT is levied at a standard rate of 24% (January 2013), and two reduced rates of 14% on food, restaurant services, catering services and animal feed, and 10% on books, pharmaceutical products, services creating opportunities for physical exercise, passenger transportation and accommodation.[57]
Excise taxes are in place for alcohol, tobacco, sweets, lotteries, insurances, transport fuels and automobiles (2011). The motor vehicle tax is substantial. As a rule, permanent residents cannot drive foreign-registered cars in Finland. Persons with permanent residence outside Finland may drive foreign-registered car in Finland for six months, or up to 18 months if residence abroad is separately proven to Customs.[58] As an exception, European Civil Service employees working for the European Union are exempt from the car tax for their personal vehicle.
Pharmacies pay only the excise tax from their yearly income; no VAT is levied on medications. There is a tax credit for pharmacies that keep subsidiary pharmacies (sivuapteekki). The aim of this policy is to support keeping pharmacies in sparsely populated regions.[59]
Taxes related to salary are paid both by the employee and the employer. The "gross salary" as reported to the employee conventionally does not include any of the taxes paid by the employer, which is a substantial portion of taxes. The employee personally pays municipal tax, state tax, and various minor taxes including contributions to mandatory insurance. The employer pays mandatory contributions to insurance and pension fees.[60] [61] The Finnish system does not require the employee to personally pay pension fees, and does not provide for voluntary contributions or employer matching.
Considering the sum of all mandatory fees on the total employer's salary expense, the marginal tax rate, i.e. the percentage of each additional €100 withheld, increases rapidly from 25% to 48% at €13,000/y, from 48% to 55% at €29,000/y, reaches 67% at €83,000 /year and decreases slightly to 65% at €127,000/year (2018 data). This includes pension. Different sources include different fees: the official calculator on the Tax Administration website at vero.fi includes only the employer contributions to tax, while the Taxpayers Association of Finland includes both employer and employee contributions. These give significantly different results.[62] [63]
Even when information of earnings and the taxation procedure of individual persons and companies are not public, the amount of taxes carried for each person and company is public information. Tax Administration authority is required to submit information for free if request is targeted. Larger records are submitted for journalistic purposes. Capital income and earned income are both public information, while taxation of dividends from unlisted limited company is not.
In 2014, Finnwatch estimated that 60–70% (€37 billion) of Finnish pension funds were invested in tax havens.[64] Political parties have different agendas in respect to tax havens.[65]
Book: Colliander , Anders . Taxation in Finland 2009. Ministry of Finance publications. 7/2009. April 2009. Ministry of Finance. 978-951-804-932-9.